2023 (7) TMI 786 - AT - Income Tax

Scope of Limited scrutiny u/s 143(2) - disallowance u/s 40A(7) - Whether the AO has travelled beyond the scope of limited scrutiny and made additions in respect of three issues (subject matter of challenge before the Tribunal) which never formed part of the issues identified for limited scrutiny - HELD THAT - The assessee submitted that the AO framed assessment beyond the scope of limited scrutiny is not correct as the proposal for addition in respect of disallowance u/s 40A(7) of the Act was deleted and the Assessing Officer has restricted its comments only on the issue of disallowance under Section 40A(7) of the Act which is in consonance with limited scrutiny assessment. Therefore, ground no.1 is dismissed. Disallowance u/s 36(1)(va), addition u/s 37 and addition under other sources - The said disallowances were made as per order dated 13.11.2019 which is intimation under Section 143(1) of the Act and the same was not challenged by the assessee before the CIT(A) as well as before the Tribunal. This amounts to acceptance of the disallowance on the intimation under Section 143(1) itself and the same cannot be taken at this juncture as the appealable order has not commented on the said disallowance or not given any reasons on the said disallowances. It is merely mentioning the earlier disallowances. The assessee has not challenged the intimation under Sub-section-1 of Section 143 before the CIT(A) and, therefore, scope of the appeal before the Tribunal is restricted to limited scrutiny only. Therefore, the disallowance made by the Assessing Officer in respect of intimation under Section 143(1) of the Act cannot be taken in the present appeal. Therefore, ground no.2 is dismissed.

Summary

Issues involved:
The issues involved in this judgment include challenging the assessment order under Sections 143(3), 143(3A), and 143(3B of the Act, and disputing the additions made to the returned income, specifically related to late deposit of employees' contributions towards PF & ESIC, disallowances under Sections 36, 37, and other sources, and the scope of limited scrutiny assessment.

Assessment Order Challenge:
The Assessee challenged the assessment order passed by the CIT(A) for the Assessment Year 2018-19, arguing that it was bad in law due to procedural irregularities. The Assessee contended that the assessment order was passed without following due procedure, lacking concrete reasons for additions made, and exceeding the scope of scrutiny assessment notice. The Assessee sought to have the assessment order quashed on these grounds.

Additions to Returned Income:
Regarding the additions totaling Rs. 4,40,100/- to the returned income, the Assessee disputed the actions of the CIT(A) in confirming the additions made by the Assessing Officer. The Assessee argued that the additions related to late deposits of employees' contributions towards PF & ESIC were erroneous, as the contributions were deposited on the due date but showed a later credit date due to technical issues. The Assessee also contested the additions under Section 37 and other sources, claiming that the CIT(A) failed to address these issues adequately despite relevant submissions during the appellate proceedings. The Assessee requested the deletion of these additions.

Limited Scrutiny Assessment:
The Assessee contended that the Assessing Officer exceeded the scope of limited scrutiny assessment by making additions beyond the identified issue. The Assessee argued that the assessment order should be quashed based on established principles that restrict the Assessing Officer from expanding the scope of limited scrutiny. The Assessee cited relevant decisions and CBDT circulars to support this argument.

Judgment:
The Tribunal dismissed the appeal of the Assessee, ruling that the assessment order was not beyond the scope of limited scrutiny and that the additions to the returned income were in line with the intimation under Section 143(1) of the Act, which the Assessee had not challenged previously. Therefore, the Tribunal upheld the additions made by the Assessing Officer and the CIT(A), concluding that the appeal was restricted to the issues within the limited scrutiny assessment. The Tribunal also noted a general ground raised by the Assessee but did not require adjudication on it. Ultimately, the Tribunal dismissed the appeal of the Assessee, pronouncing the order on 9th June 2023.