SMT. MANJU KAUSHIK, JAIPUR V. DEPUTY COMMISSIONER OF INCOME TAX, RANGE-7, JAIPUR

ITA 1419/JPR/2019

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 1737 (ITAT-JAIPUR)
• Duration Of Justice: 11 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-12-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2014-2015
• Appeal Filed On: 10-12-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P P MEENA DCIT DR DHK
• Keywords: Capital asset; Principle of natural justice; Period of limitation; Competent authority; Time period of passing order; Set aside
• Section: 54B; 2(14); 142(1); 143(2); 13

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCH A , JAIPUR JH FOT; IKY JKO] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE : SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM VK;DJ VIHY LA-@ ITA NO. 1419/JP/2019 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2014-15 SMT. MANJU KAUSHIK C-30, BHAGWAN DAS ROAD C-SCHEME, JAIPUR CUKE VS. THE DCIT RANGE 7 JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ P AN/GIR NO .: ADHPK 9678 K VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI ANIL GOYAL, CA JKTLO DH VKSJ LS@ REVENUE BY : SHRI P.P. MEENA, DCIT- DR LQUOKBZ DH RKJH[K@ DATE OF HEARING : 05/11/2019 ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 09/12/2019 VKNS'K@ ORDER PER VIJAY PAL RAO, JM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE LD. CIT(A)-3, JAIPUR DATED 22-10-2018 FOR THE ASSESSME NT YEAR 2014-15. THE ASSESSEE HAS RAISED THE GROUNDS ALONGWITH FORM NO. 36 AS UNDER:- 1. THE ORDERS OF THE LEARNED AO AND CIT(A) ARE B AD IN LAW AND AGAINST FACTS OF THE CASE. 2. THE LEARNED AO HAS ERRED IN CONVERTING THE CASE OF LIMITED SCRUTINY INTO CASE OF COMPLETE SCRUTINY IN COMPLETE DISREGAR D OF VARIOUS INSTRUCTIONS ISSUED BY CBDT FROM TIME TO TIME. THEREFORE ASSESSM ENT ORDER PASSED IS NULL & VOID. THE LEARNED CIT(A) HAS ERRED IN REJECTING T HIS GROUND OF APPEAL. ITA NO.1419/JP/2019 SMT. MANJU KAUSHIK VS DCIT, RANGE-7, JAIPU R 2 3. THE LEARNED AO HAS ERRED IN GIVING DEDUCTION UN DER SECTION 54B AT RS 24,32,800/- ONLY AS AGAINST DEDUCTION CLAIMED RS 89,77,226/-. THE LEARNED CIT(A) HAS ERRED IN NOT ALLOWING THIS GROUN D OF APPEAL. 3.1 THE LEARNED AO HAS ERRED IN HOLDING THAT AGREE MENT FOR SALE DATED 1/4/2013 FILED BEFORE HIM WAS A SHAM TRANSACTION AN D AFTER THOUGHT OF THE ASSESSEE. 3.2. THE LEARNED AO HAS ERRED IN MAKING ADDITION I N THE NAME OF 'SHARE APPLICATION MONEY AS DISCUSSED ABOVE' RS 65, 44,426/- WHEREAS THERE WAS NO SUCH CASE. 4. THE LEARNED AO HAS ERRED IN NOT FOLLOWING THE B INDING DECISIONS OF SUPREME COURT AND OTHER HIGH COURTS HOLDING THAT PROVISIONS GIVING INCENTIVE FOR GROWTH AND DEVELOPMENT SHOULD BE INTE RPRETED LIBERALLY. THE LEARNED CIT(A) HAS ERRED IN NOT ALLOWING THIS G ROUND OF APPEAL. 5. THE LEARNED AO HAS ERRED IN NOT ACCEPTING THE C LAIM OF THE ASSESSEE THAT AGRICULTURE LAND SOLD WAS OUT OF THE PURVIEW OF DEFINITION OF CAPITAL ASSETS AS GIVEN IN SECTION 2(14) OF INCO ME TAX ACT. THEREFORE NO CAPITAL GAIN TAX WAS CHARGEABLE IN THIS CASE. TH E LEARNED CIT(A) HAS ERRED IN NOT ALLOWING THIS GROUND OF APPEAL. THE ASSESSEE HAS SUBSEQUENTLY MODIFIED THE GROUND N O. 2 WHICH READS AS UNDER:- IN THE FACTS AND CIRCUMSTANCES OF THE CASE, AND I N LAW, THE LEARNED AO HAS ERRED IN CONVERTING THE CASE FROM LI MITED SCRUTINY TO COMPLETE SCRUTINY. THE ACTION OF LEARNED AO IS ILLE GAL, UNJUSTIFIED, ARBITRARY AND AGAINST THE FACTS OF THE CASE. RELIEF MAY BE GR ANTED BY QUASHING ENTIRE ASSESSMENT PROCEEDINGS, BEING VOID AND ILLEGAL.' 