M/s Janpaksh Printing & Publishing, Jabalpur V. Income Tax Officer-Ward 1(1)Jabalpur, Jabalpur

ITA 58/JAB/2021

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 2871 (ITAT-JABALPUR)
• Duration Of Justice: 4 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-05-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: SMC
• Assessment Year: 2015-2016
• Appeal Filed On: 23-12-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SANJAY MISHRA
• Keywords: Transfer pricing; Search and seizure; Question of law
• Section: 148; 132; 11; 143(3); 133A; 153A; 12AA; 250; 274; 143(2); 254(2); 119; 153C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL JABALPUR BENCH, JABALPUR (through web-based video conferencing platform) BEFORE SHRI SANJAY ARORA, HON‘BLE ACCOUNTANT MEMBER I.T.A. No. 58/JAB/2021 (Asst. Year : 2015-16) Assessee by : Shri Sanjay Mishra, Advocate. Department by : Shri S.K. Halder, Sr. DR Date of hearing : 09/03/2022 Date of pronouncement : 06/05/2022 O R D E R Per Sanjay Arora, AM: [ This is an Appeal by the Assessee directed against the Order by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre Delhi ( ̳CIT(A)‘ for short) dated 25/10/2021, dismissing the assessee‘s appeal contesting its‘ assessment under section 143(3) of the Income Tax Act, 1961 ( ̳the Act‘ hereinafter) for the Assessment Year (AY) 2015-16 vide Order dated 30/11/2017. 2. Though the assessee‘s appeal raises several grounds, the assessee‘s foremost grievance, as stated by its‘ ld. counsel, Shri Mishra, before me, was that there has been an omission by the first appellate authority to consider the assessee‘s reply dated 17.02.2021, furnished in response to the notice u/s. 250 Janpaksh Printing & Publishing,1, Gopal Bagh, Damohnaka, Jabalpur (MP) Vs. Income Tax Officer Ward-1(1), Jabalpur. [PAN : AAFFJ 2543 L] (Appellant) (Respondent) ITA No. 58/JAB/2021 (A.Y. 2015-16) Janpaksh Printing and Publishing v. ITO 2 dated 12.01.2021 requiring the assessee to make its‘ submission by 27.01.2021 (PB pgs. 3-9). There is in fact no reference to the said notice at para 5 of the impugned order which enlists the dates of the various notices of hearing to the assessee during the appellate proceedings. The assessee‘s reply, though admittedly submitted beyond the due date specified in the said notice (27.1.2021), he would continue, the same would be of no moment in view of the subsequent notices of hearing dated 20.8.2021 and 24.9.2021. He, however, conceded to the assessee not responding to these notices as well as the first notice dated 08.01.2021. The matter, he concluded, be restored to the file of the first appellate authority for a decision on merits; its adjudication being sans the consideration of the assessee‘s said reply. Discussion/Findings 3.1 There is, thus, admittedly no response by the assessee to 3 out of the 4 notices of hearing issued to it by the first appellate authority. What, though, is more surprising is that having made its‘ submissions on 17.2.2021, all that the assessee was required to do, in response to the subsequent notices, was to draw attention to the same, so that the same was considered, and any further explanation or query, if any, sought or raised, resulting in a proper and complete consideration of the assessee‘s case. It is also unfortunate that the reply/s furnished by the assessee in response to notice/s of hearing is glossed over and not referred to in the impugned order, signifying its consideration. 3.2 Be that as it may, the question of remission to the file of the first appellate authority (FAA) arises only where the assessee has indeed raised any fresh argument, supported by material/s, before the said authority. This is as, where not, and the assessee‘s case remains the same as before the Assessing Officer (AO), or substantially so, no useful purpose would be served by the said remission as the assessee‘s case, finding clear statement in the assessment order, stands considered by the first appellate authority. Shri Mishra was, accordingly, ITA No. 58/JAB/2021 (A.Y. 2015-16) Janpaksh Printing and Publishing v. ITO 3 required to exhibit the stated non-consideration of the assessee‘s case, proceeding ground-wise with reference to the grounds of appeal in Form-35, i.e., the memo of appeal before the FAA, also reproduced in its reply dated 17.2.2021. 