2022 (5) TMI 943 - AT - Income Tax

Compulsory scrutiny - Assessment pertaining to survey under section 133A - AO Jurisdiction and authority to take up the case for compulsory scrutiny - Procedure and criteria for selection of scrutiny cases under compulsory manual - requirement of impounding of books of accounts only in the survey proceedings - HELD THAT - A plain reading of Clause (d)of para 3 of the instruction no. 10/2013 will lead to the only inference that all assessment pertaining to survey under section 133A are falling in the category of compulsory scrutiny subject to the exceptions provided therein. Thus the impounding of books of accounts and documents as mentioned in Clause (d) as a direct nexus with the survey under section 133A and therefore we do not find any substance in the contention of the learned DR that what is required is impounding of books of accounts not necessarily in the survey. Powers under section 131 cannot be linked with the powers to carry out the survey under section 133A of the Act and hence the books of accounts impounded by the Assessing Officer under section 131(3) cannot be regarded as impounding of the books of accounts in the proceedings under section 133A of the Act. Once there is no impounding of the books of accounts during the survey under section 133(A) of the Ac and the returned income of the assessee for the year under consideration is not less than the returned income of the immediate preceding year then the case would not fall in the category of compulsory scrutiny. AO has not taken any prior approval for issuing the notice under section 143(2) it is also pertinent to note that the notice under Section 143(2) was issued by the Assessing Officer on 11.6.2013 which is prior to the instruction no. 10/2013 dated 5.8.2013. The timing of issuing the instructions by the CBDT for the scrutiny of the cases is very relevant as the earliest limitation for issuing the notice u/s143(2) expires on 30th September as per the proviso to section 143(2) being other within six month from the end of the financial year in which the return was filed. The instructions were issued by the CBDT well in time and the AO was having the sufficient time even after the instructions dated 5.8.2013 to issue notice under section 143(2) however the AO issued notice under section 143(2) on 11.6.2013 which is much prior to the CBDT instructions issued for taking up the compulsory scrutiny during the financial year 2013-14. Even the criteria for selection of the returns/cases for scrutiny during the financial year 2012- 13 there is no much difference so far as the conditions prescribed in Clause (d) of the said instruction. Accordingly the notice issued by the AO under section 143(2) on 11.6.2013 is not in conformity with the criteria provided by the CBDT in the instruction no. 10/2013 as well as in the earlier instructions for the financial year 2012-13 because the mandatory conditions are not satisfied. The case was fixed for the hearing and disposal on the additional ground challenging the jurisdiction and powers of the Assessing Officer to initiate the compulsory scrutiny proceedings by issuing notice under section 143(2) of the Act. Since the conditions as prescribed in Clause D of para 3 of the instruction no. 13/2013 are not satisfied therefore the Assessing Officer was not having the jurisdiction and authority to take up the case for compulsory scrutiny. Accordingly the initiation of the compulsory scrutiny proceedings by issuing the notice under section 143(2) dated 11.6.2013 is invalid and consequently the assessment framed by the Assessing Officer is vitiated as invalid in law. Hence the impugned assessment framed by the Assessing Officer is liable to be quashed being passed without jurisdiction. Appeal of assessee allowed.

Summary

Issues Involved:
1. Jurisdiction of the Assessing Officer to initiate compulsory scrutiny assessment.
2. Validity of the survey proceedings and subsequent actions taken by the Assessing Officer.
3. Compliance with CBDT instructions for compulsory scrutiny.

Issue-wise Detailed Analysis:

1. Jurisdiction of the Assessing Officer to Initiate Compulsory Scrutiny Assessment:
The Tribunal initially dismissed the assessee's additional ground regarding the jurisdiction of the Assessing Officer. However, upon reconsideration, it was found that the Assessing Officer was not part of the authorized team to conduct the survey under section 133A of the Income Tax Act. This mistake was deemed apparent from the record, leading to the recall of the Tribunal's earlier order. The Tribunal emphasized that the failure to consider this crucial fact amounted to a mistake that needed rectification under section 254(2) of the Income Tax Act.

2. Validity of the Survey Proceedings and Subsequent Actions Taken by the Assessing Officer:
The Tribunal noted that the survey conducted on 6.1.2012 was interrupted and left unconcluded. The Assessing Officer later issued a notice under section 131, conducted a post-survey enquiry, and impounded the books of accounts on 27.1.2012. The Tribunal initially considered these actions as part of the survey proceedings. However, it was later clarified that the Assessing Officer was not authorized to conduct the survey, and the impounding of books was not part of the survey proceedings under section 133A. The Tribunal cited the Hon'ble Delhi High Court's judgment in the case of SKY View Consultants (P.) Ltd., which held that an Income Tax Officer without proper authorization could not exercise powers under section 133A(1).

3. Compliance with CBDT Instructions for Compulsory Scrutiny:
The Tribunal examined the CBDT instructions, specifically instruction no. 10/2013, which outlines the criteria for compulsory scrutiny. The instructions required that for a case to fall under compulsory scrutiny, there must be impounded books of accounts or documents during the survey under section 133A, and the returned income should not be less than the preceding year's income. The Tribunal found that the Assessing Officer issued the notice under section 143(2) on 11.6.2013, before the CBDT issued the relevant instructions on 5.8.2013. Moreover, the impounding of books of accounts by the Assessing Officer under section 131(3) could not be linked to the survey proceedings under section 133A. Consequently, the Tribunal concluded that the notice for compulsory scrutiny was issued without jurisdiction and was invalid.

Conclusion:
The Tribunal allowed the additional ground of the appeal, declaring the initiation of compulsory scrutiny proceedings by the Assessing Officer as invalid and without jurisdiction. Consequently, the assessment framed by the Assessing Officer was quashed. The order was pronounced in open court on 13.05.2022 at Allahabad.