Income Tax, Issue Update

Disallowances regarding issues not covered in limited scrutiny: Jurisdiction of an assessing officer

Case: Shri Prabir Das vs Income Tax Officer,Ward , Gauhati ITAT

Outcome: Partial

Facts

  • The Assessee had filed return of income on 15.12.2016. Later the case of the Assessee was selected for limited scrutiny and a limited scrutiny notice under section 143(2) dated 20.09.2017 was issued for only one issue i.e. whether stock was valued correctly or not.
  • However, the Assessing Officer completed the assessment proceedings by making an addition under section 68 which was not specified in the limited scrutiny notice.

Key points

  • In the present facts of the case, on perusal of the order sheet it was found that the Assessing Officer did not take approval in writing from the Principal Commissioner of Income tax/ Commissioner of Income tax before he ventured to expand the scope of assessment from limited scrutiny to complete scrutiny as prescribed in the CBDT circular dated 29.12.2015 which was admittedly binding on him.
  • Since the CBDT Circular issued under section 119 of the Act was binding on the department/ Assessing Officer as held by the Hon’ble Apex Court and High Courts, the Assessing Officer was bound by it and without taking approval in writing from Principal Commissioner of Income tax/ Commissioner of Income tax he could not have enquired into other issues other than the issue for which the assessment was selected for limited scrutiny.
  • Therefore, as the Assessing Officer had expanded his jurisdiction without approval the action of Assessing Officer was without jurisdiction and hence, bad in law. Thus, addition under section 68 was to be deleted.

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