3.3 The first three grounds concern/challenge the jurisdiction of the assessing authority. There is, to begin with, no submissions qua Grounds 2 and 3 in the assessee‘s written submission dated 17.2.2021, which stand though disposed of vide paras 7 and 8 of the impugned order. Per Ground 1, the assessee has challenged the validity of the notice u/s. 143(2) by the AO inasmuch as the same is contrary to the provisions of the Act; there being no provision therein for the selection of a case through CASS (computer aided scrutiny selection). The same stands adjudicated as under: (at pg.5) ―6. The ground of appeal no. 1 relates to selection for scrutiny under CASS and it is stated to be contrary to provisions of Act. No further submission is given in this regard. The computer aided scrutiny selection scheme has been formulated for encouraging credibility and transparency in selection of cases for scrutiny and powers are exercised by Central Board of Direct Taxes by issuing relevant notifications and circulars in this regard. The ground is entirely baseless and is hereby dismissed.‖ It cannot be, therefore, said that there has been no consideration of the assessee‘s case by the first appellate authority; the assessee neither elaborating its‘ stand nor supplementing it with any case law. Even as the same may, agreeably, be not to the satisfaction of the assessee, who still continues to be aggrieved and hold reason to agitate the said ground, the same would obtain on merits rather than the stated non-consideration. 3.4 Grounds 4 to 7 (and not Ground 4 to 6 as wrongly stated) stand considered per para 9 of the impugned order. It is therefore wholly incorrect to say that the same does not consider its‘ case, which is, again, the same as before the AO. The only addition, admittedly made by the assessee per its‘ written submissions during the first appellate proceedings, is the tabulation of ̳other expenses‘ for the preceding three years, which are stated to have been ̳accepted‘ in the past, so ITA No. 58/JAB/2021 (A.Y. 2015-16) Janpaksh Printing and Publishing v. ITO 4 there was no reason for disallowance thereof for the current year. The argument is misconceived on the very face of it. There has been admittedly (by Shri Mishra during hearing) been no assessment u/s. 143(3) (or even u/s. 144) for any of the said three years, so that there is no question of any ̳acceptance‘ of the assessee‘s claim by the Revenue. Even otherwise, each year is an independent unit of the assessment, and the principle of res judicata is not applicable to the proceedings under the Act (New Jehangir Vakil Mills Co. Ltd. v. CIT [1963] 49 ITR 137 (SC); M.M. Ipoh v. CIT [1968] 67 ITR 106 (SC)). The written submissions also make out the case of the expenses included in ̳other expenses‘ being, to the extent specified therein, not being in fact so, but ̳trading expenses‘, and wrongly mentioned (on account of a bona fide mistake) as ̳other expenses‘, so that the same be allowed. There is, however, no demonstration of the said bona fide mistake. It is only where the ̳other expenses‘ (OE), to verify which the assessee‘s return for the relevant year stands selected for scrutiny under CASS, had been not so shown for the preceding years, with reference to which there is a quantum jump therein for the current year (being at 10.89% (i.e., 45.99 * 100/422.38), as against at 7.66% to 8.71% for the preceding three years), that the assessee can be said to have made out a prima facie case to complain its non-consideration by the first appellate authority. The same has not been. On the contrary, there is, as afore-noted, admittedly a quantum jump in ̳other expenses‘ vis-a-vis the preceding years, which has presumably been captured under CASS, requiring verification of the expenses reported as OE for the current year. The adjudication by the first appellate authority (at para 9) takes into account all the other submissions by the assessee before the AO, which find repetition in its written submissions thereto, discussed hereinabove, finding the same as irrelevant/un- evidenced. The assessee‘s plea fails qua the said grounds (before the ld. CIT(A)) as well. 3.5 Ground 8 per Form-35, which stands though canvassed before, and adjudicated at para 10 by, the ld. CIT(A), is in respect of initiation of penalty u/s. ITA No. 58/JAB/2021 (A.Y. 2015-16) Janpaksh Printing and Publishing v. ITO 5 271(1)(b), and, thus, not appealable in these proceedings. The assessee‘s Grounds 1 and 2 before the Tribunal are thus without merit and, accordingly, dismissed. 