INCOME TAX ACT, 1961

Section 143(3)

Assessment - Validity - AO travelled beyond his jurisdiction for converting limited scrutiny case into complete scrutiny case -

Assessee's case was selected for scrutiny assessment under CASS for examination of Minimum Alternate TAx (MAT) liability mismatch and unsecured loans. AO while framing assessment under section 143(3) not made any addition on above two points rather made additions on together two new issues of interest on FDR treating the same as income from other sources amounting to Rs. 1.72 lakhs. Assessee challenged this. Held: It is a case of converting a limited scrutiny into a complete scrutiny. By way of CBDT Circular, guidelines were issued for selection of limited scrutiny and complete scrutiny. The guidelines clearly state conditions of converting a limited scrutiny into a complete scrutiny which is given in Para 3(d) of the Circular, wherein it is clearly mentioned that in case assessment proceedings of limited scrutiny case if it comes to the notice of the AO there is potential escapement of income exceeding Rs. 5 lacs for cities other than metros but the condition of the metro is upto Rs. 10 lacs requiring substantial verification on any other issue then the case may be taken up for complete scrutiny assessment but with the prior approval of Principal Commissioner or Commissioner concerned. Further, condition mentioned in this circular is that such approval shall be accorded by the Principal Commissioner/Commissioner in writing after being satisfied about the merits of the issue necessitating complete scrutiny in that particular case. When this fact was pointed to the Sr. Departmental Representative, he could not state any of the approval accorded by the Commissioner or Principal Commissioner in writing or there is no satisfaction of Commissioner/Principal Commissioner recorded in this case. Escapement pointed out in assessment order was limited to interest of fixed deposits amounting to Rs. 1.72 lakhs, whereas CBDT Circular [issued vide Instruction No. 20/2015 [F.No. 225/269/250-IRA] put a limit of Rs. 10 lakhs, this being a case of Metro city like Bombay. In view ot this, AO travelled beyond his jurisdiction for converting limited scrutiny case into complete scrutiny case and in the result, appeal of assessee was allowed.

Applied:Amal Kumar Ghosh v. Asstt. CIT (2014) 361 ITR 458 (Cal) : 2014 TaxPub(DT) 1401 (Cal-HC) and CIT v. Smt. Nayana P. Dedhia (2004) 270 ITR 572 (AP) : 2004 TaxPub(DT) 1871 (AP-HC).

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2015-16

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