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Income Tax Appellate Tribunal, AMRITSAR BENCH, AMRITSAR
Before: DR. M. L. MEENA & SH. ANIKESH BANERJEE
This appeal has been filed by the assessee against the order of the Ld. Commissioner of Income Tax (Appeals)-1, Jalandhar dated 14.12.2018 in respect of Assessment Year 2015-16.
The assessee has raised the following grounds of appeal:
Amar Singh v. ITO “1. The Commissioner of Income Tax (Appeals) erred to confirm addition of Rs.5,40,014/- without appreciating that the A.O. estimated the total sale of poultry by totaling the bank deposits which includes sale of agricultural produce and sale of milk and poultry feed made by his wife and son.
2. The appellant craves leave to add/amend any ground of appeal.”
3. At the time of hearing, the ld. counsel for the assessee raised the legal ground challenging the validity of assessment on account of converting the limited scrutiny into the detail scrutiny without approval of Pr.
Commissioner of Income Tax. The issue raised being legal in nature which goes to the root of the matter and disputed low quantum of tax involved and hence the additional ground is admitted.
The ld. counsel argued that the assessee’s case was selected for limited scrutiny for verification of source of cash deposits in its bank accounts as evident from notice u/s 143(2) of Income Tax Act (APB pg. no. 1). During the course of scrutiny proceedings, the Assessing Officer has not verified the source of cash deposits in its bank account, the issue of limited scrutiny, but he has expanded the scope of limited scrutiny by way of treating cash deposits as business receipts of the assessee and thereby applied net profit rate of 30% on the total receipts which is in contravention to the scheme of the limited scrutiny.
Amar Singh v. ITO 5. The Ld. DR on the other hand stands by the impugned order but he could have controverted the contentions of the assesse.
Heard. Admittedly, the assessee’s case was selected under limited scrutiny for verification of cash deposit in its bank account. The Assessing Officer (in short (“the AO”) has not doubted the source of cash so deposited but he has estimated the deemed income treating the cash deposits as trading receipts by expanding the scope of limited scrutiny without seeking mandatory approval of the Pr.CIT during the course of assessment proceeding. The Ld. CIT (A) has not deliberated on the expanding of the limited scrutiny assessment without taking any approval of the Pr. CIT for other issues other than verification of source of cash deposit in bank account, an issue of limited scrutiny. However, the AO extended the scope of scrutiny to other issue of service charges from Transport and made additions rejecting the contentions of the assessee. In our view, this kind of approach of the AO in making the assessments i.e. beyond the CASS provisions, is outside the scope of the circular of the CBDT dated 08.09.2010 and thereafter.
From above it is evident that the source of the cash deposits in the bank account of the assessee was accepted by the Revenue Authorities. In Amar Singh v. ITO our view, once the issue of limited scrutiny, the source of cash deposit accepted by the department as stands explained, the AO ought to have either accepted the return income. The AO had no power to extent the scope of scrutiny or convert into full scrutiny to treat the cash deposits in the bank accounts as business receipts to charge deemed income without prior approval of Pr. CIT, by applying net profit rate based on assumptions and presumptions.
On similar facts, in the case of “Sh. Himanshu Arora Vs. Income Tax Officer”, Assessment Year: 2017-18, the Coordinate Amritsar Bench held as under:
“8. Heard. Admittedly, the appellants assesse case was selected under limited scrutiny for verification of source of cash deposit in its bank account. The Ld. CIT (A) has not deliberated on the expanding of the limited scrutiny assessment without taking any approval of the Pr. CIT for other issues other than verification of source of cash deposit in bank account, an issue of limited scrutiny. However, the AO extended the scope of scrutiny to other issue of service charges from Transport and made additions rejecting the contentions of the assessee. In our view, this kind of approach of the AO in making the assessments i.e. beyond the CASS provisions, is outside the scope of the circular of the CBDT dated 08.09.2010 and thereafter.
Recently, in the case of “Shri Sita Ram Swami V. The ITO’, (Supra), the ITAT Jaipur Bench held that AO cannot travel beyond the scope of limited scrutiny and cannot take up a fresh issue which has no connection with the Amar Singh v. ITO original issue of limited scrutiny without prior approval of appropriate authority to convert limited scrutiny into complete scrutiny. 10. Similar view is held by ITAT Pune Bench in the case of “SURESH JUGRAJ MUTHA VS. ADDL. CIT”, (Supra) that No additions on issues which are not part of limited Scrutiny.
In view of the above CBDT instruction and various judicial pronouncement, we hold that It is outside the jurisdiction of AO to expand the scope of the limited scrutiny without the approval of Administrative Commissioner of Income Tax. Accordingly, the assessment order annulled being void ab initio and bad in law.”
9. Following our judgement in the case of “Sh. Himanshu Arora Vs. Income Tax Officer”, (Supra) we hold that Assessment order passed is without jurisdiction and accordingly, the assessment order is annulled being void ab initio and bad in law.
Order pronounced in the open court on 20.12.2022