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TMI Blog2023 (4) TMI 29X X X X Extracts X X X X X X X X Extracts X X X X ..... 12.2017, which is bad in law and the entire proceedings under Section 143(3) of the Act is liable to be quashed. 2. a) That on the facts and in the circumstances of the case and in law, Ld. CIT(A) has erred in confirming the action of the AO in treating an aggregate sum of Rs. 80,00,000/- i.e. (Rs. 15,00,000/- from Varmita Developers (wrongly mentioned as 25,00,000/-) + Rs. 25,00,000/- from Oversure Vincom Pvt. Ltd. + Rs. 40,00,000/- from Silvertoss Vanijya Pvt. Ltd.) received as loan as unexplained cash credit under section 68 of the Act which is erroneous, arbitrary and bad in law. b) That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in confirming the action of AO and concluded that the assessee has failed to prove identity, genuineness and creditworthiness in respect of the three parties when all the corroborating evidences were placed on record. 3. That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in confirming the action of AO with respect to the addition of Rs. 42,747/- being 20% of the gardening expenses incurred by the appellant. 4. That on the facts and in the circumstances of the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scrutiny which is against the provisions of Act. The Ld. CIT(A) noted these facts in para 4 of the appellate order however no clear-cut findings were given on this issue while the addition was deleted on merit. The Ld. CIT(A) noted in this order that assessee had objected to conduct of broad enquiries covering loan creditors prior to 14.12.2017 which was selected for limited scrutiny on the issues other than the loan creditors. The Ld. CIT(A) noted that post 14.12.2017 limited scrutiny were converted into complete scrutiny and thus the AO has exceeded jurisdiction by calling for details and carrying out enquiries qua loan creditors even much before 14.12.2017. The Ld. CIT(A) duly recorded in the appellate order and admitted that the AO issued requisitions and notice as if he was in a proceedings of complete scrutiny even though it was a limited scrutiny. The relevant finding has extracted below: "5. I have perused the Remand Report, various submissions of the appellant and the assessment folder. As regards the scrutiny alleged to have been conducted beyond the scope of limited scrutiny, I do see that the AO issued requisitions and notices as if he was in a proceeding of complete ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quashed. In defense of his arguments the Ld. A.R. relied on the decision of the Co-ordinate Bench of Chandigarh in the case of Shri Vijay Kumar vs. ITO in ITA No. 434/Chad/2019 for AY 2014-15 dated 12.09.2019 and the decision of Co-ordinate Bench of Delhi in the case of Dev Milk Foods Pvt. Ltd. vs. Addl. CIT in ITA No. 6767/Del/2019 for AY 2015-16 dated 12.06.2020. The Ld. A.R submitted that in view of the decisions as referred to above the assessment framed by the AO is bad in law and may kindly be quashed. 7. The Ld. D.R on the other hand relied heavily on the order of authorities below by submitting that though the notice was issued u/s 142(1) of the Act dated 20.02.2017 calling for information in respect of secured and unsecured loans while admitting that the case was converted into complete scrutiny on 14.12.2017. The ld. D.R submitted that what is required during the assessment proceedings converting the limited scrutiny into complete scrutiny was duly done by the AO and therefore the arguments of the AO has nor force and the appeal of the assessee may kindly be dismissed on this legal issue. 8. After hearing the rival contentions and perusing the material on record, and a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rlier Instruction dated 29.12.2015, 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 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 intimate the taxpayer concerned regarding conducting 'Complete Scrutiny' in such cases. Instruction no. 4 provides only complete scrutiny after following the procedure laid down above and the AO may examine the additional is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses should invariably be picked up while conducting Review 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 29th 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. 7/2014dated 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 furth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... crutiny ' 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 accordance with the principle of natural justice. In this regard, the Assessin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 InstructionNo.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 scrutiny to complete scrutiny aimed at making fishing enquiries. We also note that the Ld. Pr. Commissioner of Inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Officer while making the impugned additions has exceeded his jurisdiction. That the case of the assessee was selected for limited scrutiny issue i.e. regarding security transaction. The Assessing Officer could not find any reason to make any addition in respect of issue for which the limited scrutiny was done. However, the Assessing officer made the certain other additions for which the Assessing Officer did not have any jurisdiction. 4. The Ld. D.R has been fair enough to admit that the impugned additions have been made by the Assessing Officer on certain other issues, whereas, the case of the assessee was selected for the purpose of limited scrutiny relating to security transactions." Considering the facts of the assessee's case and also the ratio laid down drawn in the above decisions and also the CBDT Instruction No. 5/2016, we are of the considered view that the AO has exceeded his jurisdiction in enquiring into those issues beyond the scope of limited scrutiny even prior to the date of conversion which is in clear violation of mandate given by CBDT in the said Circular and has been held by the Co-ordinate Bench of Delhi in the case of Dev Milk Foods Pvt. Ltd. (supra) to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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