2.1 AT THE TIME OF HEARING, THE LD.AR OF THE ASSESS EE HAS STATED AT BAR THAT THE ASSESSEE DOES NOT WANT TO PRESS THE GROUND NOS. 1 AND 5 OF THE GROUNDS OF APPEAL AND THE SAME MAY BE DISMISSED AS NOT PRESSED FOR ITA NO.1419/JP/2019 SMT. MANJU KAUSHIK VS DCIT, RANGE-7, JAIPU R 3 WHICH THE LD. DR HAS NO OBJECTION. HENCE, THE GROUN D NOS. 1 AND 5 OF THE ASSESSEE ARE DISMISSED BEING NOT PRESSED. 3.1 THE GROUND NO. 2 OF THE ASSESSEE IS REGARDING V ALIDITY OF ASSESSMENT FRAMED BY THE AO FOR WANT OF JURISDICTIO N TO TAKE UP THE ISSUE OF DISALLOWANCE OF DEDUCTION U/S 54B OF THE ACT WIT HOUT HAVING NECESSARY APPROVAL OF CONVERSION OF LIMITED SCRUTINY TO COMPR EHENSIVE SCRUTINY. 3.2 LD.AR OF THE ASSESSEE SUBMITTED THAT THE ASSESS EE FILED HER RETURN OF INCOME ON 30-09-2014 DECLARING TOTAL INCOME OF R S. 36,60,870/-. THE CASE OF THE ASSESSEE WAS SELECTED FOR LIMITED SCRUT INY UNDER CASS. THE AO ISSUED NOTICE U/S 143(2) OF THE ACT ON 18-09-201 5 AND THEREAFTER ALSO ISSUED A NOTICE U/S 142(1) ON 4-07-2016 ALONGWITH Q UESTIONNAIRE ON THE ISSUE OF INCREASE IN CAPITAL. SUBSEQUENTLY VIDE NOT ICE U/S 142(1) OF THE ACT DATED 25-11-2016, THE AO PROPOSED TO DISALLOW THE C LAIM OF DEDUCTION U/S 54B OF THE ACT. THE LD.AR OF THE ASSESSEE SUBMI TTED THAT ASSUMPTION OF THE JURISDICTION BY THE AO TO SCRUTINIZE THE CLA IM OF DEDUCTION U/S 54B OF THE ACT WITHOUT APPROVAL OF THE COMPETENT AUTHOR ITY TO CONVERT THE CASE FROM LIMITED SCRUTINY TO COMPLETE SCRUTINY IS INVAL ID. CONSEQUENTLY, THE ASSESSMENT FRAMED BY THE AO IS LIABLE TO BE QUASHED THE LD.AR FURTHER CONTENDED THAT THERE IS NOTHING IN THE ASSESSMENT O RDER TO SHOW THAT THE ITA NO.1419/JP/2019 SMT. MANJU KAUSHIK VS DCIT, RANGE-7, JAIPU R 4 AO HAS SOUGHT ANY PERMISSION OR APPROVAL FOR CONVER SION OF LIMITED SCRUTINY TO COMPLETE SCRUTINY. THEREFORE, THE INITI ATION OF PROCEEDINGS BY THE AO FOR COMPLETE SCRUTINY BY ISSUING NOTICE U/S 142(1) IS WITHOUT JURISDICTION AND AUTHORITY. HE HAS FURTHER CONTENDE D THAT EVEN OTHERWISE THE SAID INITIATION OF PROCEEDINGS FOR FULL SCRUTIN Y IS NOT PERMISSIBLE WHEN THE NOTICE U/S 143(2) WAS ISSUED ONLY FOR THE PURPO SE OF CONDUCTING LIMITED SCRUTINY AND THE SUBSEQUENT INITIATION OF P ROCEEDINGS BY THE AO FOR FULL SCRUTINY IS AFTER LIMITATION PERIOD FOR IS SUING NOTICE U/S 143(2) OF THE ACT. THUS THE PROCEEDINGS INITIATED BY THE AO F OR FULL SCRUTINY IS WITHOUT THE NOTICE U/S 143(2) OF THE ACT AND EVEN A FTER THE LIMITATION PERIOD FOR ISSUE OF NOTICE U/S 143(2) IS INVALID AN D LIABLE TO BE QUASHED. HE HAS REFERRED TO CBDT INSTRUCTION NO. 5/2016 DATE D 14-07-2016 AND SUBMITTED THAT CBDT HAS ISSUED SPECIFIC INSTRUCTION THAT THE CASE SELECTED FOR LIMITED SCRUTINY CANNOT BE TAKEN UP FOR FULL SC RUTINY WITHOUT PRIOR APPROVAL OF THE COMPETENT AUTHORITY. THESE INSTRUCT IONS HAVE BEEN REPEATED BY THE CBDT TIME AND AGAIN VIDE INSTRUCTIO N NOS. 7/2014 DATED 26-09-2014, 20/2015 DATED 29-12-2015 AND 5/2016 DA TED 14-07-2016 THAT THE AO SHALL EXPEDITIOUSLY INTIMATE THE TAX PA YERS CONCERNED REGARDING CONDUCTING COMPLETE SCRUTINY IN THE CASES WHERE THE AO ITA NO.1419/JP/2019 SMT. MANJU KAUSHIK VS DCIT, RANGE-7, JAIPU R 5 PROPOSED TO CONVERT THE LIMITED SCRUTINY TO COMPLET E SCRUTINY . HE HAS FURTHER CONTENDED THAT THE ASSESSEE CAME TO KNOW AB OUT THIS FACT ONLY THROUGH THE ASSESSMENT ORDER THAT THE AO CONVERTED HER CASE FROM LIMITED SCRUTINY TO COMPLETE SCRUTINY. THEREFORE, THERE IS A GROSS VIOLATION OF INSTRUCTIONS CBDT WHICH RENDERS THE ASSESSMENT ORDE R NULL AND VOID. THE LD.AR OF THE ASSESSEE HAS RELIED ON VARIOUS DECISIO NS OF THIS TRIBUNAL ON THIS POINT. 