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TMI Blog2022 (9) TMI 973X X X X Extracts X X X X X X X X Extracts X X X X ..... mbai erred in concluding that the purpose of "Development Fund" is vague and not specific and does not have concrete plan for setting aside the amount as stated above. b. The Appellant duly furnished all the requisite details that were sought by the Learned Assessing Officer and there was no notice that was unanswered by the Appellant. The Appellant had also explained the use of the term Development Fund and the rationale behind the same and that how the amount of Rs.2,50,00,000/- accumulated u/s 11(2) Act for AY 2015-16 is ultimately utilized in AY 2017-18 towards the various projects carried out by the Appellant. c. The reduction in block of assets with respect to the sale of flat of Rs. 34,70,955/- and sale of motor vehicle of Rs.8,48,026/- was duly explained to the Learned Assessing Officer during the course of assessment proceedings and only after due verification and perusal of all the documents and materials on record and after duly understanding the facts and rationale of the Appellant, did the learned Assessing Officer pass the order u/s 143(3) of the Act for AY 2017 18. d. (d) The Appellant had informed the Learned CIT (Exemptions), Mumbai that the reduction in CWIP ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted by action of the Ld. CIT in terms of section 263 of the Income-tax Act, 1961 (in short 'the Act') for holding the assessment order dated 16/11/2019 passed by the Assessing Officer as erroneous insofar as prejudicial to the interest of the Revenue. 4. Briefly stated facts of the case are that : (i) the assessee is a registered charitable trust and for the year under consideration filed return of income on 26/10/2017 declaring Nil income, along with income and expenditure account, balance sheet and audit report in Form No. 10B of the Income-tax Rules, 1962. The return of income filed by the assessee was selected for limited scrutiny for verification of payment made to be specified persons. The Assessing Officer accordingly issued notice under section 143(2) of the Act, which was duly served upon the assessee. Thereafter the Assessing Officer issued notice under section 142(1) dated 8/02/2019 calling for detailed information from the assessee. The assessee filed reply of the queries asked vide letter dated 20/02/2019. After considering the submission of the assessee the Assessing Officer, accepted the returned income, vide assessmentorder dated 16/11/2019 passed under section 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ages 1 to 113) containing interalia, notices issued by the Assessing Officer during assessment proceedings, reply of the same by the assessee, notices issued in proceeding under section 263 of the Act and reply of the assessee by the same. 7. We have heard rival submission of the parties and perused the relevant material on record. With reference to additional ground that under the limited scrutiny assessment, the Assessing Officer was authorized only to examine the limited issue of verification of payment to specified persons in terms of section 13 of the Act. The Ld. counsel referred to the query No. 16 issued vide notice u/s 142(1) dated 08/02/2019 (PB- 14). In response, the assessee filed reply at serial No. 15 of reply dated 20/02/2019(PB-18). Thus according to the Ld. counsel of the assessee, the limited point on which the case was selected for scrutiny, was duly verified by the Assessing Officer during scrutiny proceedings. 7.1 The Ld. counsel of the assessee referred to instruction No. 7 of 2014 dated 26/09/2014 issued by the Central Board of Direct Taxes (CBDT) for restricting the scope of the enquiry during assessment proceedings to verification of particular aspects on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T dated 11/03/2021 has been accordingly quashed by the ITAT vide order dated 05/05/2022 in ITA No. 686/Mum/2021. 8. The Ld. DR on the other hand submitted that the CBDT instructions referred by the assessee for verification of the limited scrutiny cases and converting of limited scrutiny case to complete scrutiny case relates to CASS cycle 2015 and 16 only and no instruction has been filed by the assessee relevant to the selection of the instant case, which falls in CASS cycle 2017 & 2018, therefore Ld. CIT is justified in holding that no enquiry was made by the Assessing Officer on the issues other than the issues under the limited scrutiny reasons. 8.1 In the rejoinder, the Ld. counsel filed a copy of the instruction issued with regard to CASS Cycle 2017 and 2018 for scope of enquiry in limited scrutiny cases. 9. We have heard rival submission of the parties on the issue in dispute and perused the relevant material on record. In the case, return of income filed by the assessee for year under consideration was selected for limited scrutiny for verification of payment made to the specified persons. The Ld. counsel has referred to the query issued by the Assessing Officer vide no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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." 