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TMI Blog2020 (6) TMI 317X X X X Extracts X X X X X X X X Extracts X X X X ..... med as mandated in the said CBDT Instruction No.5/2016 in an objective manner and secondly merely suspicion and inference is the foundation of the view of the AO. There is no direct nexus brought on record by the AO in the said proposal and, therefore, it is very much apparent that the proposal of converting the limited scrutiny to complete scrutiny was merely aimed at making fishing enquiries. We also note that the Ld. Pr. Commissioner of Income Tax has accorded the approval in a mere mechanical manner which is in clear violation of the CBDT Instructions No.20/2015. The Co-ordinate bench in PAYAL KUMARI [ 2011 (2) TMI 1578 - ITAT CHANDIGARH] , has held that even Section 292 BB of the Act cannot save the infirmity arising from infraction of CBDT Instructions dealing with the subject of scrutiny assessments where assessment has been framed in direct conflict with the guidelines issued by the CBDT. The instant conversion of the case from limited scrutiny to complete scrutiny cannot be upheld as the same is found to be in total violation of CBDT Instructions No.5/2016. - Decided in favour of assessee. - ITA No.6767/Del/2019 - - - Dated:- 12-6-2020 - Shri Sudhanshu Srivastav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion and the shares pertained to companies under investigation, a further questionnaire was issued to the assessee in which assessee was confronted on the issue on non-genuine capital loss. The assessee responded to the questionnaire and, thereafter, further queries were again raised by issuing another questionnaire which was also responded to by the assessee. The assessee requested the AO to be given an opportunity to cross-examine those persons on whose statements the AO was proposing to rely and conclude that the short term capital loss was not genuine. However, the AO noted that such an opportunity was not to be given. 2.2 The Assessing Officer went on to hold that the purchase of shares did not take place and the transactions were sham in view of documentary evidences, circumstantial evidences, human conduct and preponderance of probabilities. The Assessing Officer observed that the entire exercise was a device to avoid tax. The Assessing Officer (AO) completed the assessment u/s 143(3) of the Income Tax Act, 1961 (hereinafter called as the Act ) after making an addition of ₹ 4,20,94,764/- on account of disallowance of short term capital loss, ₹ 8,41,895/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icion only and for verification only, on basis of invalid approval of PCIT-3, entire addition on a/c disallowance, of short term capital loss of ₹ 420,94,764 ₹ 8,41,895 as alleged unexplained commission expense is not as per CBDT instructions (refer instruction no 19 20/2015 of29/12/2015) on the subject and ergo ultra vires to provisions of the Act. Other grounds on merits- Qua disallowance of short term capital loss (STCL) of ₹ 420,94,764/- addition for ₹ 8,41,895 as alleged unexplained commission expense (₹ 42936,659) 3. That order passed by Ld AO dated 30/12/2017 and further order passed by Ld CIT A dated 18/06/2019 are bad in law in as much as disallowance of ₹ 42936,659/- (break up: disallowance on a/ of short term capital loss on share sale of ₹ 420,94,764/- ₹ 8,41,895/- as alleged unexplained commission expense) is made in most perfunctory and light hearted manner which is highlighted elaborately in next ground by outlining striking features of extant case. 4. That order passed by Ld AO dated 30/12/2017 and further order passed by Ld CIT A dated 18/06/2019 are bad in law in as much as addition of S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and in law, Ld CIT-A erred in sustaining the action of Ld AO in making addition of ₹ 42936,659/- without appreciating that basis of findings of the lower authorities is suspicion and human probabilities only which is never converted to reliable and trustworthy material and entire assessment order is passed on sole basis of borrowed satisfaction and without any independent application of mind (like a rubber stamp order). 7. That on the facts and in the circumstances of the case and in law, Ld CIT-A erred in sustaining the action of Id AO in making addition of ₹ 42936359/- without appreciating that no opportunity is given to the assessee to be confronted with back material relied extensively in impugned orders like investigation wing report etc and no opportunity to cross examine the revenue s witness was given despite specific written request in this regard made to Ld AO/CIT-A. 8. That on the facts and in the circumstances of the case and in law, Ld CIT-A erred in sustaining the action of Ld AO in making addition of ₹ 429.36,659/- without appreciating that in identical facts in various orders relief has been granted to assesses accepting loss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee and submitted that it was evident from the computation that nowhere was the details of the loss incurred in shares disclosed company-wise. It was submitted that the details of the companies in which the assessee had incurred loss in the shares transaction was communicated only by the assessee at the time of the assessment proceedings and also in the statement recorded by the Assessing Officer of the assessee company s Director. The Ld. Authorized Representative submitted that, thus, it was very much apparent that the Department had converted the limited scrutiny into complete scrutiny only for making roving enquiries and that the Department did not have a reasonable view as mandated in CBDT Instruction No.5/2016 dated 14.07.2016 and, thus, there was inherent weakness and deficiency in the action to convert the limited scrutiny into full scrutiny. 