3.3 ON THE OTHER HAND, THE LD. DR HAS SUBMITTED THA T THE AO HAS CONVERTED THE LIMITED SCRUTINY TO COMPLETE SCRUTINY ONLY AFTER TAKING THE APPROVAL FROM THE PR. CIT. HE HAS SUBMITTED THAT T HE AO SENT A PROPOSAL OF CONVERSION OF LIMITED SCRUTINY TO FULL SCRUTINY VIDE LETTER DATED 11-11- 2016 AND PR.CIT VIDE HIS LETTER DATED 24-11-2016 AC CORDED THE APPROVAL FOR COMPLETE SCRUTINY FROM LIMITED SCRUTINY. THUS T HE NOTICE ISSUED U/S 142(1) OF THE ACT ON 25-11-2016 IS ONLY AFTER APPRO VAL ACCORDED BY THE PR. CIT ON 24-11-2016. HE HAS FILED THE COPY OF THE PROPOSAL SENT BY THE AO DATED 11-11-2016 AND THE COMMUNICATION OF APPROV AL ACCORDED BY THE PR. CIT DATED 24-11-2016. THUS THE LD. DR HAS S UBMITTED THAT ONCE THE APPROVAL WAS ACCORDED BY THE PR. CIT THEN THE C ONVERSION WAS IN ITA NO.1419/JP/2019 SMT. MANJU KAUSHIK VS DCIT, RANGE-7, JAIPU R 6 ACCORDANCE WITH THE PROVISIONS OF LAW AND INITIATIO N OF PROCEEDINGS BY THE AO FOR FULL SCRUTINY IS VALID. 3.4 IN REJOINDER, THE LD.AR OF THE ASSESSEE HAS SUB MITTED THAT THE ALLEGED PROPOSAL AND APPROVAL ACCORDED BY THE PR. C IT IS AN AFTERTHOUGHT AND PRE-DATED. THE AO HAS NOT MENTIONED ANYTHING IN THE ASSESSMENT ORDER REGARDING ANY PROPOSAL FOR CONVERSION OF LIMI TED SCRUTINY TO FULL SCRUTINY AND THE ASSESSEE WAS ALSO NOT INTIMATED AB OUT THE SAID PROPOSAL OF CONVERSION OF LIMITED SCRUTINY TO FULL SCRUTINY. THEREFORE, THESE PROPOSAL AND APPROVAL ARE NOTHING BUT AN AFTERTHOUG HT DOCUMENTS PREPARED BY THE DEPARTMENT. HE HAS REFERRED TO THE LETTER DATED 28-11- 2016 OF ADDL. CIT WHICH WAS RECEIVED BY THE AO ON 2 9-11-2016. THEREFORE, INITIATION OF PROCEEDINGS BY ISSUE OF NO TICE U/S 142(1) FOR FULL SCRUTINY IS WITHOUT THE ALLEGED APPROVAL COMMUNICAT ED AND IN THE KNOWLEDGE OF THE AO. 3.5 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WEL L AS THE RELEVANT MATERIALS AVAILABLE ON RECORD. THERE IS NO DISPUTE THAT THE CASE OF THE ASSESSEE WAS SELECTED FOR LIMITED SCRUTINY UNDER CA SS WHEREBY THE AO INITIATED PROCEEDINGS BY ISSUE NOTICE U/S 143(2) OF THE ACT ON 18-09-2015 ONLY ON THE ISSUE OF INTRODUCTION OF CAPITAL/ INCRE ASE IN THE CAPITAL. ITA NO.1419/JP/2019 SMT. MANJU KAUSHIK VS DCIT, RANGE-7, JAIPU R 7 SUBSEQUENTLY, THE AO HAS CONVERTED THE LIMITED SCRU TINY INTO COMPLETE SCRUTINY AND ISSUED NOTICE U/S 142(1) OF THE ACT ON 25-11-2016 WHEREBY THE AO PROPOSED TO DISALLOW THE CLAIM OF DEDUCTION U/S 54B OF THE ACT. THE AO HAS GIVEN THE DETAILS OF APPROVAL ACCORDED B Y THE PR.CIT IN THE ASSESSMENT ORDER AND ALSO REFERRED THE LETTER DATED 24-11-2016. THERE IS NO DISPUTE THAT SCOPE OF ENQUIRY IN CASE SELECTED F OR LIMITED SCRUTINY UNDER CASS IS ONLY TO THE EXTENT OF THE ISSUE FOR W HICH CASE WAS SELECTED FOR SCRUTINY UNDER CASS. CBDT HAS ISSUED INSTRUCTIO NS FROM TIME TO TIME IN THIS RESPECT AND HAS SPECIFICALLY INSTRUCTED THE TAXING AUTHORITIES THAT SCOPE OF ENQUIRY SHOULD BE LIMITED TO VERIFICATION OF ALL THE PARTICULARS FOR WHICH LIMITED SCRUTINY WAS TAKEN UP UNDER CASS. HOW EVER, IN CASE DURING THE ASSESSMENT PROCEEDING IF THE AO