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TMI Blog2023 (7) TMI 1554X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer, Ward- 2(4), Raiganj travelled beyond his jurisdiction to frame the assessment order, for which the assessment order is bad-in-law and liable to be quashed. 1b. That the Assessing Officer Ward-2(4), Raiganj, Uttar Dinajpur made the additions to the tune of T 28,43,478/- in the point other than 'Limited Scrutiny' cannot be sustained in the eye of the law in absence of obtaining the prior approval from the Ld. Pr. CIT/CIT as directed by the CBDT Instruction no: 20/2015 dated 29th. December 2015. The assessment order passed by the Assessing Officer Ward-2(4), Raiganj is illegal, bad-in-law, void-ab-initio. 1c. That the facts and circumstances of the case, Assessing Officer, Ward-2(4), Raiganj, Uttar Dinajpur violating the CBDT Instruction in respect 'Limited Scrutiny' assessment, and passed the assessment order beyond his jurisdiction is illegal, arbitrarily, bad-in-law, void-ab-initio and liable to be quashed. 2. That on the facts and circumstances of the case the Ld. CIT (appeals) National Face Less Appeal Centre (NFAC) has erred to ignore the fact that the assessing officer has added back an amount of 28,43,478/- on the issues other than issue raised in the 'Limit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or delay in filing of appeal is the location of the assessee in a very remote village named Ramganj, Uttar Dinajpur, West Bengal. According to him the Advocates are not available who argue the matters before the ITAT and this is the sole reason for the delay in filing of the appeal. After hearing both the parties and the reasons stated before us, we are of the view that there is a reasonable cause for late filing of appeal. Accordingly, we condone the delay and adjudicate the issue in the following paras. 3. The issue raised in the first ground of appeal is against the order of Ld. CIT (A) upholding the order of Assessing Officer (in short ld. 'AO') wherein Ld. AO has made addition over stepping and going beyond his jurisdiction on the ground that the case was selected for limited scrutiny and the addition was made on account of gross profit which was not the subject matter of the limited scrutiny and that too without converting the limited scrutiny into complete scrutiny. 4. The facts in brief are that the assessee filed return of income on 29.03.2018 showing total income of Rs. 5,89,430/-. The assessee is engaged in the business of wholesale of paddy and other agri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that Ld. AO during the course of assessment proceedings noticed from the bank statement of the assessee with SBI, Kaliganj that the total credit entries were Rs. 7,84,62,187/- whereas in the trading account the assessee has shown the sales of Rs. 1,29,44,244/- only and as such the sales amounting to Rs. 6,55,17,943/- were found to be not disclosed or suppressed. Ld. A/R submitted that Ld. AO added a sum of Rs. 28,43,478/- to the income of the assessee by estimating the suppressed income @ 4.34% for those undisclosed sales of Rs. 6,55,17,943/-. The main thrust of Ld. A/R was that since the issue on which the addition was made was not the subject matter of the limited scrutiny, therefore, Ld. AO has apparently crossed the boundaries without seeking any approval from the competent authority to convert the limited scrutiny into complete scrutiny and therefore, the assessment framed is in violation of the CBDT Circular No. 5/2016 dated 14.07.2016. Ld. A/R in support of his arguments relied on the decision of Coordinate Benches namely: a) Sukhdham Infrastructures LLP Vs. ITO, Ward-40(2), Kolkata. ITA No. 2611/Kol/2019 b) Urban Improvement Co. (P) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 16 dated 14.07.2016 which provides for the procedure to be followed for conversion of limited scrutiny into the complete scrutiny. In our opinion, the action of Ld. AO is not sustainable as the same is in violation of the said circular. 10. The case of the assessee finds support from the judicial decisions passed by the Coordinate Benches as discussed above. In the case of Sukhdham Infrastructures LLP (supra) the Coordinate Bench held as under: "8. After hearing the rival contentions and perusing the material on record, and also notice dated 143(2) dated 28.07.2016 issued for limited scrutiny covering four issues namely) Interest expenses, ii) Income from Real Estate Business, iii) Sales Turnover mismatch and iv) Other expenses claimed in the profit and loss a/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 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ires, 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 issues besides the issue involved in limited scrutiny and AO shall also expeditiously conducted complete scrutiny in such cases. We note that in the present case there has been a complete violation of the Circular issued 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 lim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 further clarity on some of the issues emerging from the aforesaid Instruction, following clarifications are being made. i Year of applicability : As stated in the Instruction 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Assessing Officer shall issue an appropriate show-cause notice duly indicating the reasons for the proposed additions/disallowances along with necessary evidences/ 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. DG ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 scrutiny to complete scrutiny 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. 6.5 The 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in 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 be bad in law. We note that CBDT has in para 4 of the said instruction clarified that in a limited scrutiny, the 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 wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated 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 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 'Limited Scrutiny' cases shall remain confined only to the specific reasons/issues for which case has been picked up for scrutiny. Further, the scope of enquiry shall be restricted to the 'Limited Scrutiny' issues ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid down Standard Operating Procedure for handling of cases under 'Limited Scrutiny' which were selected through Computer Aided Scrutiny Selection in 'CASS Cycle 2015'. In these cases, it was stated that the general scope of enquiry in scrutiny proceedings should be restricted to the relevant parameters which formed the basis for selecting the case for scrutiny. However, in revenue potential cases, it was further provided that 'Complete Scrutiny' could be conducted, if there was potential escapement of income above a prescribed monetary limit, subject 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 ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12. The crux of the instructions are summarized as under: i. The questionnaire u/s 142(1) shall be confined only to the issue of limited scrutiny. ii. Approval of PCIT/CIT concern iii. PCIT/CIT concern shall grant approval in writing and after being satisfied on the merits of the case. iv. Such cases shall be monitored by range head. v. In limited scrutiny cases enquiry shall be restricted only on the issues of limited scrutiny. vi. Only after conversion of case to complete scrutiny and after following the procedure outlined above the A.O. may examined the issues other than limited scrutiny issues. v. The A.O. shall intimate the assessee regarding conducting complete scrutiny. vi. The provisions of Sec. 144A should be invoked in suitable cases. vii. To prevent the roving and fishing enquiries, such cases should be picked up for review and inspection by administrative authorities. 13. Reliance is also being placed in the order of the Co-ordinate Bench of ITAT in the case of CBS International Projects Pvt. Ltd. Vs ACIT, New Delhi in ITA No. 144/Del/2019 and order of the Hon'ble Jurisdictional High Court in the case of Best Plastics Pvt. Ltd. 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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