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TMI Blog2022 (5) TMI 613X X X X Extracts X X X X X X X X Extracts X X X X ..... rticle 14, or not. This, to our mind, would be the only valid challenge as the Board has wide powers, both u/s. 119(1), to which reference was made by Sh. Mishra, as well as u/s. 119(2), to which it was not, conferred on it for furtherance of the objects and administration of the Act. Reference in this context may profitably be made to the decision in Pahwa Chemicals (P.) Ltd.[ 2005 (2) TMI 136 - SUPREME COURT] wherein the Hon'ble Apex Court clarified that the Instructions by the Board u/s. 37B (of the Central Excise Act, 1944), which is akin to s. 119 of the Act, are circumscribed by the consideration stated in section 37B itself, i.e., in furtherance of the provisions of the Act. It is, as such, difficult to contend, as Shri Mishra does, that Board Instruction 04/2016 violates section 143(2) of the Act, which provision finds specific reference in section 119(2)(a). Instruction is in breach of or ultra vires section 119(1)(a) as it requires the AO to make an assessment in a particular case - The words in a particular manner qualify not only the words dispose of a particular case but also the words making a particular assessment , preceding the same. The ld. couns ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n assessee located in seven cities specified therein (and which does not include Jabalpur) and, two is for not being assessed electronically. The ground itself is misconceived. This decides the vaguely stated Gd. 5, giving it the meaning stated by Sh. Mishra which translates into a legal ground, liable for admission. Further, we observe this to be also the subject matter of the Additional Gd. 10, not pleaded for admission by Sh. Mishra, which though gets also decided alongwith. Assessee claimed a higher expenditure under the head Other Expenses (OE), i.e., vis-a-vis the preceding year - The scope of the limited scrutiny could be, as per the Board Instruction, extended by the AO only upon seeking approval for the same from the competent authority (PB-1, pgs. 39, 54), and which has not been - we cannot agree more with the assessee. The expenditure, for an aggregate of Rs. 38,43,334 afore-noted, also qualifies as direct trading expenditure, and ought to have, like-wise, i.e., as that on paper consumption, excluded from the purview of the limited scrutiny, as the assessee s return was selected only for the limited purpose of verifying OE claimed per its profit loss account, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hearing dated 20.8.2021 and 24.9.2021. He, however, conceded to the assessee not responding to these notices as well as the first notice dated 08.01.2021. The matter, he concluded, be restored to the file of the first appellate authority for a decision on merits; its adjudication being sans the consideration of the assessee s said reply. Discussion/Findings 3.1 There is, thus, admittedly no response by the assessee to 3 out of the 4 notices of hearing issued to it by the first appellate authority. What, though, is more surprising is that having made its submissions on 17.2.2021, all that the assessee was required to do, in response to the subsequent notices, was to draw attention to the same, so that the same was considered, and any further explanation or query, if any, sought or raised, resulting in a proper and complete consideration of the assessee s case. It is also unfortunate that the reply/s furnished by the assessee in response to notice/s of hearing is glossed over and not referred to in the impugned order, signifying its consideration. 3.2 Be that as it may, the question of remission to the file of the first appellate authority (FAA) arises only where the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, which is, again, the same as before the AO. The only addition, admittedly made by the assessee per its written submissions during the first appellate proceedings, is the tabulation of other expenses for the preceding three years, which are stated to have been accepted in the past, so there was no reason for disallowance thereof for the current year. The argument is misconceived on the very face of it. There has been admittedly (by Shri Mishra during hearing) been no assessment u/s. 143(3) (or even u/s. 144) for any of the said three years, so that there is no question of any acceptance of the assessee s claim by the Revenue. Even otherwise, each year is an independent unit of the assessment, and the principle of res judicata is not applicable to the proceedings under the Act (New Jehangir Vakil Mills Co. Ltd. v. CIT [1963] 49 ITR 137 (SC); M.M. Ipoh v. CIT [1968] 67 ITR 106 (SC)). The written submissions also make out the case of the expenses included in other expenses being, to the extent specified therein, not being in fact so, but trading expenses , and wrongly mentioned (on account of a bona fide mistake) as other expenses , so that the same be allowed. There is, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubject to the verification procedure under the Act by issue of notice u/s. 143(2), is not contemplated by law. Shri Mishra would, to buttress his point, take the Bench through a series of decisions, reading out relevant parts thereof, viz. CIT v. Bal Krishna Malhotra [1971] 81 ITR 759 (SC); Om Trading Company Ors. v. ITO [1991] 188 ITR 641 (Kar); CIT v. Nayana P. Dadhia [2004] 270 ITR 572 (AP); Janta Metal Works v. ITO [1990] 186 ITR 458 (All); Harbans Kaur v. ITO [1993] 204 ITR 685 (P H); and Gujarat Gas Ltd. v. Jt. CIT [2000] 245 ITR 84 (Guj). 4.2 Shri Halder, the ld. Sr. DR, would, on the other hand, plead that none of the cited decisions is applicable inasmuch as formulating a criteria, based on relevant filters as identified by the Board for selecting cases for scrutiny, is well within the powers of the Board u/s. 119. 5. I have heard the parties, and perused the material on record. 