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TMI Blog2016 (12) TMI 1405X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. The learned Commissioner of Income Tax (Appeals) erred on facts and in law in enhancing the assessment by Rs. 21,70,537 on account of treatment of expenditure on G.I. sheets as capital expenditure (net of depreciation) as against revenue as claimed by the assessee. He ought to have given proper notice for such enhancement. In any case, he ought to have appreciated that the subject expenditure is purely revenue in nature. The reasons assigned are arbitrary. 3. The learned Commissioner of Income Tax (Appeals) erred on facts and in law in upholding disallowance of Rs. 31,000 made by the A.O. u/s 40A(3). 4. The learned Commissioner of Income Tax (Appeals) erred on facts and in law in upholding disallowance of Rs. 1,51,927 out of site expenses. 5. Without prejudice to ground No.1 to 4 and in the alternative, the order passed by the Id AO is bad in law as much as the same is passed against the relaxed norms by CBDT vide press release which was binding upon him. 4. The Revenue in ITA No. 605/PN/2012 has raised the following grounds of appeal :- (1) On the facts and in the circumstances of the case and in law the Ld. C IT(A ), Kolhapur erred in deleting the addition of low ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g that a Co-operative Credit Society is required to be treated as a C o-operative Bank if its share capital exceeds R s.1 lakh in absence of any such claim made by the C o-operative Credit Society or any such recognition granted by the Reserve Bank of India. (7) On the facts and in the circumstance s of the case and in law the CIT(A ) erred in holding that a Co-operative Credit Society is required to be treated as a Co-operative Bank in terms of the Madhava Committee Report which has no application to the issue on hand which is whether by virtue of exemption if available to the Co-operative credit Society u/s 194A (3) of the IT Act the assessee could pay interest to the Co -operative Credit Society without deduction of tax at source. 5. The learned Authorized Representative for the assessee at the outset pointed out that the ground of appeal No.5 raised is challenging the validity of assessment order passed by the Assessing Officer and the same being jurisdictional issue be decided first. So, we proceed to decide the ground of appeal No.5 after hearing both the learned Authorized Representatives. 6. Briefly, in the facts of the case, the assessee had furnished e-return of inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 143(2) and 142(1) of the Act. The assessee participated in the assessment proceedings and produced the books of account for verification along with other details. During the course of assessment proceedings, vide submissions dated 14.05.2010, the assessee objected to the scrutiny assessment for the year stating that since it had duly offered the additional income declared during the course of Survey and no books were impounded during the course of Survey, the CBDT vide press release had exempted from scrutiny of cases on which Survey action was conducted subject to fulfillment of conditions. It was also brought to the knowledge of JCIT that earlier letter was filed before the DCIT. In the said letter, the assessee explained that it had not retracted from its earlier declaration and since the CBDT had relaxed the scrutiny norms and exempted the persons from scrutiny, if certain conditions were fulfilled, then as the assessee had fulfilled the conditions, the case of assessee could not be picked up for scrutiny. The Assessing Officer vide para 3.2 observes that the facts stated by the assessee in the said submissions were totally distorted as the amount disclosed in Sur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt year under scrutiny. It was specifically asked whether the case was selected for scrutiny under CASS. In reply, the Central Public Information Officer stated that the case of assessee was not selected for scrutiny under CASS. Further, the assessee has asked as to why its case was selected for scrutiny since it was covered by relaxed scrutiny norms. In answer, it was pointed out that the case was selected for scrutiny, in view of guidelines for selection of scrutiny issue during financial year 2010-11; copies of RTI application and the reply are placed at pages 20 to 22 of the Paper Book. The learned Authorized Representative for the assessee further referred to the criteria of guidelines for income-tax scrutiny, copy of which is placed at page 23 and 24 of the Paper Book and reiterated that in the case of assessee, Survey was carried out and criteria was fixed for not picking up the case under scrutiny and the assessee clearly fulfils the same. He further pointed out that in case the criteria is not met with, then as per clause (g), the Assessing Officer can select any return for scrutiny after recording reasons and after obtaining the approval of CCIT/DGIT. In this regard, he p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad debts claimed by the assessee were disallowed by the Assessing Officer. He then went into merits of the case. It was also stressed by the learned Departmental Representative for the Revenue that the declared income in the hands of assessee means the book profit. 12. The learned Authorized Representative for the assessee in rejoinder pointed out that in the case of assessee, he declared additional income during the course of Survey. He further pointed out that the details of expenses were compared by the Assessing Officer. 13. We have heard the rival contentions and perused the record. The preliminary issue raised in the present appeal by way of ground of appeal No.5 is against the validity of assessment made in the hands of assessee. The assessee claims that the case of assessee was not selected for scrutiny under CASS but was selected manually. For selection of any return for scrutiny manually by the Assessing Officer, the requirement of guidelines issued for this purpose for relevant assessment year was that the same should be after obtaining approval of the CCIT / DGIT. Since no such approval was received from the CCIT / D GIT, the Assessing Officer had no jurisdiction to p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y and other relevant information relating to assessment year 2008-09. The specific question asked by the assessee was whether its case was selected for scrutiny under CASS and in case it was not selected under CASS and why the same was picked up for scrutiny. The assessee also asked that under which norms the case was selected for scrutiny and whether relaxation in selection of cases in which survey action was carried out on fulfilling the criteria was available in the said norms or not. In reply, it was stated that the guidelines / instructions were followed and since the guidelines were confidential in nature, the copy of same could not be provided. In reply to the next question whether the case was selected under CASS, the categorical answer was 'No'. The said RTI reply further stated that the case was selected for scrutiny in view of the guidelines contained in F.No.225/93/2009/ITA.II. 15. The said guidelines for selection of scrutiny were published and it was pointed out that the said guidelines were only for the use of Officers of Income Tax Department and the same could not be disclosed even under the RTI Act, 2005. The said application under the RTI Act and the order under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t year 2008-09. In the above circumstances, where the order has been passed against the norms laid down by the CBDT vide its guidelines which were binding upon the Assessing Officer, then the order passed by the Assessing Officer is bad in law. The instructions issued by the CBDT are to be strictly followed by the authorities i.e. Assessing Officer and in the absence of the same, the assessment order passed in the case is annulled. Such is the proposition laid down by the Hon'ble High Court of Andhra Pradesh in CIT Vs. Smt. Nayana P. Dedhia (supra) and the Hon'ble High Court of Delhi in CIT Vs. Best Plastics (P) Ltd. (supra). In view thereof, we hold that where the Assessing Officer has failed to follow the guidelines issued for selecting the cases for scrutiny and in the facts of the present case, where the case was selected manually for scrutiny, but no previous approval of CCIT was obtained, then the Assessing Officer lacks jurisdiction to carry out the scrutiny assessment in the present case and accordingly, assessment order passed by the Assessing Officer is bad in law. Hence, we hold so. Since the assessment order is held to be bad in law, the issue on merits becomes academic ..... X X X X Extracts X X X X X X X X Extracts X X X X
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