IS OF TH E VIEW THAT SUBSTANTIAL VERIFICATION OF OTHER ISSUE IS ALSO REQUIRED THEN T HE CASE MAY BE TAKEN UP FOR COMPREHENSIVE SCRUTINY WITH THE APPROVAL OF THE PR.CIT/DIT CONCERNED. IT IS ALSO INSTRUCTED THAT SUCH AN APPRO VAL SHALL BE ACCORDED BY THE PR.CIT/DIT IN WRITING AFTER BEING SATISFIED ABO UT THE MERITS OF THE ISSUE (S) NECESSITATING WIDER AND DETAILED SCRUTINY IN THE CASE. IN THE LATEST INSTRUCTION NO. 5/ 2016 DATED 14-07-2016, CBDT HAS AGAIN INSTRUCTED THE TAXING AUTHORITIES IN PARA 2 TO 4 AS UNDER:- ITA NO.1419/JP/2019 SMT. MANJU KAUSHIK VS DCIT, RANGE-7, JAIPU R 8 2. IN ORDER TO ENSURE THAT MAXIMUM OBJECTIVITY IS MAIN TAINED IN CONVERTING A CASE FALLING UNDER 'LIMITED SCRUTINY' INTO A 'COMPLETE SCRUTINY' CASE, THE MATTER HAS BEEN FURTHER EXAMINED AND IN P ARTIAL MODIFICATION TO PARA 3(D) OF THE EARLIER ORDER DATED 29.12.2015, BOARD H EREBY LAYS DOWN THAT WHILE PROPOSING TO TAKE UP 'COMPLETE SCRUTINY' IN A CASE WHICH WAS ORIGINALLY EARMARKED FOR 'LIMITED SCRUTINY', THE ASSESSING OFF ICER ('AO') SHALL BE REQUIRED TO FORM A REASONABLE VIEW THAT THERE IS POSSIBILITY OF UNDER ASSESSMENT OF INCOME IF THE CASE IS NOT EXAMINED UNDER 'COMPLETE SCRUTINY'. IN THIS REGARD, THE MONETARY LIMITS AND REQUIREMENT OF ADMINISTRATI VE APPROVAL FROM PR. CIT/CIT/PR. DIT/DIT, AS PRESCRIBED IN PARA 3(D) OF EARLIER INSTRUCTION DATED 29.12.2015, SHALL CONTINUE TO REMAIN APPLICABLE. 3. FURTHER, WHILE FORMING THE REASONABLE VIEW, THE ASS ESSING OFFICER WOULD ENSURE THAT: A. THERE EXISTS CREDIBLE MATERIAL OR INFORMATION AVAILABLE ON RECORD FOR FORMING SUCH VIEW; B. THIS REASONABLE VIEW SHOULD NOT BE BASED ON MERE SUSPICION, CONJECTURE OR UNRELIABLE SOURCE; AND C. THERE MUST BE A DIRECT NEXUS BETWEEN THE AVAILABLE MATERIAL AND FORMATION OF SUCH VIEW. 4. IT IS FURTHER CLARIFIED THAT IN CASES UNDER 'LIM ITED SCRUTINY', THE SCRUTINY ASSESSMENT PROCEEDINGS WOULD INITIALLY BE CONFINED ONLY TO ISSUES UNDER 'LIMITED SCRUTINY' AND QUESTIONNAIRES, ENQUIRY, INVESTIGATIO N ETC. WOULD BE RESTRICTED TO SUCH ISSUES. ONLY UPON CONVERSION OF CASE TO 'COMPL ETE SCRUTINY' AFTER FOLLOWING THE PROCEDURE OUTLINED ABOVE, THE AO MAY EXAMINE TH E ADDITIONAL ISSUES BESIDES THE ISSUE(S) INVOLVED IN 'LIMITED SCRUTINY'. THE AO SHALL ALSO E XPEDITIOUSLY CONCERNED REGARDING CONDUCTING 'COMPLETE SCRUTINY' IN SUCH CASES. THUS THE AO IS DUTY BOUND TO FOLLOW THE INSTRUCTION S IN CASE LIMITED SCRUTINY ASSESSMENT PROCEEDING ARE PROPOSED TO BE C ONVERTED INTO COMPLETE SCRUTINY AND WITHOUT FOLLOWING SAID PROCED URE AND NECESSARY ITA NO.1419/JP/2019 SMT. MANJU KAUSHIK VS DCIT, RANGE-7, JAIPU R 9 APPROVAL OF THE COMPETENT AUTHORITY CONDUCTING AN E NQUIRY ON THE ISSUE WHICH IS OUTSIDE THE LIMITED SCRUTINY WOULD BE BEYO ND THE JURISDICTION OF THE AO. THIS TRIBUNAL HAS TAKEN THE CONSISTENT VIEW ON THIS ISSUE IN THE SERIES OF DECISIONS THAT IF THE AO HAS TAKEN UP THE ISSUE OF SCRUTINY WITHOUT CONVERTING THE LIMITED SCRUTINY TO COMPLET E SCRUTINY BY TAKING A PRIOR APPROVAL FROM THE COMPETENT AUTHORITY THEN TH E SAID ORDER PASSED BY THE AO WILL BE IN NULLITY AND BEYOND HIS JURISD ICTION. IN CASE OF M/S. CBS INTERNATIONAL PROJECTS PVT. LTD VS CIT, ITAT D ELHI BENCH VIDE ITS ORDER (ITA NO.144/DEL/2019 DATED 28-02-2019) HAS CO NSIDERED THE RELEVANT INSTRUCTION ISSUED BY THE CBDT ON THIS ISS UE AND HELD IN PARA 13 TO 16 AS UNDER:- 13. CBDT INSTRUCTION NO. 20/2015 IS AS UNDER: SCRUTINY ASSESSMENTS-SOME IMPORTANT ISSUES AND SCO PE OF SCRUTINY IN CASES SELECTED THROUGH COMPUTER AIDED S CRUTINY SELECTION (CASS)-REG. THE CENTRAL BOARD OF DIRECT TAXES (CBDT), VIDE IN STRUCTION NO.7/2014 DATED 26.09.2014 HAD CLARIFIED THE EXTENT OF ENQUIRY IN CERTAIN CATEGORY OF CASES SPECIFIED THEREIN, WHI CH ARE SELECTED FOR SCRUTINY THROUGH CASS. FURTHER CLARIFICATIONS H AVE BEEN SOUGHT REGARDING THE SCOPE AND APPLICABILITY OF THE AFORESAID INSTRUCTION TO CASES BEING SCRUTINIZED. 