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TMI Blog2023 (10) TMI 774X X X X Extracts X X X X X X X X Extracts X X X X ..... ccordingly directed to be deleted. Addition u/s 14A r.w. Rule 8D - Mandation to record satisfaction - HELD THAT:- AO has simply invoked the provisions of Rule 8D of the Rules without recording any satisfaction as is mandatory by Section 14 before resorting to the provisions of Section 14A - recording of satisfaction is prerequisite for invoking Section 14A of the Act r.w. Rule 8D of the Rules failing which the addition made by the AO cannot be sustained. Accordingly, we set aside the order of Ld. CIT(A) and direct the AO to delete the addition. Appeal filed by the assessee is allowed. - Sri Rajesh Kumar, Accountant Member For the Assessee : Sh. K.M. Roy, A/R. For the Department : Smt. Nibedita Gupta, JCIT. ORDER PER RAJESH KUMAR, ACCOUNTANT MEMBER: This is an appeal preferred by the assessee against the order of Learned Commissioner of Income-tax (Appeals)-NFAC, Delhi [hereinafter referred to Ld. CIT(A) ] dated 28.07.2023 for the Assessment Year (in short AY ) 2014-15. 2. The issue raised in ground no. 1 is against the jurisdiction of the Assessing Officer (in short ld. 'AO') to add Rs. 1,01,714/- by the AO on account of delayed pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /c and also subsequent notice issued u/s 142(1) dated 20.02.2017 called for information on secured and unsecured loan deposits, we find that there is no dispute that even prior to conversion of limited scrutiny to complete scrutiny on 14.12.2017 the AO has started enquiries during the year even prior to that date which is evident from the notice dated 20.02.2017 wherein the information/details were called for qua secured and unsecured loans. Thus this is not in dispute that though the limited scrutiny was converted into complete scrutiny on 14.12.2017 and order was passed on 20.12.2017 whereas the issue in respect of secured and unsecured loans were enquired and examined by the AO much prior to that date. In our view this is incomplete disregard of the Instruction No. 5/2016 issued by CBDT on 14.07.2016 which provides that while proposing to take up complete scrutiny which was fixed for limited scrutiny, the AO shall form a reasonable view that there is a possibility of under-assessment of income if the case is not examined under complete scrutiny and that plea has to be on the existence of the credible material not merely on suspicion and conjecture or unreliable sources. We note ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the CBDT. The case of the assessee finds support from the decision of Co-ordinate Bench of Delhi in the case of Dev Milk Foods Pvt. Ltd. (supra) wherein it has been held as under: 6.0 We have heard the rival submissions and have also perused the material on record. After considering the entire factual matrix we first deal with the primary arguments of the Ld. Authorized Representative that the conversion of the case from limited scrutiny to completer scrutiny was not legally valid. The subject of conversion of case from limited scrutiny to complete scrutiny has been dealt with in CBDT Instruction No.5/2016 which is being reproduced herein under for the sake of convenience: 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion No. 7/2014, the said Instruction is applicable only in respect of the cases selected for scrutiny through CASS-2014 ii Whether the said Instruction is applicable to all cases selected under CASS: The said Instruction is applicable where the case is selected for scrutiny under CASS only on the parameter(s) of AIR/CIB/26AS data. If a case has been selected under CASS for any other reason(s)/parameter (s) besides the AIR/CIB/26AS data, then the said Instruction would not apply. iii Scope of Enquiry: Specific issue based enquiry is to be conducted only in those scrutiny cases which have been selected on the parameter(s) of AIR/CIB/26AS data. In such cases, the Assessing Officer, shall also confine the Questionnaire only to the specific issues pertaining to AIR/CIB/26AS data. Wider scrutiny in these cases can only be conducted as per the guidelines and procedures stated 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 ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es/ reasons forming the basis of the same. Before passing the final order against the proposed additions/disallowances due consideration shall be given to the submissions made by the assessee in response to the show cause notice. 5. The contents of this Instruction should be immediately brought to the notice of all concerned for strict compliance. 6. Hindi version to follow. 6.2 We have also gone through the CBDT letter bearing No. DGITVIF/HQ SI/2017-18 dated 30.11.2017 which states that the idea behind such stipulation was to enforce checks and balances upon the power of the Assessing Officer to do fishing and roving enquiries in cases selected for limited scrutiny etc. In this very letter, the CBDT has also highlighted the aspect of cryptic order sheet entries which according to the CBDT shows irresponsible, ad hoc and indisciplined working of an Officer of the Department. A perusal of the aforesaid instructions would show that the objective behind the issuance of these instructions is (i) to prevent possibility of fishing and roving enquiries; (ii) ensure maximum objectivity; and (iii) to enforce checks and balances upon the powers of an Assessing Officer. 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Hon ble Calcutta High Court in the case of Amal Kumar Ghosh reported in 361 ITR 458 (Cal.) discussed the purpose behind the CBDT Circulars. The relevant observations of the Hon ble Calcutta High Court are as under: ...Mrs. Gutgutia, learned Advocate submitted that the circulars are not meant for the purpose of permitting the unscrupulous assessees from evading tax. Even assuming, that to be so, it cannot be said that the department, which is State, can be permitted to selectively apply the standards set by themselves for their own conduct. If this type of deviation is permitted, the consequences will be that floodgate of corruption will be opened which it is not desirable to encourage. When the department has set down a standard for itself, the department is bound by that standard and cannot act with discrimination. In case, it does that, the act of the department is bound to be struck down under Article 14 of the Constitution. In the facts of the case, it is not necessary for us to decide whether the intention of CBDT was to restrict the period of issuance of notice from the date of filing the return laid down under section 143(2) of the I.T. Act. 6.6 The Co-ordinate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e scrutiny assessment proceedings would initially be confined only to issues and questionnaire, enquiry, investigation etc. would be restricted to such issues in the limited scrutiny. Only upon conversion of such case to complete scrutiny after following the procedure laid down as stated, the AO may examine the issues other than the issues involved in the limited scrutiny but in the present case the procedures were not followed and assessment was conducted in violation of this Instruction. In our opinion, the order passed by the AO is bad in law and cannot be sustained for the said reason. Accordingly we quash the assessment order as nullity and bad in law. Issue raised by the assessee in ground no. 1 is allowed. 5. Since the facts before us are materially same vis- -vis the facts of the case as decide by the Coordinate Bench (Supra). We therefore, are inclined to hold that the addition made by the AO is without jurisdiction and is accordingly directed to be deleted. Therefore, ground no. 1 raised by the assessee is allowed. 6. The issue raised in ground no. 2 is against the confirmation of addition of Rs. 45,516/- by Ld. CIT(A) as made by the AO u/s 14A of the Act r.w. Rule ..... X X X X Extracts X X X X X X X X Extracts X X X X
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