The Income Tax Appellate Tribunal (ITAT), Lucknow, held that the jurisdiction of the Assessing Officer while making assessments in Limited Scrutiny cases, by initiating inquiries on new issues has to comply with mandatory requirements of the relevant CBDT Instructions i.e., the approval of the PCIT.
The present ruling was made in the case of Ravi Prakash Khandelwal v. Dy. CIT, by a Bench consisting of A. D. Jain and Shri T. S. Kapoor.
The assessee’s case was picked up for limited scrutiny through CASS for the reasons (i) Large deduction claimed under section 54B, 54C, 54D, etc. and (ii) Large cash deposits in savings bank accounts.
The Tribunal held that the assessment order, is beyond the intent purpose and scope of the jurisdiction of the Assessing Officer, as the assessment has been made, exceeding his jurisdiction, because the case has been selected for limited scrutiny only on two issues, which is covered under Section 48 of the Income Tax Act, and is outside the scope and purview of the reasons of limited scrutiny.
The Tribunal ruled that, “the proper course for the AO before making these additional enquiries would have been to take approval from the administrative Commissioner to widen the scrutiny. This, however, was not done and therefore, the action of the AO is violative of the CBDT Instruction.”
The Tribunal held that, “the action of the AO is violative of the CBDT Instruction. Thus, the addition so made by the Assessing Officer, in gross violation of the CBDT Instruction, is liable to be deleted”.
The Tribunal, while dealing with other issues, noted that, “There is no bar in the act that the Bonds for two different assessment years cannot be purchased en masse and that they should be purchased separately. The restriction is only to the extent that the bonds in excess of Rs.50 lakhs cannot be purchased in one single financial year.”
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