2014 (3) TMI 1211 - HC - Income Tax

Scrutiny Assessment - Satisfaction of instructions issued by CBDT for selection of cases for scrutiny for the financial year 2007-08 - HELD THAT - Admitted for determination of following substantial questions of law which arise in this appeal i) Whether on the facts and in the circumstances of the case Hon ble ITAT New Delhi was right in law in quashing the notice as well as assessment made in the case of the assessee by holding that instructions issued by CBDT for selection of cases for scrutiny for the financial year 2007-08 are not shown to have been satisfied for assumption of jurisdiction whereas the case of assessee was rightly picked up for scrutiny as per guidelines contained in CBDT instruction for selection of cases for scrutiny? ii)Whether Hon ble ITAT New Delhi was right in law in quashing the notice as well as assessment made as the assessment for the year A.Y 2004-05 was framed by making disallowance of Rs.5, 60, 207/- and the appeal of the assessee was pending before CIT(A) and as per the CBDT instructions contained in Scrutiny Guidelines for F.Y 2007-08 in clause 2(v)(b) provided that all cases in which an appeal was pending before the CIT(A) against an addition/disallowance of Rs.5 lacs or above or the Department had filed an appeal before ITAT against the order of the CIT(A) deleting such an addition/ disallowance and an identical issue in arising in the current year be taken for scrutiny; the Hon ble ITAT misinterpreting the said instructions wrongly held that the instructions issued by CBDT are not shown to have been satisfied for assumption of jurisdiction? iii)Whether Hon ble ITAT New Delhi was right in law in quashing the notice as well as assessment made in the case of assessee without adjudicating upon the issues raised by the Revenue as well as the assessee by way of appeals filed before the Hon ble Tribunal? To be listed for final hearing on 22.05.2014.

Summary

Issues Involved:
1. Jurisdiction of ITAT New Delhi in quashing notice and assessment.
2. Compliance with CBDT instructions for selection of cases for scrutiny.
3. Adjudication of issues raised by Revenue and assessee.

Analysis:

Issue 1: Jurisdiction of ITAT New Delhi in quashing notice and assessment

The High Court considered whether the ITAT New Delhi was correct in quashing the notice and assessment made in the case of the assessee. The primary contention revolved around the satisfaction of CBDT instructions for assumption of jurisdiction. The Court examined the legality of the ITAT's decision and whether the case was rightly picked up for scrutiny based on CBDT guidelines. The Court sought to determine if the ITAT's actions were justified in light of the relevant legal provisions.

Issue 2: Compliance with CBDT instructions for selection of cases for scrutiny

Another significant issue addressed by the Court was the compliance with CBDT instructions for the selection of cases for scrutiny. The Court delved into the specifics of the CBDT guidelines for the financial year 2007-08 and scrutinized whether the case of the assessee met the criteria outlined in the instructions. The Court analyzed the interpretation of the instructions by the ITAT and assessed whether the ITAT's decision to quash the notice and assessment aligned with the CBDT guidelines.

Issue 3: Adjudication of issues raised by Revenue and assessee

The Court also examined whether the ITAT New Delhi was correct in quashing the notice and assessment without adjudicating upon the issues raised by both the Revenue and the assessee in their respective appeals before the Tribunal. The Court considered the importance of addressing the issues raised by both parties and evaluated whether the ITAT's decision to quash the notice and assessment without proper adjudication was legally sound.

In conclusion, the High Court scheduled the matter for final hearing to delve deeper into the substantial questions of law raised in the appeal. The Court's analysis focused on the jurisdiction of the ITAT, compliance with CBDT instructions, and the necessity of adjudicating upon the issues raised by both the Revenue and the assessee. The detailed examination of these issues aimed to ensure a fair and just resolution in the legal proceedings.