2. IN ORDER TO FACILITATE THE CONDUCT OF SCRUTIN Y ASSESSMENTS AND TO BRING FURTHER CLARITY ON SOME OF THE ISSUES EMERGING FROM THE AFORESAID INSTRUCTION, FOLLOWING CLARIFICATIONS ARE BEING MADE: ITA NO.1419/JP/2019 SMT. MANJU KAUSHIK VS DCIT, RANGE-7, JAIPU R 10 I. YEAR OF APPLICABILITY: AS STATED IN THE INSTRUC TION NO.7/2014, THE SAID INSTRUCTION IS APPLICABLE ONLY IN RESPECT OF THE CASES SELECTED FOR SCRUTINY THROUGH CASS-201 4. II. WHETHER THE SAID INSTRUCTION IS APPLICABLE TO ALL CASES SELECTED UNDER CASS: THE SAID INSTRUCTION IS APPLIC ABLE WHERE THE CASE IS SELECTED FOR SCRUTINY UNDER CASS ONLY ON THE PARAMETER(S) OF AIR/CIB/26AS DATA. IF A CASE HA S BEEN SELECTED UNDER CASS FOR ANY OTHER REASON(S)/PARAMET ER(S) BESIDES THE AIR/CIB/26AS DATA, THEN THE SAID INSTRU CTION WOULD NOT APPLY. III. SCOPE OF ENQUIRY: SPECIFIC ISSUE BASED ENQUIR Y IS TO BE CONDUCTED ONLY IN THOSE SCRUTINY CASES WHICH HAVE B EEN SELECTED ON THE PARAMETER(S) OF AIR/CIB/26AS DATA. IN SUCH CASES, THE ASSESSING OFFICER, SHALL ALSO CONFINE TH E QUESTIONNAIRE ONLY TO THE SPECIFIC ISSUES PERTAININ G TO AIR/CIB/26AS DATA. WIDER SCRUTINY IN THESE CASES CA N ONLY BE CONDUCTED AS PER THE GUIDELINES AND PROCEDURES S TATED IN INSTRUCTION NO. 7/2014. IV. REASON FOR SELECTION: IN CASES UNDER SCRUTINY FOR VERIFICATION OF AIR/CIB/26AS DATA, THE ASSESSING OF FICER HAS TO INTIMATE THE REASON FOR SELECTION OF CASE FOR SC RUTINY TO THE ASSESSEE CONCERNED. 3. AS FAR AS THE RETURNS SELECTED FOR SCRUTINY THRO UGH CASS-2015 ARE CONCERNED, TWO TYPE OF CASES HAVE BEEN SELECTED FOR SCRUTINY IN THE CURRENT FINANCIAL YEAR-- ONE IS LIMITED SCR UTINY AND OTHER IS COMPLETE SCRUTINY. THE ASSESSEES CONCERNED HAV E DULY BEEN INTIMATED ABOUT THEIR CASES FALLING EITHER IN LIMI TED SCRUTINY OR COMPLETE SCRUTINY THROUGH NOTICES ISSUED UNDER SE CTION 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 ASSESSEE CONCERNED. B. THE QUESTIONNAIRE UNDER SECTION 142 (1) OF THE ACT IN LIMITED SCRUTINY CASES SHALL REMAIN CONFINED ONLY TO THE SPECIFIC REASONS/ISSUES FOR WHICH CASE HAS BEEN PIC KED UP FOR SCRUTINY. FURTHER, THE SCOPE OF ENQUIRY SHALL BE RE STRICTED TO THE LIMITED SCRUTINY ISSUES. ITA NO.1419/JP/2019 SMT. MANJU KAUSHIK VS DCIT, RANGE-7, JAIPU R 11 C. THESE CASES SHALL BE COMPLETED EXPEDITIOUSLY IN A LIMITED NUMBER OF HEARINGS. D. DURING THE COURSE OF ASSESSMENT PROCEEDINGS IN LIMITED SCRUTINY CASES, IF IT COMES TO THE NOTICE OF THE A SSESSING OFFICER THAT THERE IS POTENTIAL ESCAPEMENT OF INCOM E EXCEEDING RS. FIVE LAKHS (FOR METRO CHARGES, THE MO NETARY LIMIT SHALL BE RS. TEN LAKHS) REQUIRING SUBSTANTIAL VERIFICATION ON ANY OTHER ISSUE(S), THEN, THE CASE MAY BE TAKEN UP FOR COMPLETE SCRUTINY WITH THE APPROVAL OF THE PR. CI T/CIT CONCERNED. HOWEVER, SUCH AN APPROVAL SHALL BE ACCOR DED BY THE BY THE PR. CIT/CIT IN WRITING AFTER BEING SATIS FIED ABOUT MERITS OF THE ISSUE(S) NECESSITATING COMPLETE SCRU TINY IN THAT PARTICULAR CASE. SUCH CASES SHALL BE MONITORED BY T HE RANGE HEAD CONCERNED. THE PROCEDURE INDICATED AT POINTS ( A), (B) AND (C) ABOVE SHALL NO LONGER REMAIN BINDING IN SUC H CASES. (FOR THE PRESENT PURPOSE, METRO CHARGES WOULD MEA N DELHI, MUMBAI, CHENNAI, KOLKATA, BENGALURU, HYDERABAD AND AHMEDABAD). 