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TMI Blog2018 (5) TMI 1855X X X X Extracts X X X X X X X X Extracts X X X X ..... ction with the jurisdiction of the AO in matters relating to extension of areas of scrutiny to the ones than the authorised ones by the Board. Board circular do not permit the AO from converting the limited scrutiny case like the present one to the unlimited one without the approval of Administrative Commissioner of Income Tax. AO did not mention the reasons for not taking such an administrative approval before making the said addition. As such, the Pune Bench of the Tribunal has already taken the favourable view in these matters in favour of the assessee. We do not understand why AO failed to take approval for such conversion. Considering the settled nature of the issue, we allow the legal ground raised by the assessee vide Ground No.1 and hold that the assessment order passed by the AO is bad in law and void-ab initio. Appeal of the assessee is partly allowed. - ITA No.05/PUN/2016 - - - Dated:- 4-5-2018 - SHRI D.KARUNAKARA RAO, AM AND SHRI VI KAS AWASTHY, JM For the Appellant : Dr. V.L. Jain For the Respondent : Dr. Vivek Aggarwal ORDER PER D. KARUNAKARA RAO, AM : This appeal is filed by the assessee against the order of CIT(A)-1, Nashik, dated 08- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on this account. However, in the assessment proceedings, AO noticed that the assessee claimed the interest of ₹ 1,89,991/- on loan availed from Jalgaon Janta Sahakari Bank, Deopur, Dhule Branch, Dhule. Further, he also noticed that there is claim of deduction u/s.54 of the Act in respect of long term capital gains. At the end of the assessment proceedings, the AO disallowed the said interest income and held that the loan was not utilised as per the law. Further, the claim of deduction u/s.54 was also denied holding that the sale of the lands constitutes an adventure in the nature of trade. In the appeal before First Appellate authority, CIT(A) dismissed the appeal of the assessee and confirmed the additions made by the AO. 4. Before us, aggrieved with the order of CIT(A), the assessee raised the grounds on merit as well as legal ground. The legal ground raised vide Ground No.1 relates to the issue of making additions by the AO outside the said limited scrutiny under Computer Aided Scrutiny Selection (in short CASS ) for the A.Y. 2011-12 without obtaining the written approval of the concerned Commissioner of income-tax. The issue for the limited scrutiny is to examine the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 21-12-2016 6. On the other land, Ld. DR for the Revenue submitted that circular No.225/26/2006-ITA.II(PL), dated 08-09-2010 issued by the CBDT does not override the provisions of the statute. Elaborating the same, Ld. DR submitted that if the AO is authorised to scrutinise the accounts of the assessee and claims in the returns as per the provisions of section 143(2) of the Act and the CBDT Circular should not create any hurdles on the AO in matters of scrutiny assessment once notice u/s.143(2) of the Act is issued. Therefore, it is the case of the Ld. DR that AO has all powers to examine any issue which he deems fit despite the restrictions imposed by the Board on the AOs. For this proposition, he relied on the judgment of Hon ble Bombay High Court in the case of Banque Nationale De Paris Vs. CIT 237 ITR 518. 7. During the rebuttal time, on the issue of overriding powers of the AO vide the directions issued by the CBDT through the circular, Ld. Counsel for the assessee submitted that it is settled legal proposition that the AOs are under obligation to abide with the letters/circulars issued by the CBDT in this regard and the same are issued for a class of assessees. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of income exceeding ₹ 10 lakhs (for non-metro charges, the monetary limit shall be ₹ 5 lakhs) on any other issue(s) apart from the AIR/CIB/26AS information based on which the case was selected under CASS requiring substantial verification, the case, may be taken up for comprehensive scrutiny with the approval of the Pr.CIT/DIT concerned. However, such an approval shall be accorded by the Pr.CIT/DIT in writing after being satisfied about merits of the issue(s) necessitating wider and detailed scrutiny in the case. Cases so taken up for detailed scrutiny shall be monitored by the Jt. CIT/Addl.CIT concerned. 