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TMI Blog2025 (3) TMI 946X X X X Extracts X X X X X X X X Extracts X X X X ..... EI of ITR) (3) Large other expenses claimed in the Profit and Loss a/c (4) Large current liability in comparison to total asset in balance sheet (Part A-BS of ITR)" as per the return of income filed for the assessment year concerned. Accordingly, statutory notices u/s 143(2) and 142(1) were issued and served on the assessee, in response to which the AR of the assessee filed the requisite details from time to time. 3. During the course of assessment proceedings the Assessing Officer noted from the balance sheet ending 31.03.2016 that an amount of Rs. 261, 16, 88, 424/- has been shown under the head "Current liabilities", out of which, advance received against land is at Rs. 164, 00, 20, 100/-. The assessee in its letter dated 03.09.2018 submitted that the funds have been received against the sale of land which the company proposed to purchase and sell. It was further stated that the assessee company has received advances against sale of land of Rs. 164 crores (Rs.94 crores from ABIL. Corporation Pvt. Ltd + Rs. 70 crores from Shashbindu Constructions Pvt. Ltd) and are reflected under the head "Current liabilities". The Assessing Officer noted from the balance sheet of Shashbindu Con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved by assessee company from Shashhindu Constructions Pvt Ltd as unsecured loan/advance, the accumulated Reserve & Surplus at Rs. 9, 30, 66, 244/- has to be taxed as per the provisions of section 2(22)(e) of IT Act. 6.4.3 Hence in this case, it is clear that the transactions between M/s ABIL Realty Private Limited and M/s Shashbindu Constructions Pvt Ltd are plain loans and advances and not pertaining to any kind of land transactions. The assessee M/s ABIL Realty Private Limited & M/s Shashhinda Constructions Pvt Ltd were not having any authority or occasion to collect or raise these funds at this juncture as it has been made clear in the discussion above in the assessment order. The basis of quantification of FSI or of the amounts claimed to be advances against such land transactions could not be established at all by the assessee. Hence, it is clear that these figures are therefore imaginary hypothetical figures. In fact, it is amply clear that the unsigned unregistered MOU's have just been submitted by the assessee to give it a Colour of business transactions to the loans and advances transactions amongst group concerns to avoid the purview of section 2(22)(e) of the IT Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed against the sale of land which the company proposed to purchase and sell is nothing but a transfer of accumulated Reserve & Surplus in the guise of unsecured loan/advance with no business nexus. 5.1 Ground No 1 is against the addition of Rs. 9, 30, 66.244/- u/s 2(22)(e) and in not treating the amount received from subsidiary company as part of normal business transaction. Further, the appellant company pleads for direction to the AO to restrict the addition u/s 2(22)(e) to 51 percent of Rs. 9, 30, 66, 244/- i.e. Rs. 4, 74, 64, 090/- being the shareholding of the appellant company in M/s. Shashbindu Constructions Pvt. Ltd. In the assessment order the AO has highlighted that the appellant company. engaged in Real Estate Projects had received advances against sale of land of Rs. 164 Crores (Rs.94 Crores from ABIL Corporation Pvt. Ltd Rs. 70 Crores from Shashbindu Constructions Pvt. Ltd) and reflected under the head current liabilities. The transactions between M/s ABIL Realty Private Limited and M/s. Shashbindu Constructions Pvt. Ltd are plain loans and advances and not pertaining to any kind of land transactions. The appellant company M/s ABIL Realty Private Limited & M/s Shas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty even before the proposed seller acquires the title to the property so as to get the proposed buyer committed to the transaction and accepts substantial advance from the proposed buyer as its commitment to the transaction. The same is not tenable as it is seen that the overall management and control of entire group company and the subsidiary companies is with 2 individuals only, the promoters, Mr. Avinash Bhosale, & Mr Amit Bhosale the father and son duo, the sole decision making authorities and the ultimate commitment to any transaction is to be taken by them only. The appellant company claims to have entered into Memorandum of Understanding (MOU) with M/s Shashbindu Constructions Pvt. Ltd. and M/s ABIL Corporation Pvt Ltd. and the business advances of 1.164cr received were business advances against specific MOUs. But the same was found unsigned during the course of assessment proceedings and the same can't be relied upon now. Further, the appellant company claim, to have not retained those loan funds for its own activities and have redistributed the same to its subsidiaries for carrying on their respective business have not been substantiated. The AO has given his finding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see is in appeal before the Tribunal by raising the following grounds: 1. Ld CIT(A) erred in confirming the addition of Rs. 9, 30, 66, 244/- as deemed dividend u/s. 2(22)(e) of the I.T. Act, 1961 without appreciating the fact that the advance received by the appellant from M/s Shashbindu Constructions Pvt Ltd is the business advance towards the proposed transaction of the immovable property between the appellant and M/s Shashbindu Constructions Pvt Ltd. Accordingly, the appellant prays before Your Honour that kindly direct the Ld AO to delete the addition of Rs. 9, 30, 66, 244/- made u/s 2(22)(e) of the 1.T. Act, 1961. 