4. THE BOARD FURTHER DESIRES THAT IN ALL CASES UND ER SCRUTINY, WHERE THE ASSESSING OFFICER PROPOSES TO MAKE ADDITIONS OR DISALLOWANCES, THE ASSESSEE WOULD BE GIVEN A FAIR OPPORTUNITY TO E XPLAIN HIS POSITION ON THE PROPOSED ADDITIONS/DISALLOWANCES IN ACCORDAN CE WITH THE PRINCIPLE OF NATURAL JUSTICE. IN THIS REGARD, THE A SSESSING OFFICER SHALL ISSUE AN APPROPRIATE SHOW-CAUSE NOTICE DULY INDICAT ING THE REASONS FOR THE PROPOSED ADDITIONS/DISALLOWANCES ALONG WITH NECESSARY EVIDENCES/REASONS FORMING THE BASIS OF THE SAME. BE FORE PASSING THE FINAL ORDER AGAINST THE PROPOSED ADDITIONS/DISALLOW ANCES, DUE CONSIDERATION SHALL BE GIVEN TO THE SUBMISSIONS MAD E BY THE ASSESSEE IN RESPONSE TO THE SHOW-CAUSE NOTICE. 5. THE CONTENTS OF THIS INSTRUCTION SHOULD BE IMMED IATELY BROUGHT TO THE NOTICE OF ALL CONCERNED FOR STRICT COMPLIANCE. 6. HINDI VERSION TO FOLLOW. SD/- (ANKITA PANDEY) UNDER SECRETARY TO GOVERNMENT OF INDIA 14. WITH INSTRUCTION 7 OF 2014, THE BOARD HAS MADE IT SPECIFICALLY CLEAR THAT THE SCOPE OF ENQUIRY SHOULD BE LIMITED T O VERIFICATION OF THE PARTICULAR ASPECTS ONLY. IT HAS ALSO BEEN DIREC TED THAT AN ITA NO.1419/JP/2019 SMT. MANJU KAUSHIK VS DCIT, RANGE-7, JAIPU R 12 APPROVAL IS REQUIRED FROM THE PCIT/DIT, IN WRITING, AFTER BEING SPECIFIC ABOUT THE MERITS OF THE OTHER ISSUES FOR C OMPREHENSIVE SCRUTINY. 15. THE SAID INSTRUCTION READS AS UNDER: INSTRUCTION NO. 7/2014 GOVERNMENT OF INDIA MINISTRY OF FINANCE DEPARTMENT OF REVENUE (CBDT) ROOM NO. 143E, NORTH-BLOCK, NEW-DELHI DATED THE 26 TH OF SEPTEMBER, 2014 TO AU PR. CHIEF-COMMISSIONERS OF INCOME-TAX/CHIEF- COMMISSIONERS OF INCOME-TAX A ALL PR. DIRECTORS-GENERAL OF INCOME-TAX/DIRECTORS-G ENERAL OF INCOME-TAX SIR/MADAM, SUBJECT: - SCOPE OF ENQUIRY IN CASES SELECTED FOR S CRUTINY DURING THE FINANCIAL YEAR 2014-2015 ON BASIS OF AIR /C1B /26AS MIS-MATCH REGARDING IT HAS COME TO THE NOTICE OF THE BOARD THAT DURING THE SCRUTINY ASSESSMENT PROCEEDINGS SOME OF THE AOS ARE ROUTINEL Y CALLING FOR INFORMATION WHICH IS NOT RELEVANT, FOR ENQUIRY INTO THE ISSUES TO BE CONSIDERED. THIS HAS BEEN CAUSING UNDUE HARAS SMENT TO THE TAXPAYERS AND HAS ALSO DRAWN ADVERSE CRITICISM FROM SEVERAL QUARTERS. FURTHER, FEEDBACK AND ANALYSIS OF SUCH ORDERS INDICATES THAT MANY TIMES THE CORE ISSUES, WHICH FO RMED THE BASIS OF SELECTION OF THE CASE FOR SCRUTINY WERE NO T EXAMINED PROPERLY. SUCH INSTANCES PRIMARILY OCCURRED IN CASE S SELECTED FOR SCRUTINY UNDER COMPUTER AIDED SCRUTINY SELECTIO N ('CASS') FOR VERIFICATION OF SPECIFIC INFORMATION OBTAINED F ROM THIRD PARTY SOURCES WHICH APPARENTLY DID NOT MATCH WITH THE DET AILS SUBMITTED BY THE TAX AVER IN THE RETURN OF-INCOME. ITA NO.1419/JP/2019 SMT. MANJU KAUSHIK VS DCIT, RANGE-7, JAIPU R 13 2. THEREFORE, FOR PROPER ADMINISTRATION OF THE INCO ME-TAX ACT, 1961 ('ACT'), CENTRAL BOARD OF DIRECT TAXES, BY VIR TUE OF ITS POWERS UNDER SECT ON 119 OF THE ACT, IN SUPERSESSIO N OF EARLIER INSTRUCTIONS/GUIDELINES ON THIS SUBJECT, HEREBY DIR ECTS THAT THE CASES SELECTED FOR SCRUTINY DURING THE FINANCIAL YE AR 2014- 20(15 UNDER CASS, ON THE BASIS OF EITHER AIR DATA O R CIB INFORMATION OR FOR NON RE-CONCILIATION WITH 26AS DA TA THE SCOPE OF ENQUIRY SHOULD BE LIMITED TO VERIFICATION OF THE SE ARE PARTICULAR ASPECTS ONLY. THEREFORE, IN SUCH CASES, AN ASSESSING OFFICER HALL CONFINE THE QUESTIONNAIRE AND SUBSEQUE NT ENQUIRY OR VERIFICATION ONLY TO THESE SPECIFIC POINT(S) ON THE BASIS OF WHICH THE PARTICULAR RETURN HAS BEEN SELECTED FOR S CRUTINY. 