4.1 Vide Ground 3, the assessee raises the issue of invalidity of the notice u/s. 143(2) as the same stands admittedly issued under CASS. The Central Board of Direct Taxes (CBDT), it is argued with reference to section 119(1), is incompetent to issue such an Instruction (i.e., as CASS) inasmuch as section 119(1) circumscribes its‘ power to preclude an instruction or direction so as to require any Income-tax authority to make a particular assessment. That is, the power of the AO in the matter of assessment is plenary, and cannot be interfered with by any income tax authority, including CBDT (Board). It is only where the AO considers it necessary and expedient to issue a notice u/s. 143(2) with a view to ensure that income has not been understated, etc., that he may do so, and the Board formulating a scheme (as CASS), whereby a particular return/case, as of the assessee, is required to be subject to the verification procedure under the Act by issue of notice u/s. 143(2), is not contemplated by law. Shri Mishra would, to buttress his point, take the Bench through a series of decisions, reading out relevant parts thereof, viz. CIT v. Bal Krishna Malhotra [1971] 81 ITR 759 (SC); Om Trading Company & Ors. v. ITO [1991] 188 ITR 641 (Kar); CIT v. Nayana P. Dadhia [2004] 270 ITR 572 (AP); Janta Metal Works v. ITO [1990] 186 ITR 458 (All); Harbans Kaur v. ITO [1993] 204 ITR 685 (P&H); and Gujarat Gas Ltd. v. Jt. CIT [2000] 245 ITR 84 (Guj). 4.2 Shri Halder, the ld. Sr. DR, would, on the other hand, plead that none of the cited decisions is applicable inasmuch as formulating a criteria, based on relevant filters as identified by the Board for selecting cases for scrutiny, is well within the powers of the Board u/s. 119. 5. I have heard the parties, and perused the material on record. ITA No. 58/JAB/2021 (A.Y. 2015-16) Janpaksh Printing and Publishing v. ITO 6 5.1 The short question arising is if the formulation of guidelines, based on broad identifiable filters, for selection of cases for scrutiny by the assessing authority, is ultra vires the powers of the Board u/s. 119 of the Act. This is as, admittedly, the notice u/s. 143(2) dated 02/8/2016 in the instant case was issued under CASS 16 issued by the Board (para 1 of the assessment order). The relevant Board Instruction (# 4/2016, dated 13/7/2016/PB-3, pgs. 5 to 7) reads as under: Instruction No. 4/2016 Government of India Ministry of Finance Department of Revenue (CBDT) North-Block, New Delhi Date: 13th of July, 2016 To All Pr. Chief-Commissioners of Income-tax/Chief-Commissioners of Income- tax All Pr. Directors-General of Income-tax/Directors-General of Income-tax Sir/Madam Subject: Compulsory manual selection of cases for scrutiny during the Financial Year 2016-2017- regd:- 1. In supersession of earlier Instructions on the above subject, the Board hereby lays down the following procedure and criteria for manual selection of returns/cases for compulsory scrutiny during the financial-year 2016-2017:- (i) Cases involving addition on a substantial and recurring question of law or fact in earlier assessment year(s), in excess of Rs. 25 lakhs in metro charges at Ahmedabad, Bengaluru, Chennai, Delhi, Hyderabad, Kolkata, Mumbai and Pune, while for other charges, quantum of such addition should exceed Rs. 10 lakhs (for transfer pricing cases, quantum of such addition should exceed Rs. 10 crore) and where: a. such an addition in assessment has become final as no further appeal was/has been filed; or b. such an addition has been confirmed at any stage of appellate process in favour of revenue and assessee has not filed further appeal; or c. such an addition has been confirmed at 1 st appeal stage in favour of revenue or subsequently and further appeal of assessee is pending before any Authority in the appellate process. (ii) All assessments pertaining to Survey under section 133A of the Act excluding those cases where books of accounts, documents etc. were not impounded and ITA No. 58/JAB/2021 (A.Y. 2015-16) Janpaksh Printing and Publishing v. ITO 7 returned income (excluding any disclosure made during the Survey) is not less than returned income of