The Income Tax Appellate Tribunal (ITAT), Delhi bench, while quashing an income tax assessment passed in violation of the norms of the limited scrutiny, has held that the instructions/circulars issued by the Central Board of Direct Taxes (CBDT) are binding on the Assessing Officer.
While processing the income tax returns of the assessee, the assessing officer observed that the training charges of Rs.16,20,992 received by the assessee, being in the nature of Fee for Technical Services (FTS) taxable in India.
The assessee contended before the ITAT that in terms of CBDT Instruction nos. 20/2015 and 5/2016 read with DGIT(Vigilance) letter dated 30th November, 2017 before venturing into other issues outside the scope of limited scrutiny, the Assessing Officer should have taken prior approval of PCIT/CIT.
A bench of Shri G.S. Pannu, President and Shri Saktijit Dey, Judicial Member observed that “Admittedly, in the facts of the present appeal, the assessing officer has not taken any such approval of the concerned authorities. Therefore, the assessment order passed is in violation of CBDT Instructions, referred to above. Therefore, the question which arises for consideration is, what will be the fate of such an order passed in violation of the extant CBDT Instructions/circulars.”
Relying on a catena of decision, the ITAT held that violation of norms of limited scrutiny in terms with the CBDT instructions and conversion to complete scrutiny without seeking prior approval would render the assessment order not only without jurisdiction but a nullity in the eyes of law.
“This is so because, as per section 119 of the Act CBDT instructions/circulars are binding on Assessing Officer. That being the legal position enunciated in the decisions cited before us, the impugned assessment order has to be declared as wholly without jurisdiction, hence, null and void. That being the case, the assessment order deserves to be quashed. Accordingly, we do so. Consequently, the impugned order of learned Commissioner (Appeals) is hereby set aside. Since, while deciding the additional ground raised by the assessee, we have quashed the assessment order, the other grounds raised by the assessee having become infructuous, do not require adjudication at this stage,” the ITAT held
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