3. THE REASON(S) FOR SELECTION OF CASES UNDER CASS ARE DISPLAYED TO THE ASSESSING OFFICER IN AST APPLICATI ON AND NOTICE U/S 143(2), AFTER GENERA ION FROM AST, IS ISSUED TO THE TAXPAYER WITH THE REMARK 'SELECTED UNDER COMPUTER A IDED SCRUTINY SELECTION (CASS)'. THE FUNCTIONALITY IN AS T IS BEING MODIFIED SUITABLY TO FLAG THE REASONS FOR SCRUTINY SELECTION IN AIR/CIB/26AS CASES. THIS FUNCTIONALITY IS EXPECTED TO BE OPERATIONALISED BY 15TH OCTOBER, 2014. FURTHER, THE ASSESSING OFFICER WHILE ISSUING NOTICE UNDER SECTION 142(1) O F THE ACT WHICH IS ENCLOSED WITH THE FIRST QUESTIONNAIRE WOUL D PROCEED TO VERIFY ONLY THE SPECIFIC ASPECTS REQUIRING EXAMINATION/VERIFICATION. IN SUCH CASES, ALL EFFORT S WOULD BE MAD TO ENSURE THAT ASSESSMENT PROCEEDINGS ARE COMPL ETED EXPEDITIOUSLY IN MINIMUM POSSIBLE NUMBER OF HEARING S WITHOUT UNNECESSARILY DRAGGING THE CASE TILL THE TIME-BARIN G DATE. 4. IN CASE, DURING THE COURSE OF ASSESSMENT PROCEED INGS IT IS FOUND THAT THERE IS POTENTIAL ESCAPEMENT OF INCOME EXCEEDING RS. 10 LAKHS (F NON -METRO CHARGES, THE MONETARY LI MIT SHALL BE RS. 5 LAKHS) ON ANY OTHER ISSUE(S) APART FROM THE A IR/CIB/26AS INFORMATION BASED ON 14 WHICH THE CASE WAS ELECTED UNDER CASS REQUIRING SUBSTANTIAL VERIFICATION, THE CASE M AY BE TAKEN U FOR COMPREHENSIVE SCRUTINY WITH THE APPROVAL OF T HE PR. CIT/DIT CONCERNED. HOWEVER, SUCH AN APPROVAL SHALL BE ITA NO.1419/JP/2019 SMT. MANJU KAUSHIK VS DCIT, RANGE-7, JAIPU R 14 ACCORDED BY THE PR. CIT/DIT IN WRITING AFTER BEING SATISFIED ABOUT MERITS OF THE ISSUE(S) NECESSITATING WIDER AN D DETAILED SCRUTINY IN THE CASE. CASES SO TAKEN UP FOR DETAILE D SCRUTINY SHALL BE MONITORED BY THE IT. CIT/ADDL. CIT CONCERN ED. 5. THE CONTENTS OF THIS INSTRUCTION SHOULD BE IMMED IATELY BROUGHT TO THE NOTICE OF ALL CONCERNED FOR STRICT C OMPLIANCE. 6. HINDI VERSION TO FOLLOW. (ROHIT GARG) DEPUTY SECRETARY TO THE GOVERNMENT OF INDIA 16. A PERUSAL OF THE AFORESAID INSTRUCTION SHOWS TH AT THE ASSESSING OFFICER CAN WIDEN THE SCOPE OF SCRUTINY EVEN IF IT IS SELECTED FOR SCRUTINY ASSESSMENT UNDER CASS. HOWEVER, THE CONDIT ION PRECEDENT FOR SUCH ACTION OF THE ASSESSING OFFICER IS THAT HE HAS TO SEEK PRIOR APPROVAL OF THE HIGHER AUTHORITIES. A PERUSAL OF TH E ASSESSMENT ORDER SHOWS THAT THE ASSESSING OFFICER HAS NOT MENTIONED AS TO WHEN THE PERMISSION FROM THE PCIT WAS SOUGHT TO MAKE FURTHER ENQUIRIES IN THE CASE OF THE ASSESSEE. CONSIDERING THE FACTS OF THE CASE IN TOTALITY, IN THE LIGHT OF THE CBDT INSTRUCTIONS MEN TIONED HEREINABOVE, QUA NOTICE U/S 143(2) OF THE ACT, WE A RE OF THE CONSIDERED OPINION THAT THE 15 ASSESSMENT ORDER SO FRAMED BY THE ASSESSING OFFICER IS NOT IN CONSONANCE WITH INSTRUC TION OF THE CBDT AND, THEREFORE DESERVES TO BE QUASHED. THE ORDER OF THE LD. CIT(A) IS ACCORDINGLY SET ASIDE. WE FORTIFY OUR VIEW BY THE ABOVE CITED DECISION OF ITAT DELHI BENCH. IN THE CASE IN HAND, THOUGH THE AO HAS MENTIONED THAT APPROVAL WAS ACCORDED BY THE PR.CIT ON 24-11-2016 AND