preceding assessment year. However, where assessee retracts the disclosure made during the Survey, such cases will not be covered by this exclusion. (iii) Assessments in search and seizure cases to be made under section(s) 158B, 158BC, 158BD, 153A & 153C read with section 143(3) of the Act and also for the returns filed for the assessment year relevant to the previous year in 1/2 which authorization for search and seizure was executed u/s 132 or 132A of the Act. (iv) Return filed in response to notice under section 148 of the Act. (v) Cases where registration u/s 12AA of the IT Act has not been granted or has been cancelled by the CIT/DIT concerned, yet the assessee has been found to be claiming tax-exemption under section 11 of the Act. However, where such orders of the CIT/DIT have been reversed/set-aside in appellate proceedings, those cases will not be selected under this clause. (vi) Cases of entities, being ̳scientific research association‘ or ̳university, college or other institution‘, having approval under section(s) 35(1)(ii)/35(1)(iii) of the Act. (vii) Cases in respect of which specific and verifiable information pointing out tax-evasion is given by any Government Department/Authority. However, before selecting a case for scrutiny under this criterion, Assessing Officer shall be required to take prior administrative approval from the concerned jurisdictional Pr. CIT/Pr.DIT/CIT. 2. Computer Aided Scrutiny Selection (CASS): Cases are also being selected under CASS-2016 on the basis of broad based selection filters. List of such cases has been/is being separately intimated by the Pr.DGIT(Systems) to the jurisdictional authorities concerned. 3. As a taxpayer friendly measure, to reduce the departmental interface with the assessee and reduce the compliance burden of tax payers in scrutiny assessment proceedings, the scheme of Assessment through e-mail is being extended to all scrutiny cases including the cases selected under above parameters in seven cities of Ahmedabad, Bengaluru, Chennai, Delhi, Hyderabad, Kolkata and Mumbai. However, assessees in these seven cities can exercise the option of not being scrutinized under the e-mail based paperless assessment proceedings after informing the Assessing Officer concerned in writing in the beginning or subsequently during the course of assessment proceedings. Further, in cases which require submission of voluminous documents and it is not practicable to submit the scanned copies thereof through e-mail, in such instances; the Assessing Officer may decide to receive such documents in physical form after recording reasons for the same. 4. It is reiterated that the targets for completion of scrutiny assessments and strategy of framing quality assessments as contained in Central Action Plan document for Financial-Year 2016-2017 have to be complied with and it must be ITA No. 58/JAB/2021 (A.Y. 2015-16) Janpaksh Printing and Publishing v. ITO 8 ensured that all scrutiny assessment orders including the cases selected under the manual criterion are completed through the AST system software only. It should be the endeavour of the Assessing Officers and his supervisory authorities to ensure that scrutiny assessment cases are disposed in a well planned manner without dragging the assessment proceedings till the last date of limitation. Further, Pr. CCsIT/CCIT(Central)/Pr. CCIT(International tax)/CCIT(Exemption)/ DsGIT should evolve a suitable monitoring mechanism in their respective charges in order to ensure quality of assessments being framed during the financial year. In this regard, by 31st January, 2017, such authorities shall send a report to the respective Zonal Member with a copy to Member (IT) containing details of at least 25 quality assessment orders from their respective charges. It may further be the endeavour that cases selected for publication in ̳Let us Share‘ are picked up only from the quality assessments as reported. 5. These instructions may be brought to the notice of all concerned for necessary compliance. 