2019 (5) TMI 1256 - AT - Income Tax

Condonation of delay of 125 days - wrong guidance and advice by the Tax Consultant - misunderstanding and inadequate advice about the correct remedy - HELD THAT - On receipt of the order of the First Appellate Authority assessee first approached the CIT(A) u/s 264 of the Act on 07.12.2017 instead of approaching the Tribunal for relief. The assessee filed the present appeal on 24.04.2018. Therefore the delay should be condoned Scope of limited scrutiny - case selected under CASS - the additions on the non-CASS issues - Turnover of the assessee as the same deferred from the turnover returned under the GST provisions - No approval from the superior authorities before the scrutiny scope is extended to non-CASS issues - HELD THAT - As relying on SURESH JUGRAJ MUTHA VERSUS ADDL. CIT RANGE-3 DHULE 2018 (5) TMI 1855 - ITAT PUNE it is settled legal issue at the level of the Tribunal Pune Bench in the cases selected under CASS the additions on the nonCASS issues can only be made after obtaining due permission from the superior authorities and the said approval of the superior authorities in writing should be available on records. In this appeal I find there is no whisper about the obtaining of such approval from the superior authorities before the scrutiny scope is extended to non-CASS issues. In any case the Assessing Officer did not make any addition on account of the issues of sales of the assessee. Therefore in my considered view the said order of the Tribunal covers the common solitary preliminary issue raised before me in this appeal. Accordingly the preliminary issue raised by the assessee in his appeal is allowed.

Summary

Issues Involved:
1. Delay in filing the appeal.
2. Validity of the assessment order due to exceeding the scope of limited scrutiny.
3. Addition of ?14,76,497 towards disallowance of purchases.
4. Addition of ?1,69,160 towards disallowance of labour charges.
5. Additions related to difference in receipts and interest under section 244A.

Detailed Analysis:

1. Delay in Filing the Appeal:
The assessee filed the appeal with a delay of 125 days, attributing the delay to wrong guidance by the Tax Consultant. The Tribunal condoned the delay, finding the reasons for the delay beyond the assessee's control. The Tribunal proceeded to adjudicate the issues on merits.

2. Validity of the Assessment Order:
The primary issue was whether the Assessing Officer (AO) exceeded the scope of limited scrutiny without obtaining the prescribed approval from superior authorities. The case was selected for limited scrutiny under CASS to examine the turnover discrepancies between the assessee's returns and GST provisions. The AO made several additions unrelated to the turnover without formal approval for converting limited scrutiny to full scrutiny.

The Tribunal emphasized that, according to CBDT Circular No.F.No.225/26/2006-ITA.II (Pt.) dated 08th September, 2010, the AO must obtain approval from the Competent Authority to convert limited scrutiny to full scrutiny. In the absence of such approval, the additions made by the AO were deemed unsustainable in law.

The Tribunal referred to the precedent set by the Pune Bench in the case of Suresh Jugraj Mutha vs. Addl.CIT, which held that additions made without the required approval for extending the scope of scrutiny are invalid. Therefore, the Tribunal held that the assessment order was bad in law and void-ab initio.

3. Addition of ?14,76,497 towards Disallowance of Purchases:
The Tribunal found that the addition related to purchases was not connected to the turnover, which was the subject of limited scrutiny. As such, this addition was deleted.

4. Addition of ?1,69,160 towards Disallowance of Labour Charges:
Similarly, the addition related to labour charges was also found to be unrelated to the turnover issue. Consequently, this addition was deleted.

5. Additions Related to Difference in Receipts and Interest under Section 244A:
The Tribunal confirmed the additions of ?1,842 for the difference in receipts and ?2,232 for interest under section 244A, as these were related to the turnover of the assessee, which was the original scope of limited scrutiny.

Conclusion:
The Tribunal allowed the preliminary issue raised by the assessee, holding that the assessment order was invalid due to the AO's failure to obtain the necessary approval for extending the scope of scrutiny. Consequently, the additions related to purchases and labour charges were deleted, while the additions related to the difference in receipts and interest under section 244A were confirmed. The other grounds raised by the assessee were dismissed as academic, given the relief granted on the preliminary issue. The appeal was partly allowed.