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2023 (12) TMI 1117 - AT - Income TaxScope of limited scrutiny - mandation of recording satisfaction before extending/expanding scope of scrutiny - case of the Assessee was selected for ‘limited scrutiny’ for the purpose of verifying Large interest expenses relatable to exempt income (u/s 14A) and High interest expense as compared to business turnover, but the additions have been made other than the reasons for which the limited scrutiny has been selected for, which is not only illegal, arbitrary but also contrary to the circulars of the CBDT - HELD THAT:- As found that the AO travelled beyond the issues involved in the “limited scrutiny” and made enquiries and the additions u/s 68 on account of unsecured loan, on account of unaccounted expenditure and further made addition on account of interest expenses. We find it handy to refer the instructions of CBDT issued in respect of examination of issue other than the reasons taken up in limited scrutiny case. Assessment order passed by the Assessing Officer disregarding the instructions of the CBDT are liable to the set aside and no substantial of law arises. CBS International Projects Pvt. Ltd. [2019 (2) TMI 1748 - ITAT DELHI] and Best Plastics Pvt. Ltd. [2006 (4) TMI 53 - HIGH COURT, DELHI] Considering CBDT Circular and the Judicial Precedents, we hold that the Assessing Officer can widen the scope of scrutiny even the case is selected for limited scrutiny under CASS, however, the condition precedent for such widening of the scope is that the Assessing Officer has to seek prior approval of the authorities mentioned. Such prior approval and the permission of the PCIT is lacking in the instant case. There was no satisfaction about the merits of the issue which necessitated complete scrutiny in the instant case. Hence, the Assessment framed by the Assessing Officer on the issues which are not inconsonance of the instruction of CBDT are liable to be quashed. The additions made by the Assessing Officer being beyond the scope of the limited scrutiny and the same is deleted. Decided in favour of assessee.
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