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TMI Blog2018 (5) TMI 1855X X X X Extracts X X X X X X X X Extracts X X X X ..... rred in disallowing interest paid to the Bank of Rs. 1,89,991/-. Therefore, addition may please be deleted. 3. In the facts and in prevailing circumstances of the case and in law, the Ld. AO and CIT(A) has grossly erred in rejecting claim of appellant of "Long Term Capital Gain" on the surplus on sale of said plots and agricultural land which was holding as investment, and treating it was "trading asset". The finding of the lower authorities arbitrarily and hence, it may please be vacated and held that appellant has correctly shown the Long Term Capital Gain. 4. In the facts and in prevailing circumstances of the case and in law, the Ld. AO, CIT(A) has grossly erred in computing the surplus on sale of said plots and agricultural land as "business income" u/s.28 of the Act rejecting the Index cost and claim as Long Term Capital Gain. Therefore, addition made by the AO of Rs. 9,89,538/- (85,49,048 - 75,59,490) and confirmed by CIT(A), may be deleted and index cost be allowed and profit may be taxed as "Long Term Capital Gain" as shown by the appellant. 5. The appellant craves the permission to add, amend, modify, alter, revise, substitute, delete any or all grounds of the appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the another Board's letter dated 23-05-2007 relating to the AO's jurisdiction in matters relating to the selection of cases for scrutiny on the basis of AIR returns and demonstrated that the AOs are required to scrutiny the cases to the limited issues for which cases are picked for limited scrutiny. Ld. Counsel for the assessee mentioned that exceptions are provided to the above rule but the same is required to be done only with the approval of the Administrative Commissioner of Income-Tax which was not done in the present case. According to the said circulars of the Board, there is requirement of mentioning the same in the notice u/s.143(2) of the Act clearly, stamped on the said notice clearly mentioning "AIR case" etc. Ld. Counsel also submitted that for extending the scrutiny to the interest disallowance and denial of deduction u/s.54 of the Act in the present case, AO did not obtain any Administrative approval from the concerned CIT. The notices do not indicate the same. This fact is made out in the AO's letter dated 11-04-2018 addressed to the Administrative CIT. Therefore, Ld. Counsel for the assessee submitted that the assessment order passed by the AO dated 12-03-2014 is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iny norms. Therefore, Ld. Counsel argued that the additions are unsustainable in law as it is a serious procedural irregularity. Ld. Counsel for the assessee relied on the following judgments in favour of the assessee on this legal issue : 9. We heard both the parties and perused the orders of the Revenue on the legal issue raised by the assessee. We have also considered the decisions relied on by both the parties. It is an undisputed fact that the reason for which the case was picked up for limited scrutiny relates to the AIR information on the cash deposits in the savings bank account. It is also an undisputed fact that the AO did not obtain the written approval of the concerned Commissioner before extending the scope of scrutiny to the interest disallowed and denial of claim of deduction u/s.54 of the Act. Further, it is on record that the Board did not permit the Assessing Officers to extend the scope of scrutiny to the issues other than the ones which are authorised the Board in this regard under CASS. It is also a fact that judgment cited by the Ld. DR for the Revenue in the case of Banque Nationale De Paris Vs. CIT 237 ITR 518 (Bom.) was not issued in connection with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t during the course of Survey on 30.01.2008, the assessee had made a declaration of Rs. 33,18,000/- + Rs. 12 lakhs + Rs. 13,467/- which was included in the return of income filed by the assessee. He further stated that the case of assessee was picked up for scrutiny. The learned Authorized Representative for the assessee brought to our attention, the application made under the Right to Information Act, as to the basis for selection of case of the assessee for the relevant 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, c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... guidelines of CBDT, the cases could be selected, may be not through CASS. Our attention was drawn to the order of Assessing Officer, wherein he has elaborately dealt with the issue that income increased during the year only because of notional disallowance of expenses under section 40(a)(ia) of the Act and not because of declaration of additional income by the assessee. He stresses that the case was selected under normal scrutiny proceedings and excess expenditure of bad 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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion in the orders of Assessing Officer and CIT(A) is on this account that the assessee had not fulfilled the conditions relating to Survey cases for financial year and the case of the assessee could be picked up for scrutiny. The assessment order was passed on 09.09.2010 and the appellate order was passed on 04.01.2012. The assessee thereafter moved an application under the Right to Information Act, wherein a specific question asked was with regard to selection of scrutiny 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 unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lected for scrutiny after recording reasons and after obtaining the approval of CCIT / DGIT. In other words, the case of assessee could be picked up for scrutiny manually but the same had to be after recording reasons for such an action and after obtaining the approval of CCIT / DGIT. However, the Assessing Officer vide letter dated 13.05.2013 has categorically mentioned that no previous approval of CCIT was obtained to select the case manually for scrutiny for assessment 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 guidelin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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