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2008 (2) TMI 541 - ITAT BILASPURViolation of the CBDT Instruction - assuming the jurisdiction u/s 143(2) - Disallowance out of Keyman Insurance Policy and out of the selling and administrative expenses - Addition of setting off brought forward losses on the basis of return earlier filed. Violation of the CBDT Instruction - assuming the jurisdiction u/s 143(2) - As per the interpretation of the Addl. CIT, if action plan for financial year 2005-06 published is considered for returns for the asst. yr. 2004-05, then no time was available for selection for scrutiny cases of the asst. yr. 2004-05 except belated returns under s. 139(4). Even as per that instruction for the financial year 2005-06, the case is not fit for scrutiny. The judicial decisions relied upon by the learned counsel for the assessee clearly support the case of the assessee. In our considered view the CBDT instructions are binding on the Revenue authorities and, therefore, in this case, the selection for scrutiny of the case has not been as per the Board instructions referred to above. In view of the above we hold that the learned AO erred in assuming the jurisdiction under s. 143(2) of the Act in contravention of the CBDT instructions and in completing the assessment under s. 144 which is bad in law and the learned CIT(A) erred in confirming the order of the AO. The orders of the Revenue authorities are set aside. Disallowance out of Keyman Insurance Policy and out of the selling and administrative expenses - While the Act is amended in many places to the effect that the amount received will be taxable, it is nowhere provided that the premium paid on the Keyman Insurance Policy is allowable as business expenditure except by a circular of CBDT. The Circular No. 762 is binding on the Revenue authorities. The assessee's counsel has filed the xerox copies of the premium paid in respect of these policies. thus, we are of the considered opinion that the premium paid by the assessee on the Keyman Insurance Policy is allowable as business expenditure. We direct the AO to allow the claim of the assessee subject to verification of the premium paid by the assessee company. It is also seen that the net profit disclosed by the assessee for the year under consideration is better as compared to the earlier years. Since all the expenses are verifiable and vouched and no other disallowances are made by the AO, we do not find any justification for the AO to disallow out of selling and administrative expenses. No convincing reasons are given by the Revenue authorities to make the disallowance and confirm the same. The disallowance made by the AO is on ad hoc basis under the assessment framed under s. 144. Thus, since no disallowance is called for the AO is directed to delete the same. Addition of setting off brought forward losses on the basis of return earlier filed - No evidences produced - It is clear that the AO is directed to allow the claim of the assessee subject to verification. The learned CIT(A) has given only directions to verity the correctness of the claim of the assessee and not allowed the claim of the assessee. The ld DR also submitted that the appeal is infructuous, In our view, the appeal of the Revenue is to be dismissed as infructuous and the same is dismissed as such. In the result, the appeal of the assessee is allowed whereas the appeal of the Revenue is dismissed.
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