CONSEQUENT LY HE HAS INITIATED PROCEEDINGS OF COMPLETE SCRUTINY BY ISSUING NOTICE DATED 25-11-2016. HOWEVER, WE FIND THAT SAID APPROVAL OF PR.CIT WAS C OMMUNICATED TO THE AO ONLY ON 29-11-2016. THE RELEVANT COMMUNICATION L ETTER DATED 28-11- 2016 WHICH WAS RECEIVED BY THE AO ON 29-11-2016 IS AS UNDER:- ITA NO.1419/JP/2019 SMT. MANJU KAUSHIK VS DCIT, RANGE-7, JAIPU R 15 ITA NO.1419/JP/2019 SMT. MANJU KAUSHIK VS DCIT, RANGE-7, JAIPU R 16 THEREFORE, THE NOTICE U/S 142(1) ISSUED ON 25-11-20 16 FOR INITIATION OF COMPLETE SCRUTINY ASSESSMENT PROCEEDING IS PRIOR TO THE RECEIPT OF THE APPROVAL ACCORDED BY THE PR.CIT AND THUS IT IS APPA RENT THAT AO HAS INITIATED THE PROCEEDINGS FOR FULL/ COMPLETE/ COMPR EHENSIVE SCRUTINY IN ANTICIPATION OF APPROVAL TO BE ACCORDED BY THE PR.C IT. IT IS ALSO MANDATED BY CBDT INSTRUCTIONS THAT COMPETENT AUTHORITY HAS T O GRANT APPROVAL ONLY AFTER SATISFYING ITSELF ABOUT THE REQUIREMENTS OF C OMPREHENSIVE SCRUTINY OF THE CASE. FURTHER THE AO IS ALSO REQUIRED TO INTIMA TE THE ASSESSEE REGARDING CONVERSION OF LIMITED SCRUTINY TO THE COM PLETE SCRUTINY IN SUCH CASES. IT IS PERTINENT TO NOTE THAT IN THE PROCEEDI NGS FOR LIMITED SCRUTINY THE AO WAS SATISFIED WITH THE SOURCE OF INCREASE IN THE CAPITAL OF THE ASSESSEE AND EVEN DID NOT PROCEED FURTHER AFTER THE REPLY AND DOCUMENTS FILED BY THE ASSESSEE IN RESPONSE TO THE NOTICE U/S 142(1) DATED 4-07-2016. ONLY AFTER DROPPING THE SAID NOTICE, THE AO ISSUED FRESH NOTICE U/S 142(1) ON 25-11-2016. THE AO HAS FINALLY MADE ADDITION ONL Y ON ACCOUNT OF DISALLOWANCE OF DEDUCTION U/S 54B OF THE ACT. THERE FORE, AT THE TIME OF INITIATING THE COMPLETE SCRUTINY, THE ISSUE UNDER L IMITED SCRUTINY WAS NOT PENDING WITH THE AO AS HE WAS SATISFIED WITH THE RE PLY AND DOCUMENTARY EVIDENCE ON THE SAID ISSUE. IN THE CASE IN HAND, TH E AO HAS NOT INTIMATED ITA NO.1419/JP/2019 SMT. MANJU KAUSHIK VS DCIT, RANGE-7, JAIPU R 17 THE ASSESSEE ABOUT THE CONVERSION OF LIMITED SCRUTI NY TO COMPLETE SCRUTINY WHICH IS A SERIOUS VIOLATION OF THE INSTRUCTIONS IS SUED BY THE CBDT. HENCE, WE FIND THAT THE AO HAS TAKEN UP THE ISSUE A ND INITIATED PROCEEDINGS FOR COMPLETE SCRUTINY WITHOUT NECESSARY APPROVAL WITH HIM. THEREFORE, THE ISSUE TAKEN UP BY THE AO REGARDING D ISALLOWANCE OF DEDUCTION U/S 54B IS PRIOR TO THE NECESSARY APPROVA L COMMUNICATED TO THE AO AND THEREFORE, IN THE ABSENCE OF COMMUNICATION I N WRITING TO THE AO ABOUT THE APPROVAL, THE ASSUMPTION OF JURISDICTION BY THE AO IS INVALID. CONSEQUENTLY, THE ADDITION MADE BY THE AO BY DENYIN G THE DEDUCTION U/S 54B IS NOT SUSTAINABLE AND THE SAME IS DELETED. 3.6 SINCE WE HAVE DELETED THE ADDITION ON THE LEGAL GROUND, THEREFORE, WE DO NOT PROPOSE TO TAKE UP OTHER ISSUES RAISED BY THE ASSESSEE ON THE MERITS OF THE DEDUCTION U/S 54B OF THE ACT. 4.0 IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 09 /12/20 19. SD/- SD/- FOE FLAG ;KNO FOT; IKY JKO (VIKRAM SINGH YADAV) (VIJAY PAL RAO) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 09/12/ 2019 ITA NO.1419/JP/2019 SMT. MANJU KAUSHIK VS DCIT, RANGE-7, JAIPU R 18 *MISHRA VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- SMT. MANJU KAUSHIK, JAIPUR 2. IZR;FKHZ@ THE RESPONDENT- THE DCIT, RANGE-7, JAIPUR 3. VK;DJ VK;QDRVIHY ) @ CIT(A), 4. VK;DJ VK;QDR@ CIT, 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO.1419/JP/2019) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR