2023 (12) TMI 1128 - AT - Income Tax

Scope of limited scrutiny - Addition u/s. 69A - Addition towards Interest paid to Bank of Baroda - HELD THAT - It is a fact that the assessee maintains a cash credit account with Bank of Baroda which is in the nature of current account. From the bank statement we observe that the opening balance as on 1/4/2017 is Rs. 9,67,51,144.25 and the closing balance as on 31/3/2018 is Rs. 8,28,19,048.25. It is also noticed that the amount debited for Rs. 4,52,58,180/- on 29/12/2017 and even after such debit, the balance is within the limits which indicates that the assessee has serviced the interest portion. It is also seen from the paper book submissions of the Ld. AR that the bank has issued a Certificate dated 27/5/2022 regarding the receipt of interest from the CC Account. In view of the above facts of the case, we have no hesitation to delete the addition made by the Ld. Revenue Authorities u/s. 43B of the Act. We therefore allow this ground raised by the assessee. Limited scrutiny proceedings for examining business loss - In case, if the Ld. AO wants to take up the case for complete scrutiny, first the Ld. AO has to convert the limited scrutiny into complete scrutiny case and then he may take up the case for complete scrutiny with the prior approval of the Ld. Pr. CIT / CIT concerned after being satisfied about the issue of converting it into a complete scrutiny. In the instant case, we find that no such approval has been granted to the Ld. AO. We therefore find that the Ld. AO has travelled beyond his jurisdiction in treating the cash deposits u/s. 69A of the Act which is not valid in law and therefore we are inclined to delete the addition made by the Ld. Revenue Authorities and allow the ground raised by the assessee.

Summary

Issues Involved:
1. Condonation of delay in filing appeal before the Tribunal due to ill health of the assessee.
2. Disallowance of interest expenditure and cash deposits by the Assessing Officer leading to appeal before the Tribunal.

Summary:
Issue 1: Condonation of delay
The appeal was filed by the assessee against the order of the Ld. Commissioner of Income Tax (Appeals) with a delay of 24 days. The assessee explained the delay was due to the ill health of a senior citizen partner and other reasons. The Tribunal considered the reasons as a 'reasonable and sufficient cause' and condoned the delay, proceeding to adjudicate the appeal on merits.

Issue 2: Disallowance of interest expenditure and cash deposits
The assessee, a partnership firm, filed its return showing a loss. During limited scrutiny assessment, the Assessing Officer disallowed interest expenditure and treated cash deposits as unexplained income. The first appellate authority upheld part of the disallowances, leading to the appeal before the Tribunal. The issues raised were disallowance of interest paid to Bank of Baroda and addition under section 69A of the Income Tax Act.

The Tribunal observed that the interest payment to Bank of Baroda was serviced by the assessee, as evidenced by bank statements and certificates. Therefore, the disallowance of interest expenditure was deleted. Regarding the addition under section 69A, the Tribunal noted that it was beyond the jurisdiction of the Assessing Officer in a limited scrutiny case. As no approval was granted to convert it into a complete scrutiny case, the addition was deemed invalid in law and was deleted.

In conclusion, the Tribunal allowed the appeal of the assessee, pronouncing the judgment on 22nd December 2023.