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TMI Blog2019 (12) TMI 822X X X X Extracts X X X X X X X X Extracts X X X X ..... ctions issued by the CBDT. AO has taken up the issue and initiated proceedings for complete scrutiny without necessary approval with him. Therefore, the issue taken up by the AO regarding disallowance of deduction u/s 54B is prior to the necessary approval communicated to the AO and therefore, in the absence of communication in writing to the AO about the approval, the assumption of jurisdiction by the AO is invalid. Consequently, the addition made by the AO by denying the deduction u/s 54B is not sustainable and the same is deleted. - Decided in favour of assessee. - ITA No. 1419/JP/2019 - - - Dated:- 9-12-2019 - Shri Vijay Pal Rao, JM AND Shri Vikram Singh Yadav, AM For the Appellant : Shri Anil Goyal, CA For the Respondent : Shri P.P. Meena, DCIT- DR ORDER PER VIJAY PAL RAO, JM This appeal by the assessee is directed against the order of the ld. CIT(A)-3, Jaipur dated 22-10-2018 for the Assessment Year 2014-15. The assessee has raised the grounds alongwith Form No. 36 as under:- 1. The orders of the learned AO and CIT(A) are bad in law and against facts of the case. The learned AO has erred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction u/s 54B of the Act without having necessary approval of conversion of limited scrutiny to comprehensive scrutiny. 3.2 Ld.AR of the assessee submitted that the assessee filed her return of income on 30-09-2014 declaring total income of ₹ 36,60,870/-. The case of the assessee was selected for limited scrutiny under CASS. The AO issued notice u/s 143(2) of the Act on 18-09-2015 and thereafter also issued a notice u/s 142(1) on 4-07-2016 alongwith questionnaire on the issue of increase in capital. Subsequently vide notice u/s 142(1) of the Act dated 25-11-2016, the AO proposed to disallow the claim of deduction u/s 54B of the Act. The ld.AR of the assessee submitted that assumption of the jurisdiction by the AO to scrutinize the claim of deduction u/s 54B of the Act without approval of the competent authority to convert the case from limited scrutiny to complete scrutiny is invalid. Consequently, the assessment framed by the AO is liable to be quashed The ld.AR further contended that there is nothing in the assessment order to show that the AO has sought any permission or approval for conversion of limited scrutiny to complete scrutiny. Therefore, the initiation of proceedi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Pr. CIT then the conversion was in accordance with the provisions of law and initiation of proceedings by the AO for full scrutiny is valid. 3.4 In rejoinder, the ld.AR of the assessee has submitted that the alleged proposal and approval accorded by the Pr. CIT is an afterthought and pre-dated. The AO has not mentioned anything in the assessment order regarding any proposal for conversion of limited scrutiny to full scrutiny and the assessee was also not intimated about the said proposal of conversion of limited scrutiny to full scrutiny. Therefore, these proposal and approval are nothing but an afterthought documents prepared by the department. He has referred to the letter dated 28-11- 2016 of Addl. CIT which was received by the AO on 29-11-2016. Therefore, initiation of proceedings by issue of notice u/s 142(1) for full scrutiny is without the alleged approval communicated and in the knowledge of the AO. 3.5 We have considered the rival submissions as well as the relevant materials available on record. There is no dispute that the case of the assessee was selected for limited scrutiny under CASS whereby the AO initiated proceedings by issue notice u/s 14 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sure that: a. there exists credible material or information available on record for forming such view; b. this reasonable view should not be based on mere suspicion, conjecture or unreliable source; and c. there must be a direct nexus between the available material and formation of such view. 4. It is further clarified that in cases under 'Limited Scrutiny', the scrutiny assessment proceedings would initially be confined only to issues under 'Limited Scrutiny' and questionnaires, enquiry, investigation etc. would be restricted to such issues. Only upon conversion of case to 'Complete Scrutiny' after following the procedure outlined above, the AO may examine the additional issues besides the issue(s) involved in 'Limited Scrutiny'. The AO shall also expeditiously concerned regarding conducting 'Complete Scrutiny' in such cases. Thus the AO is duty bound to follow the instructions in case limited scrutiny assessment proceeding are proposed to be converted into complete scrutiny and without following said procedure and necessary approval of the competent authority conducting an enquiry on the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted in Instruction No. 7/2014. iv. Reason for selection: In cases under scrutiny for verification of AIR/CIB/26AS data, the Assessing Officer has to intimate the reason for selection of case for scrutiny to the assessee concerned. 3. As far as the returns selected for scrutiny through CASS-2015 are concerned, two type of cases have been selected for scrutiny in the current Financial Year-- one is Limited Scrutiny and other is Complete Scrutiny . The assessees concerned have duly been intimated about their cases falling either in Limited Scrutiny or Complete Scrutiny through notices issued under section 143(2) of the Income-tax Act, 1961 ( Act ). The procedure for handling Limited Scrutiny cases shall be as under: a. In Limited Scrutiny cases, the reasons/issues shall be forthwith communicated to the assessee concerned. b. The Questionnaire under section 142 (1) of the Act in Limited Scrutiny cases shall remain confined only to the specific reasons/issues for which case has been picked up for scrutiny. Further, the scope of enquiry shall be restricted to the Limited Scrutiny issues. c. These cases shall be completed ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ministry of Finance Department of Revenue (CBDT) Room No. 143E, North-Block, New-Delhi Dated the 26th of September, 2014 To AU Pr. Chief-Commissioners of Income-tax/Chief- Commissioners of Income-tax A All Pr. Directors-General of Income-tax/Directors-General of Income-tax Sir/Madam, Subject: - Scope of enquiry in cases selected for scrutiny during the Financial Year 2014-2015 on basis of AIR/C1B /26AS mis-match regarding It has come to the notice of the Board that during the scrutiny assessment proceedings some of the AOs are routinely calling for information which is not relevant, for enquiry into the issues to be considered. This has been causing undue harassment to the taxpayers and has also drawn adverse criticism from several quarters. Further, feedback and analysis of such orders indicates that many times the core issues, which formed the basis of selection of the case for scrutiny were not examined properly. Such instances primarily occurred in cases selected for scrutiny under Computer Aided Scrutiny Selection ('CASS') for verification of specific information obtained from third party sour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case. Cases so taken up for detailed scrutiny shall be monitored by the it. CIT/Addl. CIT concerned. 5. The contents of this Instruction should be immediately brought to the notice of all concerned for strict compliance. 6. Hindi version to follow. (Rohit Garg) Deputy Secretary to the Government of India 16. A perusal of the aforesaid instruction shows that the Assessing Officer can widen the scope of scrutiny even if it is selected for scrutiny assessment under CASS. However, the condition precedent for such action of the Assessing Officer is that he has to seek prior approval of the higher authorities. A perusal of the assessment order shows that the Assessing Officer has not mentioned as to when the permission from the PCIT was sought to make further enquiries in the case of the assessee. Considering the facts of the case in totality, in the light of the CBDT Instructions mentioned hereinabove, qua notice u/s 143(2) of the Act, we are of the considered opinion that the 15 assessment order so framed by the Assessing Officer is not in consonance with Instruction of the CBDT and, therefore deserves to be quashed. The order of the l ..... X X X X Extracts X X X X X X X X Extracts X X X X
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