2023 (10) TMI 921 - HC - Income Tax

Limited scrutiny u/s 143(2) - AO jurisdiction in completing the assessment on grounds which were not subject matter of the limited scrutiny - HELD THAT - Tribunal rightly allowed the assessee s appeal on the said issue. This Court had an occasion to consider a somewhat similar issue in the case of Sukhdham Infrastructures LLP 2023 (8) TMI 888 - CALCUTTA HIGH COURT held that scheme of assessment as provided under Section 143 of the Act is a complete code by itself and the circumstances under which the power under sub-section (2) of Section 143 could be invoked has been clearly spelt out and on a reading of sub-section (3) of Section 143, it s evidently clear that on the day specified in the notice issued under sub-section (2), or as soon afterwards as may be, after hearing such evidence as the assessee may produce and such other evidence as the Assessing Officer may require on specified points, and after taking into account all relevant material which he has gathered, the Assessing Officer shall, by an order in writing, make an assessment of the total income or loss of the assessee, and determine the sum payable by him or refund of any amount due to him on the basis of such assessment. Therefore, the question of part of the provision being procedural is an incorrect interpretation of the scheme provided u/s 143 of the Act. Decided against revenue.

Summary

Issues involved:
The appeal by the revenue under Section 260A of the Income Tax Act, 1961 against the order passed by the Income Tax Appellate Tribunal for the assessment year 2015-16.

Issue 1: Disallowance of carry forward of losses of earlier years

The revenue contended whether the Tribunal committed substantial error in law in deleting the disallowance of carry forward of losses of earlier years. The Tribunal overruled the objection raised by the Department regarding the additional ground raised by the appellant, stating that the issue is jurisdictional and can be raised at any point. The Tribunal found that the issue decided by the Assessing Officer was not part of the limited scrutiny for which the assessment was directed. The Tribunal referred to CBDT Instruction No. 5 of 2016 and concluded that the Assessing Officer exceeded his jurisdiction. The Court upheld the Tribunal's decision, citing a similar case where the revenue's contention was rejected.

Issue 2: Jurisdiction of Assessing Officer in limited scrutiny assessment

The main issue was whether the Assessing Officer exceeded his jurisdiction in completing the assessment on grounds not subject to limited scrutiny. The appellant argued that the assessee participated in the proceedings after being put on notice by the Assessing Officer. The Court noted the CBDT Instruction dated 30th November, 2017, emphasizing compliance with mandatory requirements in limited scrutiny cases. The Court agreed with the Tribunal's decision to allow the assessee's appeal, citing a similar case where the revenue's appeal was dismissed. The Court concluded that the revenue failed to make a case for interference with the Tribunal's order and dismissed the appeal.