The Kolkata bench of Income Tax Appellate Tribunal (ITAT) has recently held that the Assessing Officer(AO) has exceeded jurisdiction in enquiring the issues beyond scope of limited scrutiny and is in violation of Central Board Direct Tax (CBDT) circular.
Assessee Sukhdham Infrastructures LLP filed return of income on 26.08.2015 disclosing total income of Rs. 2,18,390/-. Thereafter the assessee case was selected for scrutiny. In the notice issued under section 143(2) income tax act 1961 for limited scrutiny, there were four issues stated/covered namely
i) Interest expenses,
ii) Income from Real Estate Business,
iii) Sales Turnover mismatch and
iv) Other expenses claimed in the profit and loss account
The AO called for information and details as required for secured and unsecured loans/deposits besides calling for the details. The assessee duly complied with the notices issued by the AO by filing the details/ evidences , complete books of accounts, audited accounts etc as desired by the AO. The AO converted the limited scrutiny into complete scrutiny whereas the notices were issued by the AO on the issues beyond the scope of limited scrutiny priority and finally the assessment was framed under section 143(3) of the Income Tax Act, 1961 just two days before the assessment was getting time barred. Against the order assessee filed an appeal before the ITAT.
Manish Tiwari Counsel for the assessee submits that order passed by the AO was void and nullity in the eyes of law on the ground that the AO has exceeded the jurisdiction by enquiring into those issues which were not covered in the limited scrutiny in terms of the notice issued under section 143(2) of the Income Tax Act 1961 .
Further AO has converted the limited scrutiny into a broad scrutiny only on 14.12.2017 whereas the enquiry was made with the loans much prior to that date thereby rendering the assessment as nullity which deserved to be quashed on this score alone.
Sudipta Guha Counsel for the revenue submits that notice was issued under section 142(1) of the Income Tax Act 1961 dated 20.02.2017 calling for information in respect of secured and unsecured loans while admitting that the case was converted into complete scrutiny on 14.12.2017.
After considering the contentions of the both parties the division bench of the ITAT comprising Rajesh Kumar, (Accountant Member) and Sonjoy Sarma, (Judicial Member) allowed the appeal filed by the assessee and observed that,
“ AO has exceeded his jurisdiction in enquiring into those issues beyond the scope of limited scrutiny even prior to the date of conversion which is in clear violation of mandate given by CBDT in the said Circular Instruction No. 5/2016.”
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