The Income Tax Appellate Tribunal (ITAT) Kolkata bench recently ruled that the Assessing Officer (AO) had violated the Central Board Direct Tax (CBDT) circular by going beyond the boundaries of limited scrutiny and exceeding his or her authority.
On August 26, 2015, Assessee Sukhdham Infrastructures LLP submitted a return of income revealing a total revenue of Rs. 2,18,390/-. The case of the assessee was then chosen for examination.
Four points were indicated or covered in the notice given under section 143(2) of the revenue Tax Act of 1961 for limited scrutiny:
(1) Interest expenses,
(2) revenue from real estate business,
(3) sales turnover mismatch, and
(4) other expenses claimed in the profit and loss account. In addition to calling for the facts, the Assessing Officer (AO) requested information and specifics as needed for secured and unsecured loans/deposits. The assessee dealt with the notices properly by providing the information/evidence, entire books of accounts, audited accounts, etc. as requested by the AO.
While the Assessing Officer (AO) issued notices on matters outside the purview of limited scrutiny prioritisation and finally the assessment was framed under section 143(3) of the Income Tax Act, 1961, just two days before the assessment was set to become time-barred. Assessee filed an appeal with the ITAT in opposition to the ruling. Manish Tiwari, the assessee’s attorney, claims that the order made by the AO was illegal and void because it went beyond the scope of the notice issued under section 143(2) of the Income Tax Act of 1961 and inquired into matters that were not part of the limited scrutiny.
The inquiry was conducted with the loans considerably earlier than 14.12.2017, when the restricted scrutiny was converted to a broad scrutiny by the AO, rendering the assessment invalid and deserving of being invalidated on this basis alone. Sudipta Guha, the revenue’s attorney, asserts that a notice under section 142(1) of the Income Tax Act of 1961 was sent on February 20, 2017, requesting information regarding both secured and unsecured loans, while acknowledging that the matter was turned into a thorough audit on December 14, 2017.
The division bench of the ITAT, composed of Rajesh Kumar, an accountant, and Sonjoy Sarma, a judge, allowed the appeal submitted by the assessee after carefully weighing the arguments of both parties. The division bench noted 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.”
