2021 (10) TMI 1402 - AT - Income Tax

Expansion of Scope of limited scrutiny to complete scrutiny - CIT(A) held that the limited scrutiny can be converted into full scrutiny with the approval of higher authorities and the assessee could not produce any evidences to show that approval from concerned authority was not taken - HELD THAT - As perused the material on record and it is noticed that nowhere in the assessment record, AO has made any reference that any approval of the higher authority was taken for converting the case of the assessee from limited scrutiny to the detailed scrutiny. We opined that the decision of CIT(A) is unjustified since the CIT(A) has neither called any remand report from the AO on the objection of the assessee regarding taking of approval from higher authority for converting limited scrutiny to the detailed scrutiny nor the CIT(A) has given detailed reason along with the points for determination of his decision as prescribed in section 250(6) - it would be appropriate to restore this case of the assessee to the file of the ld. CIT(A) for adjudicating afresh - Appeal of the assessee is allowed for statistical purposes.

Summary

Issues:
1. Assessment of income by the Assessing Officer.
2. Expansion of limited scrutiny to complete scrutiny without higher authority approval.

Analysis:
1. The assessee's appeal for the assessment year 2015-16 was based on the computation of income by the Assessing Officer. The Assessing Officer concluded that the assessee incorrectly computed the total taxable income by changing interest and rent received from other sources to income from business and profession. This led to setting off the income against brought forward business loss, which the Assessing Officer deemed unavailable to the assessee. The case underwent scrutiny assessment, resulting in a finalized total income assessment of Rs. 26,02,404. The assessee challenged this assessment before the CIT(A), who subsequently dismissed the appeal.

2. The main contention in the appeal was the expansion of limited scrutiny to complete scrutiny without prior approval from higher authorities. The ITAT observed that the Assessing Officer had not documented any approval from higher authorities for converting the case from limited scrutiny to detailed scrutiny. The CIT(A) dismissed the appeal based on the premise that limited scrutiny could be converted into full scrutiny with higher authority approval, but the lack of evidence regarding such approval led the ITAT to deem the decision unjustified. As a result, the ITAT decided to restore the case to the CIT(A) for a fresh adjudication after obtaining a report from the Assessing Officer. The appeal of the assessee was allowed for statistical purposes, and the case was remanded for further review and consideration.

In conclusion, the ITAT's judgment focused on the issues of income assessment by the Assessing Officer and the expansion of scrutiny without proper approval. The decision highlighted the importance of following procedural requirements and obtaining necessary approvals when transitioning from limited to detailed scrutiny in income tax assessments.