5.1 The short question arising is if the formulation of guidelines, based on broad identifiable filters, for selection of cases for scrutiny by the assessing authority, is ultra vires the powers of the Board u/s. 119 of the Act. This is as, admittedly, the notice u/s. 143(2) dated 02/8/2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s 132 or 132A of the Act. (iv) Return filed in response to notice under section 148 of the Act. (v) Cases where registration u/s 12AA of the IT Act has not been granted or has been cancelled by the CIT/DIT concerned, yet the assessee has been found to be claiming tax-exemption under section 11 of the Act. However, where such orders of the CIT/DIT have been reversed/set-aside in appellate proceedings, those cases will not be selected under this clause. (vi) Cases of entities, being scientific research association or university, college or other institution , having approval under section(s) 35(1)(ii)/35(1)(iii) of the Act. (vii) Cases in respect of which specific and verifiable information pointing out tax-evasion is given by any Government Department/Authority. However, before selecting a case for scrutiny under this criterion, Assessing Officer shall be required to take prior administrative approval from the concerned jurisdictional Pr. CIT/Pr.DIT/CIT. 2. Computer Aided Scrutiny Selection (CASS): Cases are also being selected under CASS-2016 on the basis of broad based selection filters. List of such cases has been/is being separately intimated by the Pr.DGIT( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Deputy-Secretary to the Government of India 5.2 The question posed, as I see it, has two aspects to it. One, that the Board Instruction 04/2016, dated 13/7/2016, to the extent it advocates or furnishes guidelines under CASS 16 for selection of scrutiny of tax returns, is ultra vires the Constitution of India inasmuch as it usurps the power reserved under the Act for an assessing authority thereunder. I have re-phrased the question thus as inasmuch as the AO has, in issuing notice u/s. 143(2), which is under challenge, acted in accordance with the directions issued u/s. 119 of the Act, binding on him, his action can be faulted with only where the relevant Instruction itself is not valid in law. Now, clearly, the question cannot be answered by the Tribunal, a creation of the statute itself, but only by a Constitutional Court, i.e., the Hon'ble High Court or the Hon'ble Supreme Court of India, under its writ jurisdiction. The Hon'ble Court shall, in appropriate proceedings, examine if the said Board Instruction satisfies the test of intelligible classification and on that basis decide if it offends the principle of equality before law enshrined in Article 14, or not. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... certain monetary limits), etc., the Board is requiring the assessing authority to make an assessment in a particular manner. It is only, for the efficient management of the Act, facilitating the selection of a return for scrutiny. Nothing more and, nothing less. 5.3 None of the decisions cited is on the point or in any manner contradicts or repudiates what stands stated here-in-above, which conforms to the well-established law, with, rather, and on the contrary, to the extent in relation to the Board Circular/Instruction, actually supportive of the same. The decisions listed at para 4.1 of this order are the only decisions referred to by Shri Mishra during hearing, so as to be possibly responded to by Shri Halder representing the Department and, indeed, form part of the Tribunal s record. This explains the non-reference to any other case law on the file. So, however, the several compilations filed by the assessee include decisions by the Hon'ble Apex Court as well as the Hon'ble Jurisdictional High Court. It is, therefore, despite the same being not referred to and forming part of the arguments/record, deemed proper to considered the same inasmuch as they would be in an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... validly issued on the basis of the address mentioned in PAN (refer: Pr. CIT v. I-Ven Interactive Ltd. [2019] 418 ITR 662 (SC)), change in which, where so, is required to be intimated by it u/s. 139A of the Act. In fact, the objection itself can be raised only within 30 days of the service of notice u/s. 143(2), i.e., by 01/9/2016 (section 124(3)). Thirdly, the resolution of the matter in case the assessee is not satisfied with the AO s disposal of his objection, timely raised, is through the administrative channel, and not through the appellate procedure, law on which is again well-settled (s.124(2); R.B. Seth Teomal v. CIT [1959] 36 ITR 9 (SC)). 7. Vide Gd. 5, the assessee claims being aggrieved as no opportunity was given to him, to quote the relevant Ground: to make compliance of assessment as per the scheme of scrutiny of the case. On being asked during hearing to explain the meaning thereof, Shri Mishra, admitting to have not pressed this Ground before the first appellate authority, would submit that the assessee, vide letter dated 24/11/2017 (PB-1, pg. 51), opted for being assessed on the basis of e-filing account, which was though rejected by the AO (on 27/11/2017) on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,24,650), as well, for which he would take the Bench through Trading Account (at PB- 1, pgs. 5-6). The scope of the limited scrutiny could be, as per the Board Instruction, extended by the AO only upon seeking approval for the same from the competent authority (PB-1, pgs. 39, 54), and which has not been. I cannot agree more with the assessee. The expenditure, for an aggregate of Rs. 38,43,334 afore-noted, also qualifies as direct trading expenditure, and ought to have, like-wise, i.e., as that on paper consumption, excluded from the purview of the limited scrutiny, as the assessee s return was selected only for the limited purpose of verifying OE claimed per its profit loss account, and scope of which has not been extended. The assessee being in the business of newspaper publishing, the said expenditure, a direct cost of its operations, stands rightly debited to the trading account, in contradistinction to the profit loss account, i.e., considering the assessee trade. As for the balance expenditure of Rs. 7.56 lacs (i.e., 46.00 - 38.44), the assessee s claim of the vouchers being not available as the same are small expenses, is specious and untenable. During hearing Shri M ..... X X X X Extracts X X X X X X X X Extracts X X X X
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