INCOME TAX ACT, 1961

Section 143(3)

Assessment - Validity - Conversion of case from limited scrutiny to complete scrutiny on basis of suspicion -

Assessee's case was selected for limited scrutiny with respect to long-term capital gains but it was noticed that assessee had claimed a short-term capital loss of Rs. 4,20,94,764 which had been adjusted against long-term capital gains. As per AO, loss claimed by assessee appeared to be suspicious in nature primarily due to the reason that loss could possibly have been created to reduce incidence of tax on long-term capital gains shown by assessee. Accordingly, AO as per approval of Pr. CIT, converted the case from limited scrutiny to complete scrutiny and made disallowance, of short-term capital loss. Assessee challenged this.Held: No reasonable view was formed as mandated in CBDT Instruction No. 5/2016 in an objective manner and secondly merely suspicion and inference was the foundation of view there was no direct nexus brought on record by AO in proposal and, therefore, it was very much apparent that proposal of converting limited scrutiny to complete scrutiny was merely aimed at making fishing enquiries. Accordingly, instant conversion of case from limited scrutiny to complete scrutiny could not be upheld.

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2015-16

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