10. We also perused the CBDT letter dated 08-09-2010 which deals with selection of cases for scrutiny on the basis of data in AIR returns and subsequent assessment proceedings. The instructions given in the said letter reads as under : 2. The above mentioned guidelines have been reconsidered by the Board and it has been decided that the scrutiny of such cases would be limited only to the aspects of information received through AIR. However, a case may be taken up for wider scrutiny with the approval of the administrative Commissioner, where it is felt that a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y return for scrutiny after recording reasons and after obtaining the approval of CCIT/DGIT. In this regard, he pointed out that no such approval was received from the CCIT. Our attention was drawn to the letter dated 13.05.2013 issued from the office of ACIT, Circle (1), Sangli, wherein the Assessing Officer informed the assessee that there was no record to show that previous approval of CCIT was obtained to select the cases manually for scrutiny for assessment year 2008-09. The learned Authorized Representative for the assessee stressed that where the selection was not through CASS but was manually made, then the previous approval of the CCIT was compulsory. Referring to the order of CIT(A), the assessee pointed out that the CIT(A) states that the case of assessee was selected through CASS and also mentions that the contention of assessee would have been acceptable had the case been manually selected for scrutiny. The learned Authorized Representative for the assessee further placed reliance on the ratio laid down by the Hyderabad Bench of Tribunal in Smt. Nayana P. Dedhia Vs. ACIT (2003) 86 ITD 398 (Hyd) for the proposition of binding nature of CBDT circulars upon the IT authori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CCIT / DGIT. Since no such approval was received from the CCIT / DGIT, the Assessing Officer had no jurisdiction to proceed with the scrutiny assessment in the case of assessee. The assessee had raised the issue before the Assessing Officer and CIT(A) but the facet of argument before the authorities below was that the case of assessee could not be selected for scrutiny under CASS since in the case of Survey, certain conditions were laid down and the assessee having fulfilled the said conditions, then no scrutiny could takes place in the hands of assessee. 14. In the facts of the case, Survey under section 133A of the Act was carried out at the premises of assessee on 30.01.2008. During the course of Survey, the assessee made declaration of additional income of ₹ 45,93,467/- which was offered as additional income over and above the income to be returned for the year under consideration. The assessee claims that it had disclosed the said additional income in its return of income wherein the return was filed declaring income of ₹ 81,64,598/-. However, the perusal of computation of income reflected that net profit shown in Profit Loss Account was ₹ 11,62,084/- an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers of Income Tax Department and the same could not be disclosed even under the RTI Act, 2005. The said application under the RTI Act and the order under the RTI Act are placed at pages 20 to 22 of the Paper Book. The assessee has also placed the copy of guidelines issued for scrutiny, copy of which is placed at page 23 of Paper Book. The said guidelines were for use of Income Tax Department, wherein selection criteria was provided which was applicable to all Income Tax returns at all stations. The guidelines vis- -vis survey cases are provided therein and vide clause (g), it is provided that the Assessing Officer may select any return for scrutiny after recording reasons and after obtaining the approval of CCIT / DGIT. The cases under this category should be selected, if there are compelling reasons and cases not selected under CASS. These cases are watched by the CCIT / CIT for the quality of assessment. The said guidelines are as per F.No.225/93/2009/ITA.II. The reply under RTI also refers to the said guidelines and admittedly, these guidelines were used to select the case of assessee for scrutiny. Further, the assessee also filed on record letter dated 13.05.2013 issued by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Assessing Officer is bad in law. Hence, we hold so. Since the assessment order is held to be bad in law, the issue on merits becomes academic and the grounds of appeal raised by both the assessee and the Revenue in their respective appeals are infructuous. The appeal of assessee is thus, allowed and the appeal of Revenue is dismissed. Therefore, the Board circular do not permit the AO from converting the limited scrutiny case like the present one to the unlimited one without the approval of Administrative Commissioner of Income Tax. AO did not mention the reasons for not taking such an administrative approval before making the said addition. As such, the Pune Bench of the Tribunal has already taken the favourable view in these matters in favour of the assessee. We do not understand why AO failed to take approval for such conversion. Considering the settled nature of the issue, we allow the legal ground raised by the assessee vide Ground No.1 and hold that the assessment order passed by the AO is bad in law and void-ab initio. Consequently, we find adjudication of other grounds by the assessee on merits becomes academic. Therefore, the said grounds are dismissed are aca ..... X X X X Extracts X X X X X X X X Extracts X X X X
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