6. Hindi version to follow. (Rohit Garg) Deputy-Secretary to the Government of India 5.2 The question posed, as I see it, has two aspects to it. One, that the Board Instruction 04/2016, dated 13/7/2016, to the extent it advocates or furnishes guidelines under CASS 16 for selection of scrutiny of tax returns, is ultra vires the Constitution of India inasmuch as it usurps the power reserved under the Act for an assessing authority thereunder. I have re-phrased the question thus as inasmuch as the AO has, in issuing notice u/s. 143(2), which is under challenge, acted in accordance with the directions issued u/s. 119 of the Act, binding on him, his action can be faulted with only where the relevant Instruction itself is not valid in law. Now, clearly, the question cannot be answered by the Tribunal, a creation of the statute itself, but only by a Constitutional Court, i.e., the Hon'ble High Court or the Hon'ble Supreme Court of India, under its‘ writ jurisdiction. The Hon'ble Court shall, in appropriate proceedings, examine if the said Board Instruction satisfies the test of intelligible classification and on that basis decide if it offends the principle of equality before law enshrined in Article 14, or not. This, to my mind, would be the only valid challenge as the Board has wide powers, both u/s. 119(1), to which reference was made by Sh. Mishra, as well as ITA No. 58/JAB/2021 (A.Y. 2015-16) Janpaksh Printing and Publishing v. ITO 9 u/s. 119(2), to which it was not, conferred on it for furtherance of the objects and administration of the Act. Reference in this context may profitably be made to the decision in Pahwa Chemicals (P.) Ltd. v. CCE [2005] 274 ITR 87 (SC), wherein the Hon'ble Apex Court clarified that the Instructions by the Board u/s. 37B (of the Central Excise Act, 1944), which is akin to s. 119 of the Act, are circumscribed by the consideration stated in section 37B itself, i.e., in furtherance of the provisions of the Act. It is, as such, difficult to contend, as Shri Mishra does, that Board Instruction 04/2016 violates section 143(2) of the Act, which provision finds specific reference in section 119(2)(a). Answering the, second, limited aspect of the matter, as posed by Shri Mishra, is that the Instruction is in breach of or ultra vires section 119(1)(a) as it requires the AO to make an assessment in a particular case. The same arises, in my considered view, on a misconstruction of the provision, which reads as under: “Instructions to subordinate authorities. 119 (1) The Board may, from time to time, issue such orders, instructions and directions to other income-tax authorities as it may deem fit for the proper administration of this Act, and such authorities and all other persons employed in the execution of this Act shall observe and follow such orders, instructions and directions of the Board : Provided that no such orders, instructions or directions shall be issued— (a) so as to require any income-tax authority to make a particular assessment or to dispose of a particular case in a particular manner; or (b) so as to interfere with the discretion of the Commissioner (Appeals) in the exercise of his appellate functions.‖ (emphasis, added) The words ̳in a particular manner‘ qualify not only the words ̳dispose of a particular case‘ but also the words ̳making a particular assessment‘, preceding the same. The ld. counsel is, I am afraid to say, reading a comma (,) after the word ̳assessment‘, where none exists. Now, it is nobody‘s case, nor could possibly be, that selecting a particular case, based on certain broad parameters, viz. investment in real estate; cash deposited in bank (above certain monetary limits), etc., the Board is requiring the assessing authority to make an assessment ITA No. 58/JAB/2021 (A.Y. 2015-16) Janpaksh Printing and Publishing v. ITO 10 in a particular manner. It is only, for the efficient management of the Act, facilitating the selection of a return for scrutiny. Nothing more and, nothing less. 5.3 None of the decisions cited is on the point or in any manner contradicts or repudiates what stands stated hereinabove, which conforms to the well- established law, with, rather, and on the contrary, to the extent in relation to the Board Circular/Instruction, actually supportive of the same. The decisions listed at para 4.1 of this order are the only decisions referred to by Shri Mishra during hearing, so as to be possibly responded to by Shri Halder representing the Department and, indeed, form part of the Tribunal‘s record. This explains the non-reference to any other case law on the file. So, however, the several compilations filed by the assessee