4.1 It was also pointed out that the, admittedly, there was no adverse inference with respect to long term capital gains as the entire long term capital gains had been offered to tax. The Ld. Authorized Representative drew our attention to the aforesaid CBDT Instruction wherein it has been stated that while forming ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as selected for scrutiny in April, 2016. Therefore, it was apparent that this conversion was not within the sprit and meaning of CBDT Instructions No.20/2015 5/2016. 5.0 In response the, Ld. SR. DR submitted that the Department had followed the CBDT Instructions in letter in spirit while converting this case from limited scrutiny to complete scrutiny. The Ld. Sr. DR, while referring to the contents of the proposal dated 05.10.2017 and approval dated 10.10.2017, submitted that there was nothing wrong with them and that they satisfied the conditions laid down in the CBDT instructions. The Ld. SR. Departmental Representative also defended the action of the Lower Authorities in not allowing cross examination of the persons whose statements had been relied upon and placed reliance on certain judicial precedents for the same. The Ld. SR. Departmental Representative submitted that quasi judicial adjudications do not require any opportunity to provide cross examination or opportunity to lead evidence. The Ld. SR. Department Representative also argued that Investigation Wing is a part of the Department itself and not a third party and, therefore, the Assessing Officer was completely ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or Inspection by the administrative authorities. 7. The above Instruction shall be applicable from the date of its issue and would cover the cases selected under CASS 2015 which are pending scrutiny cases as well as cases selected/being selected under the CASS 2016. 6.1 Earlier preceding instruction in this regard was 20/2015 which states as under: Instruction No. 20/2015 Government of India Ministry of Finance Department of Revenue Central Board of Direct Taxes North Block, New Delhi, the 29 th of December, 2015 Subject: Scrutiny Assessments-some important issues and scope of scrutiny in cases selected through Computer Aided Scrutiny Selection ('CASS')-reg .- The Central Board of Direct Taxes ('CBDT'), vide Instruction No. 7/2014 dated 26 09.2014 had clarified the extent of enquiry in certain category of cases specified therein, which are selected for scrutiny through CASS. Further clarifications have been sought regarding the scope and applicability of the aforesaid Instruction to cases being scrutinized. 2. In order to facilitate the conduct of scrutiny assessments and to bring f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . During the course of assessment proceedings in ' Limited Scrutiny ' cases, if it comes to the notice of the Assessing Officer that there is potential escapement of income exceeding Rs. five lakhs (for metro charges, the monetary limit shall be Rs. ten lakhs) requiring substantial verification on any other issue(s) , then , the case may be taken up for 'Complete Scrutiny ' with the approval of the Pr. CIT/CIT concerned . However , such an approval shall be accorded by the by the Pr. CIT/CIT in writing after being satisfied about merits of the issue(s) necessitating 'Complete Scrutiny' in that particular case. Such cases shall be monitored by the Range Head concerned. The procedure indicated at points (a), (b) and (c) above shall no longer remain binding in such cases. (For the present purpose, 'Metro charges' would mean Delhi, Mumbai, Chennai, Kolkata, Bengaluru, Hyderabad and Ahmedabad). 4. The Board further desires that in all cases under scrutiny, where the Assessing Officer proposes to make additions or disallowances, the assessee would be given a fair opportunity to explain his position on the proposed additions/disallowances in accordan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted for our perusal by the Ld. Sr. Departmental Representative under our directions and it shows that there is not an iota of any cogent material mentioned by the Assessing Officer which enabled him to have reached the conclusion that this case was a fit case for conversion from limited scrutiny to complete scrutiny. We have also gone through the statement of assessee s Director Mr. Rohit Verma which was recorded on 18.07.2017 i.e., after the conversion of the case and even in his statement nothing adverse is coming out vis. a vis. the impugned transactions. If the proposal of the Assessing Officer dated 05.10.2017 and the approval of the Ld. Pr. Commissioner of Income Tax dated 10.10.2017 are examined on the anvil of paragraph 3 of CBDT Instruction No.5/2016, it is very much clear that no reasonable view is formed as mandated in the said CBDT Instruction No.5/2016 in an objective manner and secondly merely suspicion and inference is the foundation of the view of the Assessing Officer. We also note that there is no direct nexus brought on record by the Assessing Officer in the said proposal and, therefore, it is very much apparent that the proposal of converting the limited ..... X X X X Extracts X X X X X X X X Extracts X X X X
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