2. Ld CIT(A) erred in confirming the addition of Rs. 9, 30, 66, 244/- as deemed dividend u/s. 2(22)(e) of the I.T. Act, 1961 without appreciating the fact that the advance received by the appellant from M/s Shashbindu Constructions Pvt Ltd is in the normal course of business and the appellant has not availed any benefit from the funds received from M/s Shashbindu Constructions Pvt Ltd. Accordingly, the appellant prays before Your Honour that kindly direct the Ld AO to delete the addition of Rs. 9, 30, 66, 244/- made u/s 2(22)(e) of the I.T. Act, 1961. 3. With ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee is purely legal in nature and all the material facts are already available on record and no new facts are required to be investigated, therefore, in view of the decision of Hon"ble Supreme Court in the case of the National Thermal Power Co. Ltd. v. CIT (supra) and in the case of Jute Corporation Of India Ltd vs Commissioner Of Income Tax And Anr (supra), the additional ground raised by the assessee is admitted for adjudication. 11. The Ld. Counsel for the assessee referring to the additional ground submitted that the case was selected for limited scrutiny under CASS for examination of the following issues as stated in the notice u/s 143(2) of the Act: i. Whether tax aspects related to investments /advances/loans have been considered in the return of income. ii. Whether the current liabilities shown are genuine. iii. Whether deduction claimed on account of other expenses is admissible. 12. He submitted that in the balance sheet filed for assessment year 2016-17 the assessee company had shown current liabilities in respect of total advance of Rs. 164 crores received from two sister concerns. Out of the same Rs. 94 Crs. was received from M/s. ABIL Corporation Pvt. L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is outside the ambit of reason for which the case was selected for limited scrutiny under CASS, then such addition is not sustainable in law: 1. PCIT v. Weilburger Coatings (India) (P) Ltd. [(2024) 296 Taxman 205 (Cal)) 2. PCIT v. Sukhdham Infrastructures LLP [(2023) 335 CTR 476 (Cal)] 3. Bharatnagar Buildcon LLP v. PCIT [(2023) 226 TTJ 488 (PUNE)] 4. M/s. Organica v. PCIT (ITA No.465/ PUNE/2021] dated 14.12.2022 5. PCIT v. Shark Mines and Minerals Pvt. Ltd. [ITA No. 1/2023 (Orissa High Court)] 6. Sahyadri Agencies Ltd. v. PCIT ((2023) 332 CTR 748 (Ker)] 7. Storewell Construction & Engineers v. PCIT (ITA No.708/PUNE/2019] dated 05.12.2019 8. Shankarsingh C. Thakur v. CIT [ITA No.833/ PUNE/ 2014] dated 12.08.2016 9. Ms. Chengmari Tea Co. Ltd. v. ACIT [ITA No.812/Kolkata/ 2019] dated 31.01.2020 10. Manoj Kumar Poddar v. PCIT [ITA No.132/Ranchi/2018] dated 09.12.2020 11. M.M. Engineers and Consultants v. PCIT [36 NYPTTJ 602 (Cuttack)] dated 09.05.2022 12. Meena Choudhary v. PCIT [35 NYPTTJ 896 (Raipur)] dated 12.10.2021 13. Balvinder Kumar v. PCIT [187 ITD 454 (Delhi)] dated 10.12.2020 14. Suraj Diamond Dealers (P) Ltd. v. PCIT (203 TTJ 137 (Mumbai)] dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... free advance / loan given by SCPL in this year cannot be considered to be a gratuitous advance as contemplated u/s 2(22)(e) of the Act, therefore, such addition u/s 2(22)(e) is not justified. For the above proposition, the Ld. Counsel for the assessee relied on the following decisions: 1. CIT v. Gayatri Chakraborty [(2018) 407 ITR 730 (Cal)] 2. CIT v. Suraj Dev Dada [367 ITR 78 (P&H)) 3. Gadgil Holdings Pvt. Ltd. v. ITO [ITA No. 1455/PUNE/2017] 4. Saamag Developers Pvt. Ltd. v. ACIT [168 ITD 649 (Del)] 5. Ravindra R. Fotedar v. ACIT [167 ITD 100 (Mum)] 6. Pradip Kumar Malhotra v. CIT [338 ITR 538 (Cal)/[ratio applicablel 20. The Ld. DR on the other hand heavily relied on the orders of the Assessing Officer and the Ld. CIT(A) / NFAC. 21. We have heard the rival arguments made by both the sides, perused the order of the Ld. CIT(A) / NFAC and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. Before deciding the issue on merit, we would first like to decide the additional ground raised by the assessee i.e. as to whether the addition made by the Assessing Officer towards deemed dividend u/s 2(22)(e) of the Act c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fic issue based enquiry is to be conducted only in those scrutiny cases which have been selected on the parameter(s) of AIR/CIB/26AS data. In such cases, the Assessing Officer, shall also confine the Questionnaire only to the specific issues pertaining to AIR/CIB/26AS data. Wider scrutiny in these cases can only be conducted as per the guidelines and procedures stated in Instruction No. 7/2014. iv. Reason for selection: In cases under scrutiny for verification of AIR/CIB/26AS data, the Assessing Officer has to intimate the reason for selection of case for scrutiny to the assessee concerned. 