Manoj Kumar, Patna V. ITO WARD - 66(3), New Delhi

ITA 727/DEL/2020

AI Insights

The case involves Manoj Kumar, the appellant, who contested the assessment order for the assessment year 2014-15, which was initially selected for limited scrutiny focusing on transactions related to securities and shares. However, the AO expanded the scope to a complete scrutiny without following the proper procedure or obtaining the necessary approval, leading to additional tax assessments. The Tribunal examined the legality of this procedural change and the subsequent assessments, ultimately deciding in favor of the appellant due to the procedural improprieties and lack of substantive evidence to support the expanded scrutiny.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 300807 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 10 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-12-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 23-11-2022
• Assessment Year: 2014-2015
• Appeal Filed On: 06-02-2020
• Other Referred Cases: Balvinder Kumar vs PCIT [2021] 187 ITD 454 (Delhi- Tib.), Dev Milk Foods Pvt. Ltd. vs. ACIT: ITA No.6767/Del/2019 (Delhi \\u2013Tib.), Vijay Kumar vs The ITO: ITA No. 434/Chd/2019 (Chandigarh \\u2013 Trib), Late Smt. Gurbachan Kaur, Thro\u2019 L/H Shri Dilpreet Singh Navrang vs. DCIT: ITA No.692/JP/2019 (Jaipur \\u2013 Trib), Shri Prabir Das, Karimganj vs ITO: ITA No.395/Gau/2019 (Kolkata-Trib)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Competent authority
• Section: 68; 143(3); 143(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI BENCH: ‘SMC’ NEW DELHI SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA No.727/Del/2020 Assessment Year: 2014-15 Manoj Kumar, Plat No. 509B, Surya Shyam Nagar, RPS Engineering College, KB Road, Patna (Bihar) PIN:801503 Vs. ITO, Ward 66(3), New Delhi. PAN :ALWPK8383R (Appellant) (Respondent) ORDER This is an appeal by the assessee against order dated 25.05.2019 of learned Commissioner of Income-Tax (Appeals)-28, New Delhi for the assessment year 2014-15. Assessee by Shri Vishal Kalra, Adv. & Ms. Reema Grewal, CA Respondent by Shri Toufel Tahir, Sr. DR Date of hearing 24.11.2022 Date of pronouncement 28.12.2022 2 ITA No.727/Del/2020 2. Grounds raised by the assessee are as under: 1. That on the facts and circumstances of the case and in law, the Ld. Commissioner of Income Tax (Appeals) - 28, New Delhi ["CIT(A)"], vide order dated 03.06.2019 passed u/s.250 of the Income Tax Act, 1961 ("Act"), has erred in partially confirming the assessment order dated 30-12-2016 passed u/s.143(3) of the Act by the ITO Ward 66(3), New Delhi ("AO"), as the assessment is vitiated being for Limited Scrutiny but converted into Complete Scrutiny without following due process in violation of Board's Instructions. The orders as passed being bad in law and void ab initio are liable to be quashed. 2. That the return of income for AY 2014-15 (FY 2013-14) was selected for Limited Scrutiny as per CASS and notice u/s. 143(2) of the Act issued accordingly only for transactions relating to securities/shares. In contravention of Board's instructions, the Ld. AO conducted a Complete Scrutiny without obtaining prior approval of the administrative Commissioner while making additions exceeding Rs. lO lakhs. The assessment order, passed in violation of Board's instructions that are binding upon the A.O., is thus bad in law and void ab-initio, may please be squashed and additions may please be deleted and consequential relief granted. (Tax Effect: Rs.4,04,130/-). Such additions are on account of: 2.1. Deposits & Credits in Bank Account totaling Rs.11,16,000/- 2.2. Disallowances of Housing Loan interest against Income under the head Salaries & Chap VIA/S.80Cdeductions 3. Notwithstanding and without prejudice to the above grounds, the following additions made outside the scope of Limited Scrutiny are untenable and may please be deleted on merits: 3.1. That contrary to facts and law, the Ld. AO/CIT (A) erred in making a total addition of Rs.11,16,000/- under section 68 of 3 ITA No.727/Del/2020 the Act by treating agricultural income exempt u/s.10(1) as taxable, involving Cash Deposits amounting to Rs. 1,38,000/-& Credit of Rs.9,78,000/-, being sale proceeds received from sales of agricultural lands in the Bank Account. In any case, such bank deposits not being cash credits in books of accounts as contemplated under the provisions of section 68 of the Act, have been erroneously treated as such, by disregarding the facts, explanations and submissions duly placed on record. 3.2. That contrary to facts and law, the Ld. AO/CIT (A) erred in not allowing set-off of housing loan repayment interest of Rs.51,312/- against Income under the head Salary and arbitrarily restricting deduction under Chapter VIA to Rs.88,214/-instead of Rs.1,00,000/- on housing loan principal repayments and PF deductions made by employer 4. That the Limited Scrutiny as per CASS being mandated in respect of transactions involving securities/shares, that while the Ld AO/CIT(A) determined short-term capital gains of Rs.53,526/- and short-term capital loss of Rs.78,238/- for AY 2014-15, the Ld AO/CIT(A) grossly erred in not considering the net income under the head Capital Gains as short-term capital loss of Rs.24,712/-,instead wrongly making an addition of Rs.53,526/- contrary to the provisions of law,the same may kindly be deleted along with consequential relief. 5. That the Ld. AO/CIT(A) grossly erred in assuming that the gross receipts/turnover of the appellant exceed the limits prescribed u/s.44AB of the Act, failing to appreciate that the Gross Value of Contacts without delivery do not constitute Turnover, only the loss/gain is the Turnover, thereby the Ld. AO erred in initiating penalty under sections 271A and 271B, the same being bad in law, may kindly be quashed. 