2024 (9) TMI 296 - HC - Income Tax

Scrutiny assessment - ITAT upholding the validity of jurisdiction assumed by the Assessing Officer to frame the assessment order u/s 144 - HELD THAT - We are of the considered opinion that even if case of the appellant was not liable to compulsorily scrutiny in terms of the aforesaid clause of CBDT guidelines, yet the case of appellant squarely fell within the purview of Sub-section (2) of Section 143 of the Act. AO having noticed that certain income had escaped assessment was well within its power to issue notice under Sub-section (2) of Section 143 of the Act and proceed to frame assessment under Section 144 of the Act. The order of assessment framed under Section 144 of the Act by the Assessing Officer in the case of the appellant, therefore, cannot be found fault with. Under Section 143 (2) of the Act, if a return has been furnished by the assessee under Section 139 or in response to a notice u/s 142 (1) and the Assessing Authority has a reason to believe that any claim of loss, exemption, deduction, allowance or relief made in the return is inadmissible, it shall serve a notice on the assessee specifying particulars of such claim of loss, exemption, deduction, allowance or relief and require him to produce any evidence or particulars specified therein or on which the assessee may rely in support of such claim. Similarly, under Sub-section (2) of Section 143 of the Act, if Assessing Officer considers it necessary or expedient to ensure that the assessee has not understated the income or has not computed excessive loss or has not under-paid the tax, it shall serve on the assessee a notice either to attend his office or produce any evidence on which the assessee may rely in support of the return. This is notwithstanding anything contained in Clause (1). The power conferred upon the Assessing Authority under Sub-section (2) of Section 143 of the Act is statutory in character and cannot be tinkered with or taken away by any order or instruction issued by the CBDT in the exercise of the power conferred upon it under Section 119 of the Act, for, issuance of such order or direction would be tantamount to requiring the AO to make or dispose of a particular case in a particular manner not prescribed by statute. Viewed from any angle, no illegality or infirmity in the order impugned passed by the ITAT, Amritsar.

Issues Involved:
1. Validity of jurisdiction assumed by the Assessing Officer to pass the assessment order.
2. Addition of undisclosed investment by passing a non-speaking order.
3. Addition on account of "Addition to fixed assets" when such assets are appearing in the balance sheet.
4. Whether the order passed by the Tribunal is in accordance with law.

Issue-Wise Detailed Analysis:

1. Validity of jurisdiction assumed by the Assessing Officer to pass the assessment order:

The appellant argued that the selection of their case for scrutiny was contrary to the CBDT guidelines, thus invalidating the jurisdiction of the Assessing Officer to issue notice under Section 143(2) and frame the assessment under Section 144 of the Act. The CIT (A) and ITAT held that the selection of a case for scrutiny is an administrative matter and does not relate to the jurisdiction of the Assessing Authority/Officer. Since the appellant did not object to the selection of the case for scrutiny and participated in the proceedings, this ground was not available to the appellant. The court concurred, stating that the CBDT guidelines are administrative and do not supplant the statutory provisions of Sections 143 and 144 of the Act. Thus, the exercise of jurisdiction by the Assessing Officer under Section 143(2) was valid, and the assessment framed under Section 144 was upheld.

2. Addition of undisclosed investment by passing a non-speaking order:

The appellant contended that the additions made on account of fixed assets were not tenable as these amounts were part of the books of accounts and balance sheet. The Assessing Officer found discrepancies in the balance sheet regarding the value of plant and machinery, leading to an addition of Rs. 13,29,206/- as undisclosed income. The explanation provided by the appellant was not accepted by the Assessing Officer, CIT (A), and ITAT. The court upheld the findings of the lower authorities, stating that the additions were based on factual determinations and supported by evidence.

3. Addition on account of "Addition to fixed assets" when such assets are appearing in the balance sheet:

The Assessing Officer made an additional finding of Rs. 6,99,679/- for the assessment year in question. The appellant's explanation that the assets were previously acquired on a hire basis and later purchased was not accepted. The court noted that all three forums below had conclusively determined the facts, and the additions were justified. The appellant's failure to raise objections at the appropriate stage further weakened their case.

4. Whether the order passed by the Tribunal is in accordance with law:

The court examined whether the ITAT's order was in accordance with the law. It was found that the ITAT had correctly upheld the Assessing Officer's and CIT (A)'s decisions, which were based on factual findings and adherence to statutory provisions. The appellant's reliance on judgments from various High Courts, including the Andhra Pradesh High Court, was distinguished based on the specific context and provisions of the CBDT circulars in question. The court emphasized that the CBDT guidelines are administrative and cannot override statutory powers conferred by the Act.

Conclusion:

The court dismissed the appeal, finding no merit in the appellant's arguments. It upheld the validity of the jurisdiction assumed by the Assessing Officer, the additions made on account of undisclosed investments, and the overall legality of the orders passed by the CIT (A) and ITAT. The court reiterated that CBDT guidelines, while binding on Assessing Officers, do not have the force of law to override statutory provisions.

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