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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 ..... sclosed sales of Rs. 6,25,17,943/- which is apparently and arguably not the issue in the limited scrutiny.
In our opinion, the said action of Ld. AO is in violation of the CBDT Circular No. 5/2016 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.
The assessment framed by AO is invalid and is hereby quashed. Accordingly, the additional ground raised by the assessee is allowed. X X X X Extracts X X X X X X X X Extracts X X X X ..... ces that particular case shall be monitored by the Range Head Concerned. As there is no approval obtained from the concerned higher authority, the assessment order is not sustainable in the eye of the law, bad in law, void -ab-initio and liable to be quashed. 4. That the assessee filed his Return of Income with Tax Audit Report. The Assessing Officer, Ward -2(4), Raiganj without rejecting the books of accounts, passed the assessment order. The action of the Assessing Officer is illegal, arbitrarily, bad-in-law, void-ab-initio and liable to be quashed. 5. That the appellant craves leave to amend, add alter and/or withdraw any ground or grounds of appeal at the time of hearing and /or before disposal of appeal." 1.1. The assessee has also raised the following additional ground of appeal: "1. 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, vide F. No. 225/402/2018/ITA.II dated 28.11.2018 The assessment order passed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rnished all the accounts duly audited according to which the sales were Rs. 7,80,20,428/- and how this figure of Rs. 1,29,44,244/- has been substituted in place of turnover is not in the know of the assessee. However, the profit derived from the business of Rs. 5,61,704/- was correctly shown. Finally Ld. AO added Rs. 28,43,278/- to the income of the assessee in the assessment framed u/s 143(3) of the Act dated 24.12.2019 calculated @ 4.34% on the suppressed sale of Rs. 6,55,17,943/- without converting the limited scrutiny into complete scrutiny. 5. The said technical issue was not raised before Ld. CIT (A) and this was raised for the first time before us. This being a technical issue and all the facts qua the said issue are available on record and also in the paperbook filed by the assessee and thus, requires further verification of facts. Therefore, we are inclined to admit the same for adjudication by relying on the decision of National Thermal Power Co. Ltd. vs. CIT (1998) 229 ITR 383 (SC). 6. The Ld. A/R prima facie submitted before the Bench that the case of the assessee was selected for the limited scrutiny and the fact has been mentioned in the assessment order itself that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee @ 4.34% on suppressed sales which is on account of non-disclosure of sales which was found to be credited in the bank account of the assessee held with SBI, Kaliganj and therefore, the appeal of the assessee cannot be allowed on this ground that Ld. AO has made addition which was not on account of withdrawals of cash. Ld. D/R, therefore, prayed that the additional ground raised by the assessee may kindly be dismissed. 9. We have heard rival contentions and perused the material available on record. The undisputed facts are that the case of the assessee was selected for limited scrutiny under CASS and statutory notices were issued and duly served upon the assessee. The reason for which the case of the assessee was selected for limited scrutiny was cash withdrawals during FY 2016-17. We note that during the course of assessment proceedings the said issue was not discussed at all, however, Ld. AO examined the issue of suppression of sales by the assessee on the basis of bank account maintained with SBI, Kaliganj and found that the turnover of the assessee was only Rs. 1,29,44,244/- as against the total credits in the bank account amounting to Rs. 7,84,62,187/-. Accordingly, Ld ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 requirement of administrative approval from Pr. CIT/CIT/Pr. DIT/DIT, as prescribed in Para 3(d) of earlier 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 materia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibed in Para 3(d) of earlier 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. 6. To ensure proper monitoring in cases which have been converted from 'Limited Scrutiny' to 'Complete Scrutiny', it is suggested, that provisions of section 144A of the Act may be invoked in suitable cases. To prevent possibility of fishing and roving enquiries in such cases, it is desirable that these cases 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 u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her 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. c. These cases shall be completed expeditiously in a limited number of hearings. d. During the course of assessment proceedings in ' Limited Scrutiny ' 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 sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... short term capital loss on sale of shares purchased on 09.07.2014 and sold on 15.02.2015 . The purchase price of the shares has been stated at Rs 499,98,440 and sale price has been mentioned at Rs 79,03,676. The resultant loss of Rs 420,94,764 has been set off by the assessee against long term capital gains. This transaction appears to be suspicious in nature and probably this loss has been created to reduce the incidence of tax on long term capital gains discussed in para 3. This issue needs to be thoroughly examined to ascertain the genuineness of this loss" 6.4 We have also through the original order sheet entries, as were present in the assessment records and which had been submitted for our perusal by the Ld. Sr. Departmental Representative under our directions and it shows that there 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... crutiny assessments where assessment has been framed in direct conflict with the guidelines issued by the CBDT. 6.7 Therefore, on an overall view of the factual matrix as well as settled judicial position, we are of the considered opinion that the instant conversion of the case from limited scrutiny to complete scrutiny cannot be upheld as the same is found to be in total violation of CBDT Instructions No. 5/2016. Accordingly, it is our considered opinion that the entire assessment proceedings do not have any feet to stand on. Therefore, we hold the assessment order to be nullity and we quash the same." 9. Similarly the Co-ordinate Bench of Chandigarh in the case of Shri Vijay Kumar (supra) wherein it has been held as under: "3. The main contention of the Ld. Counsel for the assessee is that the Assessing 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 addition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, 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 conf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her 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. (Ankita Pandey) Under Secretary to Government of India 11. Further, Instruction No. 5 of 2016 dated 14.07.2016 reads as under: Instruction No. 5/2016 Government of India Ministry of Finance Department of Revenue Central Board of Direct Taxes North Block, New Delhi, the 14th of July, 2016 Subject: Direction regarding scope of enquiry in cases under 'Lim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 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. 5. It is also clarified that once a case has been converted to 'Complete Scrutiny', the AO can deal with any issue emerging from ongoing scrutiny proceedings notwithstanding the fact that the reason for such issue have not been included in the Note. 6. To ensure proper monitoring in cases which have been converted from 'Limited Scrutiny' to 'Complete Scrutiny', it is suggested, that provisions of section 144A of the Act may be invoked in suitable cases. To prevent possibility of fishing and roving enquiries in such cases, it is desirable that these cases 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. 8. The contents of this Instruction may be brough ..... X X X X Extracts X X X X X X X X Extracts X X X X
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