2022 (12) TMI 1521 - AT - Income Tax

Condonation of delay in filing appeal before Tribunal - appeal is time-barred by 101 days - assessee submitted that the reason for delay in filing appeal was due to a communication gap between the CA of the assessee representing the matter before Ld. CIT(Appeals) and M/s Chajjed and Co. who were to argue the case before ITAT - HELD THAT - The Vishakhapatnam ITAT in the case of Smt. Samanthapudi Lavanya 2021 (5) TMI 26 - ITAT VISAKHAPATNAM held that where assessee was under bona fide impression that its appeal had been filed by accountant, but came to know fact of not having filed appeal when there was pressure from department for payment of demand, delay of 492 days in filing appeal was to be condoned, in the interests of justice. Accordingly, looking into the facts of the instant case, and the period of delay under consideration, in the interests of justice, we are hereby condoning the delay in filing the appeal. The Ld. Departmental Representative has also not objected to condonation of delay in filing of appeal by the assessee. Scope of limited scrutiny - grounds of appeal included disallowance of commission and purchases made by AO - The assessment order has travelled beyond the scope of notice issued u/s 143(2) of the Act, we are in agreement with the contention that the assessment order was initiated as limited scrutiny assessment and it is settled law that unless the limited scrutiny assessment is converted into full scrutiny assessment, after taking due approval as mandated under the Act, such assessment order has to be restricted in scope to the issues on which the notice was issued/assessment was initiated. In our considered view, the term interest expenses cannot be so general so as to encompass within its scope disallowance under section 14A as well. Further, we observe that the commission payment in the instant facts were disallowed on the ground that the same were bogus in nature and not on account of related party mismatch as mentioned in the notice under section 143(2) of the Act. Accordingly, the assessment order has been passed in respect of issues which were not the subject matter of limited scrutiny assessment notice section 143(2) of the Act. In the case of Chaitanya Bansibhai Nagori 2022 (6) TMI 225 - ITAT AHMEDABAD held that in limited scrutiny, AO cannot go beyond dispute raised in section 143(2) notice. In the case of Dharmin N. Thakkar 2022 (6) TMI 255 - ITAT AHMEDABAD ITAT quashed the assessment order on the ground that the order was passed beyond the scope of limited scrutiny as there was no question the said notice for the limited scrutiny under section 143(2) of the Act, for the cash balance. In the case of Rajesh Jain 2005 (4) TMI 629 - ITAT CHANDIGARH ITAT held that the jurisdiction of the Assessing Officer in such cases where the notices are issued for limited scrutiny is confined to the claims he has set out in the notice for verification. This position of law was further elaborated by the CBDT in its Circular No. 8/2002, dated 27-8-2002. Since the assessment order has travelled beyond the scope of notice issued under section 143(2) of the Act, the additional Grounds of Appeal of the assessee is allowed.

Summary

Issues:
1. Condonation of delay in filing appeal.
2. Jurisdiction of assessment order under limited scrutiny assessment.

Analysis:

Issue 1: Condonation of delay in filing appeal
The appeal was filed by the assessee against the order of the Commissioner of Income Tax (Appeals) for the assessment year 2015-16. The appeal was time-barred by 101 days, but the assessee sought condonation of the delay. The assessee attributed the delay to a communication gap between the Chartered Accountant (CA) and the legal representatives. The ITAT considered the case of Smt. Samanthapudi Lavanya v. ACIT, where a delay of 492 days was condoned due to a bona fide impression that the appeal had been filed. The ITAT, in the interests of justice, condoned the delay as the Departmental Representative did not object to it.

Issue 2: Jurisdiction of assessment order under limited scrutiny assessment
The assessee contended that the assessment order exceeded the scope of limited scrutiny assessment as specified in the notice under section 143(2) of the Act. The grounds of appeal included disallowance of commission and purchases made by the Assessing Officer (AO). The AO's additions were not in line with the issues mentioned in the notice for limited scrutiny assessment. The ITAT observed that the assessment order strayed beyond the scope of the notice, which is impermissible in law. The ITAT referred to various judicial precedents to support the contention that the assessment order must align with the issues specified in the limited scrutiny notice. The ITAT held that the assessment order was beyond the jurisdiction of the AO for limited scrutiny assessment and set it aside, allowing the additional Grounds of Appeal raised by the assessee.

In conclusion, the ITAT allowed the appeal of the assessee, emphasizing that the assessment order had exceeded the scope of the limited scrutiny notice, leading to the setting aside of the assessment. The judgment highlighted the importance of adhering to the specified issues in a limited scrutiny assessment to maintain the jurisdiction of the Assessing Officer.