include decisions by the Hon'ble Apex Court as well as the Hon'ble Jurisdictional High Court. It is, therefore, despite the same being not referred to and forming part of the arguments/record, deemed proper to considered the same inasmuch as they would be in any case be applicable. None of the decisions, however, were found to have any bearing on the issue/s at hand, as would be apparent from the noting that follows. The decision in ITO vs. K.N. Guruswamy [1958] 34 ITR 601 (SC) is in respect of the saving of reassessment proceedings in view of the retroceded area in Mysore when it was given back by the British Indian Government to the State of Mysore on 26/07/1947. In S.B. Adityan & Ors. vs. First ITO [1964] 52 ITR 453 (SC), the assessment was declared bad as the AO had based his order on the opinion of CBDT and did not render any decision himself. The decision in CIT vs. Balkrishna Malhotra [1971] 81 ITR 759 (SC) lays down the principle that the Courts would normally not depart from the view settled and being acted upon by the parties for years. The decision in Babulal Jain vs ITO [2008] 298 ITR 369 (MP) concerns the denial by the Tribunal of opportunity to the assessee, who had a valid reason to seek adjournment. The decision in District Central Cooperative Bank Ltd. vs. Union of India [2017] 398 ITR 161 (MP), the Hon'ble High Court allowed the assessee‘s writ on the ground that the law of limitation providing a shorter period, in the ITA No. 58/JAB/2021 (A.Y. 2015-16) Janpaksh Printing and Publishing v. ITO 11 absence of retrospectivity, could not extinguish a vested right of action, so that the Tribunal‘s order rejecting the assessee‘s application u/s. 254(2) on the basis of the amended law, providing for a shorter period, was bad in law. 5.4 The argument and, accordingly, the Ground 3, fails. I decide accordingly. }}}} 6. Vide the next Ground (Gd. 4) the assessee challenges the assessment on the ground of territorial jurisdiction of the AO, claiming that the same lies with ITO, Ward-2, Jabalpur, and not with ITO, Ward-1, Jabalpur, i.e., the authority who has framed the impugned assessment. The assessee, it is claimed, raised an objection with the AO vide his letter dated 27/10/2017 (PB-1, pg. 43). The same stands not accepted by the AO vide his communication dated 27/10/2017, on the ground that the notice u/s. 143(2) had been issued (on 02/8/2016) on the basis of the address stated in his PAN as well as the tax returns (PB-1, pg.58). The assessee‘s Gd. 1, before the ld. CIT(A), not pressed in the appellate proceedings (refer written submissions (WS) dated 17/02/2021 before him), is untenable for more than one reason. The objection is invalid as, firstly, the notice u/s. 143(2) is validly issued on the basis of the address mentioned in PAN (refer: Pr. CIT v. I-Ven Interactive Ltd. [2019] 418 ITR 662 (SC)), change in which, where so, is required to be intimated by it u/s. 139A of the Act. In fact, the objection itself can be raised only within 30 days of the service of notice u/s. 143(2), i.e., by 01/9/2016 (section 124(3)). Thirdly, the resolution of the matter in case the assessee is not satisfied with the AO‘s disposal of his objection, timely raised, is through the administrative channel, and not through the appellate procedure, law on which is again well-settled (s.124(2); R.B. Seth Teomal v. CIT [1959] 36 ITR 9 (SC)). 7. Vide Gd. 5, the assessee claims being aggrieved as no opportunity was given to him, to quote the relevant Ground: ―to make compliance of assessment as per the scheme of scrutiny of the case.‖ On being asked during hearing to explain the meaning thereof, Shri Mishra, admitting to have not pressed this Ground before the first appellate authority, would submit that the assessee, vide ITA No. 58/JAB/2021 (A.Y. 2015-16) Janpaksh Printing and Publishing v. ITO 12 letter dated 24/11/2017 (PB-1, pg. 51), opted for being assessed on the basis of e- filing account, which was though rejected by the AO (on 27/11/2017) on the ground that the said option could be exercised by the assessee only by 15/10/2017 (PB-1, pg. 50). This, it is argued by Shri Mishra, is not consistent with the Board Instruction 04/2016, dated 13/07/2016, which provided for option to intimate the AO even during the course of the assessment proceedings (PB-1, pgs. 56-57). The argument is ex