The Income Tax Appellate Tribunal (ITAT), Pune bench has held that any action of the income tax department violating the instructions of the CBDT is untenable under the law.
The appellant, Mrs. Meena Shirish Kotwal’s case was selected for scrutiny under CASS mechanism limiting the scope thereof to verification of large investment made by the assessee. During the impugned assessment year under adjudication, the appellant indeed made no investment into any immovable property, but the firm in which the appellant is a partner wherefore the appellant has contributed her share in making such investment out of the bank balance held by her wherein certain cash was deposited. However, on the basis of investment made by the firm, the financial transactions of the appellant were scrutinised and eventually the cash deposits made into her bank accounts were brought to tax in the hands of appellant u/s 68 of the Act as unexplained cash credit.
The assessee approached the ITAT contending that both the tax authorities without appreciating the scope of limited scrutiny and additional evidences have erred in making & subsisting addition under section 68 of the Act.
Shri G. D. Padmahshali, Accountant Member observed that “in the absence of any large investment made by the appellant during the impugned assessment year under adjudication, the scope of limited scrutiny meets dead-end, however the Ld. FAA without following the CBDT instruction No. 7/2014, 20/2015 and 5/2016 and also the CBDT letter dated 13 No. 2017, plagiarized the firm’s investment into the hands of assessee and opined that the said addition should have been carried out u/s 69A as unexplained money instead of bringing to tax as cash credit u/s 68 of the Act.”
Relying on the decision of the Bombay High Court in “Bombay Cloth Syndicate Vs CIT”, the Tribunal allowed the plea of the assessee and observed that “ the High Court held that, the instruction issued by the mother body i.e. CBDT undisputedly are binding on the department and any action in violation thereof renders it as untenable in law, consequently in the extant case, assessment been carried out in violation of instruction issued by CBDT deserves to be quashed, ergo we set-aside the first appellate order passed u/s 250 and quash the order of assessment passed u/s 143(3) of the Act as bad in law.
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