6. That any consequential relief that the assessee be entitled to in view of the above, may kindly be granted. 4 ITA No.727/Del/2020 7. The appellant craves leave to add, amend, modify, alter, revise, substitute, delete any or all grounds of the appeal, if deemed necessary at the time of hearing of the appeal. 3. As could be seen from the grounds raised, the grievance of the assessee is that the Assessing Officer has enlarged the scope of limited scrutiny by making additions in respect of issues which were not part of limited scrutiny . 4. I have heard the learned counsels appearing for the parties and perused the material on record. 5. Briefly the facts are, the assessee is a resident individual. For the assessment year under dispute, the assessee filed his return of income on 13.06.2015 declaring an income of Rs.1,50,990. Assessee’s case was selected for limited scrutiny for the following reasons: “ a) Large value sale of shares or units which is settled otherwise than by the actual delivery or transfer (STT- Code-3); and (b) Large value commodity exchange transaction and return filed in ITR-1/2/3/4 (CIB-502). 6. The Assessing Officer ultimately passed an assessment order under Section 143(3) of the Act on 13.12.2016 making the following additions: 5 ITA No.727/Del/2020 i) Short term capital gain : Rs.52,536 ii) Unexplained cash credits under Section : Rs.11,16,000 68 of the Act; & iii) Income from other sources : Rs.4,246 7. Against the assessment order so passed, assessee preferred an appeal before learned Commissioner (Appeals) challenging the additions made. Learned Commissioner (Appeals) disposed of the appeal granting partial relief to the assessee. 8. Before me, it is the specific case of the assessee that, though, the case was selected for limited scrutiny, however, the Assessing Officer travelled beyond the scope of limited scrutiny and examined various other issues by converting the limited scrutiny to a complete scrutiny without seeking prior approval from the competent authority. In this context, learned counsel has relied upon certain CBDT instructions and the following decisions as well: 1. Balvinder Kumar vs PCIT [2021] 187 ITD 454 (Delhi- Tib.); 2. Dev Milk Foods Pvt. Ltd. vs. ACIT: ITA No.6767/Del/2019 (Delhi –Tib.); 3. Vijay Kumar vs The ITO: ITA No. 434/Chd/2019 (Chandigarh – Trib); 4. Late Smt. Gurbachan Kaur, Thro’ L/H Shri Dilpreet Singh Navrang vs. DCIT: ITA No.692/JP/2019 (Jaipur – Trib); 5. Shri Prabir Das, Karimganj vs ITO: ITA No.395/Gau/2019 (Kolkata-Trib). 6 ITA No.727/Del/2020 9. I have considered rival submissions and perused the material available on record. 10. As discussed earlier, assessee’s case was selected for limited scrutiny to examine commodities transaction and share transactions, as stated by the Assessing Officer, not only in the body of the assessment order but also in the notice issued under Section 143(2) of the Act dated 29.08.2016. However, a perusal of the assessment order goes to reveal that the Assessing Officer has travelled beyond the scope of limited scrutiny and ventured into various other aspects, such as, set off of loss against short term capital gain, addition under Section 68 of the Act by treating cash deposits in the bank account as unexplained cash credit and adding of interest income as income from other sources. As per CBDT instruction no.5/2016 dated 14 th July 2016, the Board has laid down procedure for converting limited scrutiny into complete scrutiny. The issue has been further clarified by the Board in Instruction no.20/2015 dated 27.12.2015. As per extent CBDT instructions, not only the Assessing Officer has to record reasons why, in his opinion, the limited scrutiny has to be completed into a 7 ITA No.727/Del/2020 complete scrutiny but has to seek prior approval from the Competent Authority, as, specified in the said instructions. 11. Keeping in view the aforesaid CBDT instructions, learned Departmental Representative was called upon by the Bench to produce the assessment record and approval granted by the Competent Authority. The order sheet entry dated 14.06.2022, in this regard, is as under: “Ld. DR is directed to produce the assessment record and approval granted by competent authority for limited scrutiny to full scrutiny. The case is adjourned to 11.08.2022. Both parties are informed in the open court.” 12. However, despite sufficient opportunities being granted to the Revenue, neither assessment record nor the approval granted by the Competent Authority has been placed before the Bench. 13. On the last date of hearing, to a query made by the Bench, learned Departmental Representative submitted that the records are not traceable. Therefore, due to failure on the part of the department to furnish necessary records to demonstrate that the Assessing Officer has taken prior approval of the Competent Authority to convert the limited scrutiny to a complete scrutiny, I am constrained to take an 8 ITA No.727/Del/2020 adverse view that no such approval has been taken by the Assessing Officer before converting the case to a complete scrutiny. That being the factual position emerging on record, the assessment order has to be declared as invalid, in view of the CBDT instructions referred to above and the ratio laid down in the decisions cited before me by the learned counsel for the assessee. Accordingly, I quash the assessment order. Resultantly, the order of learned Commissioner (Appeals) is set aside. 14. In the result, the appeal is allowed as indicated above. Order pronounced in the open court on 28 th December, 2022. Sd/- (SAKTIJIT DEY) JUDICIAL MEMBER Dated: 28 th December, 2022. Mohan Lal Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi