2022 (2) TMI 171 - AT - Income Tax

Validity of Scrutiny under CASS - reason for selecting the case for limited scrutiny was difference in opening stock figure of the current year with the closing stock figure of the previous year - HELD THAT - The copy of screen shot showing the reason for selection of scrutiny and the type of selection for scrutiny under CASS has been produced and highlighted by the ld. D.R. Therefore, we are satisfied that the present case is not a limited scrutiny case and hence, we do not find any infirmity in the additions made by the Assessing Officer on account of want of jurisdiction. In any case, the assessee has filed a letter stating that it does not want to press the Additional Ground of appeal. The Additional Ground of Appeal is, accordingly, rejected. Addition u/s 69C - capital expenditure incurred by the assessee during the year, for purchase of fixed assets, addition of closing balance in the Customers Advances Account, addition on account of expenses incurred during the year and capitalized to work-in-progress - HELD THAT - As the additions under sections 68 and 69C of the Act can be made provided the transaction takes place during the previous year / financial year. Further, for making addition under section 68 of the Act, the assessee must fail to offer explanation and for making addition under section 69C of the Act, the source of the expenditure must remain unproved. In the present case, the assessee had duly explained the sources of the credit and the expenditure, respectively. As apparent that the transactions pertaining to the additions made by the Assessing Officer, i.e in respect of advances from customers and in respect of opening inventory (WIP) did not pertain to the previous year relevant to A.Y. 2012-13, but the same are related to the previous year relevant to A.Y. 2011-12. Therefore, these additions are not in accordance with the provisions of Sections 68 and 69C of the Act. We are not satisfied about the correctness of the additions made by the Assessing Officer and confirmed by the ld. CIT(A) in respect of Capital Expenditure, Closing Balance of Customer Advance, Expenses incurred on W.I.P. during the year and Expenses incurred on W.I.P. in the last year, i.e. assessment year 2011-12. Accordingly, we direct the deletion of the same by accepting Ground Nos.1 to 4 of the Concise Grounds of Appeal. Reopening of assessment u/s 147 - Whether first appellate authority has no jurisdiction to direct the Assessing Officer to bring the amount to tax in another assessment year? - HELD THAT - CIT(A) had no power to issue directions to the Assessing Officer to reopen the assessment for Assessment Year 2011-12. Apart from this, we fail to understand as to how, having confirmed all the items of additions in Assessment Year 2012-13, the ld. CIT(A) can still come to a conclusion that the income has escaped assessment. The directions given by the ld. CIT(A) are, thus, not only beyond jurisdiction, but also self-contradictory. We find our this view to be supported by the direct decisions in the cases of KIIC Investment Company vs. DCIT 2019 (1) TMI 391 - ITAT MUMBAI and DCIT vs. Bullion Investments and Financial Services Pvt. Ltd. 2008 (6) TMI 311 - ITAT BANGALORE - The direction issued by the ld. CIT(A) to the Assessing Officer to reopen the assessment for Assessment Year 2011-12 is held to be unsustainable and is hereby expunged - Decided in favour of assessee.

Summary

Issues Involved:
1. Jurisdiction of Assessing Officer under 'CASS' for assessment scrutiny proceedings.
2. Additions made by the Assessing Officer under various sections of the Income Tax Act.
3. Direction by the CIT(A) to issue a notice under section 148 for a previous assessment year.
4. Confirmation of the total income determined by the Assessing Officer.

Issue-wise Detailed Analysis:

1. Jurisdiction of Assessing Officer under 'CASS' for Assessment Scrutiny Proceedings:
The assessees contended that the additions made by the Assessing Officer were beyond the jurisdiction of 'CASS', the assessment scrutiny proceedings, and hence illegal and bad in law. The Tribunal found that the assessment was not selected for limited scrutiny, as evidenced by the screen shot produced by the ld. D.R. Consequently, the Tribunal rejected the additional ground of appeal.

2. Additions Made by the Assessing Officer:
The Tribunal examined the following specific additions made by the Assessing Officer and confirmed by the CIT(A):

- Capital Expenditure on Fixed Assets (?9,12,631): The Tribunal found that the Assessing Officer disbelieved the transaction and made the addition as unexplained expenditure. However, the assessee had provided substantial evidence, including purchase orders, invoices, and payment details, which were verified by the Assessing Officer in the remand proceedings. The Tribunal directed the deletion of this addition.

- Closing Balance in Customer Advances (?36,96,539): The Tribunal noted that the assessee had taken over advances from customers from SPCL and had not received any fresh advances during the year. The details were verified and found correct by the Assessing Officer. The Tribunal directed the deletion of this addition.

- Expenses Incurred on Work-in-Progress (WIP) (?5,42,86,466): The Tribunal observed that the expenditure was incurred on security expenses, salary, taxes, etc., and the complete particulars were verified by the Assessing Officer. The Tribunal directed the deletion of this addition.

- Opening Balance of WIP Brought Forward from the Previous Year (?50,91,92,350): The Tribunal found that the WIP was correctly accounted for in the books of SICCL and SPCL and transferred to the assessee. The voluminous documentary evidence supporting the WIP was verified and found correct. The Tribunal directed the deletion of this addition.

3. Direction by the CIT(A) to Issue a Notice under Section 148 for a Previous Assessment Year:
The Tribunal held that the CIT(A) had no jurisdiction to direct the Assessing Officer to reopen the assessment for Assessment Year 2011-12. The Tribunal referred to several case laws, including decisions of the Hon'ble Supreme Court and High Courts, which established that the appellate authority could only decide matters relating to the assessment year before it. The Tribunal expunged the direction issued by the CIT(A).

4. Confirmation of the Total Income Determined by the Assessing Officer:
The Tribunal found that the additions made by the Assessing Officer and confirmed by the CIT(A) were not in accordance with the provisions of Sections 68 and 69C of the Income Tax Act, as the transactions did not pertain to the year under consideration. The Tribunal directed the deletion of the additions and accepted the grounds of appeal raised by the assessees.

Conclusion:
The Tribunal allowed the appeals of the assessees, directing the deletion of the additions made by the Assessing Officer and confirmed by the CIT(A). The Tribunal also expunged the direction issued by the CIT(A) to reopen the assessment for a previous year. The appeals were partly allowed, and the order was pronounced on 31/01/2022.