What did the Tribunal hold?

The Tribunal held that the AO's additions were beyond the purview of limited scrutiny and no approval was obtained to convert it to complete scrutiny. Therefore, the additions made by the AO were directed to be deleted.

The assessee's return was selected for limited scrutiny concerning discrepancies in gross receipts and foreign bank account balances. However, the Assessing Officer (AO) made additions for disallowance of expenses, which were beyond the scope of the limited scrutiny.

What were the issues?

Whether additions made by the AO were beyond the scope of limited scrutiny and if the conversion to complete scrutiny was valid without proper approval.

Naveen Arya, Delhi vs ACIT | s.143(3) | ITAT Delhi 2023

Income Tax Appellate Tribunal, DELHI BENCH ‘E’, NEW DELHI

Before: Sh. C. M. GargDr. B. R. R. Kumar

For Appellant: Ms. Nivedita, Adv

For Respondent: Ms. Smita Singh, Sr. DR

Hearing: 19.07.2023Pronounced: 31.07.2023

ORDER

Per Dr. B. R. R. Kumar, Accountant Member:

The present appeal has been filed by the assessee against the order of ld. CIT(A)-10, New Delhi dated 14.06.2019.

2. The assessee has raised the following grounds of appeal: “1. That On the facts and circumstances of the case, the order passed by the Ld. CIT(A) under section 250 of the Act is bad both in the eyes of law and on facts.

2. That On the facts and circumstances of the case, the order passed by the Ld. CIT(A) under section. 250 of the Act is bad both in the eyes of law and on facts as the assessment order was passed on issues not covered under the reasons for selection for Limited Scrutiny and is therefore in contravention of the circular issued by the CBDT.

3. That the Ld. CIT(A) has erred on facts and in law in upholding the order passed by the Ld. AO under Section 143(3) of the Act.

Sh. Naveen Arya 4. That the Ld. CIT(A) has erred on facts and in law in sustaining the disallowance expenses made by the Ld. Assessing Officer to the tune of Rs. 11,44,075/- incurred by the appellant as interest income.

That the Ld. CIT(A) has erred on facts and in law in enhancing the income assessed by the Ld. AO under Section 143(3) of the Act, to the tune of Rs.4,25,570/-.

On the facts and circumstances of the case, Ld. CIT(A) has erred, both on facts and in law, in sustaining the additions without appreciating the explanations and evidences brought on record by the appellant.

That the impugned CIT(A) order is arbitrary, illegal, bad in law and in violation of rudimentary principles of contemporary jurisprudence.”

Apropos, the relevant facts of the appeal are that the return was selected for limited scrutiny for the following issues:

Gross receipts shown in Schedule OS of ITR is less than receipts reported in 26AS u/s 193 and 194A.

Large balance in foreign bank account (Schedule FA of ITR)

We find that the addition has been made on account of disallowance of expenses which is beyond the purview of limited scrutiny. There was no approval of the ld. PCIT on record or on order to convert the case of limited scrutiny to complete scrutiny as required by the directions of the CBDT and hence, the addition made by the AO is directed to be deleted.

Sh. Naveen Arya 5. In the result, the appeal of the assessee is allowed. Order Pronounced in the Open Court on 31/07/2023.

NAVEEN ARYA,DELHI vs. ACIT CIRCLE-28(1), DELHI

What did the Tribunal hold?

What were the facts?

What were the issues?

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