3. As far as the returns selected for scrutiny through CASS-2015 are concerned, two type of cases have been selected for scrutiny in the current Financial Year- one is "Limited Scrutiny" and other is "Complete Scrutiny". The assessees concerned have duly been intimated about their cases falling either in "Limited Scrutiny" or "Complete Scrutiny" through notices issued under section 143(2) of the Income-tax Act, 1961 ("Act"). The procedure for handling "Limited Scrutiny" cases shall be as under: a. In "Limited Scrutiny" cases, the reasons/issues shall be forthwith communicated to the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, 2016 Subject: Direction regarding scope of enquiry in cases under "Limited Scrutiny" selected through CASS 2015 & 2016-regd.- Vide Instruction No. 20/2015 dated 29.12.2015 in File of even number, Board has laid down Standard Operating Procedure for handling of cases under "Limited Scrutiny" which were selected through Computer Aided Scrutiny Selection in "CASS Cycle 2015". In these cases, it was stated that the general scope of enquiry in scrutiny proceedings should be restricted to the relevant parameters which formed the basis for selecting the case for scrutiny. However, in revenue potential cases, it was further provided that "Complete Scrutiny" could be conducted, if there was potential escapement of income above a prescribed monetary limit, subject to the approval of administrative Pr. CIT/CIT/Pr. DIT/DIT. 2. In order to ensure that maximum objectivity is maintained in converting a case falling under "Limited Scrutiny" into a "Complete Scrutiny" case, the matter has been further examined and in partial modification to Para 3(d) of the earlier order dated 29.12.2015, Board hereby lays down that while proposing to take up "Complete Scrutiny" in a case which was origina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w. Sd/- (Rohit Garg) Deputy Secretary to the Government of India" 24. Similarly, the CBDT on 30.11.2017 has issued the guidelines regarding unauthorized expansion of scope of limited scrutiny which read as under: "F.No. DGIT(Vig.)/HQ/SI/2017-18 Government of India Ministry of Finance Department of Revenue Central Board of Direct Taxes New Delhi-110001 Dated: 30th November, 2017 Subject: Unauthorized expansion of the scope of limited scrutiny - instructions - reg., CBDT has issued detailed guidelines/ directions for completion of cases of limited scrutiny selected through CASS module. These guidelines postulate that an Assessing Officer, in limited scrutiny cases cannot travel beyond the issues for which the case was selected. The idea behind such stipulations was to enforce checks and balances upon powers of an AO to do fishing and roving inquiries in cases selected for limited scrutiny. 2. Further, the guidelines for proper maintenance of order sheets have been given in the Manual of Office Procedure issued by the Directorate of Organisation and Management Services. The Manual clearly lays down: - A. The minutes of the hearing must be entered with date, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion while making assessments in limited scrutiny by initiating inquiries on new issues without complying with the mandatory requirements of the relevant CBDT Instructions dated 26.09.2014, 29.12.2015 and 14.07.2016. The CBDT has viewed very seriously such instances and in certain cases explanations have been called for from the officers. It is also to be noted that the CBDT circulars are binding on the Revenue authorities and once the Assessing Officer has not followed the CBDT circular / guidelines in case of limited scrutiny and expands the scope by initiating enquiries on new issues i.e. here the provisions of section 2(22)(e) of the Act, such addition on a new issue which is not the issue as per the limited scrutiny, cannot be upheld. 26. We find the Hon'ble Calcutta High Court in the case of PCIT v. Weilburger Coatings (India) (P) Ltd. (supra) has held that the Assessing Officer making additions in respect of issues not mentioned in limited scrutiny were beyond jurisdiction of the AO as the scrutiny assessment was selected for limited scrutiny u/s 143(2) and not complete scrutiny. 27. We find the Hon'ble Calcutta High Court in the case of PCIT v. Sukhdham Infrastructures LL ..... X X X X Extracts X X X X X X X X Extracts X X X X
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