9.5 Regarding the scope of enquiry in limited scrutiny cases, the CBDT vide letter dated 29/12/2015 has further clarified as under: "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 ' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the approval of administrative Pr. CIT/CIT/Pr.DIT/DIT. 2. In order to ensure that maximum objectivity is maintained in converting a case falling under 'Limited Scrutiny' into a 'Complete Scrutiny' case, the matter has been further examined and in partial modification to Para 3(d) of the earlier order dated 29.12.2015, Board hereby lays down that while proposing to take up 'Complete Scrutiny' in a case which was originally earmarked for 'Limited Scrutiny', the Assessing Officer ('AO') shall be required to form a reasonable view that there is possibility of under assessment of income if the case is not examined under Complete Scrutiny'. In this regard, the monetary limits and equirement of administrative approval from Pr. CIT/CIT/Pr.IT/DIT, as prescribed in Para 3(d) of earlier Instruction dated 9.12.2015, shall continue to remain applicable. 3. Further, while forming the reasonable view, the Assessing Officer would ensure 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Limited Scrutiny cases selected under CASS cycles 2017 and 2018 in the context of information provided by any law-enforcement/ intelligence/regulatory authority or agency redg.- Under CASS cycles 2017 and 2018, some of the cases were selected for scrutiny as a "Limited Scrutiny" case. It Limited Scrutiny' cases, Assessing Officer cannot travel beyond the issues) for which the case was selected. The idea behind such a stipulation is to enforce checks and balances upon powers of an Assessing Officer to do fishing and roving enquiries in cases under 'Limited Scrutiny'. 2. In this regard, several representations have been received in the Board from the field authorities that in several cases under 'Limited Scrutiny', information pointing out specific tax-evasion for the relevant year, given by any lawenforcement/intelligence/regulatory authority or agency is available with the concerned Assessing Officer, however, in view of the restrictive nature of enquiry/investigation which can be made in 'Limited Scrutiny" cases, the same presently cannot be acted upon. 3. The matter has been considered by the Board. In order to enable proper enquiry/ investigation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2018 cycles. It is reiterated that the grounds mentioned in para 3 above are the only grounds on which a 'Limited Scrutiny' case of CASS 2017 and 2018 cycles can be expanded in its scope and that too only to the extent of the issues referred to by the law-enforcement/intelligence/regulatory authority or agency. 7. It may be brought to the notice of all for necessary compliance." 10.1 In view of above instruction of the CBDT, it is evident that Ld. Assessing Officer was not authorized to travel beyond the enquiry on the issue for which case was selected for scrutiny and enquiry on the issues as observed by the Ld. CIT in order under section 263 of the Act on the issue of non-verification of utilization of the accumulated fund and reduction in sale of asset and capital work in progress, were beyond the scope of the limited scrutiny. The Ld. DR has not brought before us whether any permission was sought by the Assessing Officer for converting the limited scrutiny case into a completely scrutiny case. 10.2 Further, we find that Tribunal in the case of Balvinder Kumar (supra) after analyzing CBDT instructions on the issue of the scope of limited scrutiny held that it would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ic reasons/issues for which case has been picked upforscrutiny.Further, the scope of enquiry shall be restricted to the Limited Scrutiny' issues. CBDT Instruction No. 5/2016 "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 comers ion 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 intimate the taxpayer concerned regarding conducting 'Complete Scrutiny' in such cases." CBDT Letter dated 30.11.2017 J Instances have come to notice of CBDT where some Assessing Officers are travelling beyond their jurisdiction while making assessments in Limited scrutiny cases by initiating inquiries on new issues without complying with mandatory requirements of the relevant CBDT Instructions dated 26-9-2014, 29-12-2015 and 14-7-2016. These instances have been viewed very seriously by the CBDT and i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6/Mum/2019 it was held that,- "As a matter of fact, what cannot be done directly cannot be done indirectly. Accordingly, in terms of our aforesaid observations, we are of the considered view that as the A.O had aptly confined himself to the issue for which the case of the assessee was selected for limited scrutiny, therefore, no infjrmity can be attributed to his order for the reason. that he had failed to dwell upon certain other issues which were clearly beyond the realm of the reason for which the case of the assessee was selected for limited scrutiny as per the AIR information. We thus not being able to concur with the view taken by the f J r. CIT that the order passed by the A.O under Sec. 143(3), dated 10.10.2016is erroneous, therefore, set aside his order and restore the order passed by the A.O. As wehave quashed the order passed by the Pr. CIT under Sec. 263 on the ground of invalid assumption of jurisdiction by him, therefore, we refrain from adverting to and therein adjudicating the contentions advanced by the Id. A. Ron the merits of the case, which thus are left open." 11. Similarly, is the view taken consistently by the benches of this Tribunal in the other two cases ..... X X X X Extracts X X X X X X X X Extracts X X X X
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