facie baseless. Para 5 read with para 4 of the letter dated 06/10/2017 (PB-1, pg. 52) clearly conveys (to the assessee) that non-exercise of the option to participate in the assessment proceedings electronically by 15/10/2017 would imply the continuation of proceedings manually. Further, para 3 of the Board Instruction 04/2016, to which reference was made by Shri Mishra, is applicable only to an assessee located in seven cities specified therein (and which does not include Jabalpur) and, two is for not being assessed electronically. The ground itself is misconceived. This decides the vaguely stated Gd. 5, giving it the meaning stated by Sh. Mishra – which translates into a legal ground, liable for admission. Further, we observe this to be also the subject matter of the Additional Gd. 10, not pleaded for admission by Sh. Mishra, which though gets also decided alongwith. 8. Grounds 6 to 9 concern the issue of disallowance, i.e., on quantum. The assessee‘s case was selected for scrutiny assessment as it, in the business of newspaper publication, had claimed a higher expenditure under the head ―Other Expenses‖ (OE), i.e., vis-a-vis the preceeding year, so as to verify the same. The assessee failed to produce the relevant vouchers, as indeed its‘ books of account. The same stood accordingly disallowed at 20% of the relevant expenditure, excluding the expenditure on consumption of paper, claimed at Rs. 353.13 lakhs, being Rs. 46 lacs (rs. 399.13 lacs – rs. 353.13 lacs), accepting the assessee‘s plea that the same was in fact a direct (trading) expenditure, though had been wrongly claimed as OE in its‘ return, to verify which (OE) only the same was selected for ITA No. 58/JAB/2021 (A.Y. 2015-16) Janpaksh Printing and Publishing v. ITO 13 verification under the limited scrutiny procedure. Carrying the argument further, Shri Mishra would contend that the assessee‘s plea, which found acceptance with the AO, was in fact made for and applicable to other direct (trading) expenditure, similarly reported under OE, viz. Composing expenses (rs. 45,165), Ink Expenses (Rs. 35,73,519) and Plate consumption (Rs. 2,24,650), as well, for which he would take the Bench through Trading Account (at PB- 1, pgs. 5-6). The scope of the limited scrutiny could be, as per the Board Instruction, extended by the AO only upon seeking approval for the same from the competent authority (PB-1, pgs. 39, 54), and which has not been. I cannot agree more with the assessee. The expenditure, for an aggregate of Rs. 38,43,334 afore-noted, also qualifies as direct trading expenditure, and ought to have, like-wise, i.e., as that on paper consumption, excluded from the purview of the limited scrutiny, as the assessee‘s return was selected only for the limited purpose of verifying OE claimed per its profit & loss account, and scope of which has not been extended. The assessee being in the business of newspaper publishing, the said expenditure, a direct cost of its‘ operations, stands rightly debited to the trading account, in contradistinction to the profit & loss account, i.e., considering the assessee‘ trade. As for the balance expenditure of Rs. 7.56 lacs (i.e., 46.00 - 38.44), the assessee‘s claim of the vouchers being not available as the same are small expenses, is specious and untenable. During hearing Shri Mishra could not answer as to why vouchers are not available for expenditure, such as DTP expenditure, newspaper, postage, photostat, etc. The disallowance at 20% is, under the circumstances, not unreasonable, nor any case stands made out for it being regarded as not so, much less substantiated inasmuch as no evidence stands adduced at any stage. The disallowance to that extent is confirmed, and the assessee gets part relief. 9. For Gd. 10 (the additional ground): refer para 7 of this order. ITA No. 58/JAB/2021 (A.Y. 2015-16) Janpaksh Printing and Publishing v. ITO 14 10. In the result, the assessee‘s appeal is partly allowed. Order pronounced in open Court on May 06, 2022 Sd/- (Sanjay Arora) Accountant Member Dated: Ma y 06, 2022 vr/- Copy to: 1. The Assessee – M/s. Janpaksh Printing & Publishing,1, Gopal Bagh, Damohnaka, Jabalpur. 2. The Revenue – IT O, Ward-1(1), Jab alpur. 3. The CIT( Appeals), NFAC, Delhi. 4. The Sr. D.R., Jabalpur. 5. Guard File. By order (VUKKEM RAMBABU) Sr. Private Secretary, ITAT, Jabalpur