Disallowances regarding issues not covered in limited scrutiny: Jurisdiction of an assessing officer
- The Assessee, a Private Limited Company, declared an income of Rs.57.38 lakhs in the e-return of income filed on 30.09.2016.
- The Assessee’s case was selected for limited scrutiny through CASS followed by serving of notices under section 143(2) & 142(1) of the Act.
- During the course of assessment proceedings, the Assessing Officer disallowed interest expenses related to M/s Rai Metal Works Pvt. Ltd. The Assessee’s contended that the Assessing Officer had gone beyond limited scrutiny jurisdiction.
- In the present facts of the case, it was not disputed that the M/s. Rai Metal Works Pvt. Ltd. was a related/ sister concern of the Assessee and the transactions between the two concerns needed to pass through the lens of section 40(A)(2)(b) of the Act.
- The Assessing Officer issued notice under section 143(2) of the Act for limited scrutiny on custom duty payment mismatch, sales turnover mismatch, payment to related persons mismatch, duty drawback received/ receivable and loss from currency fluctuations.
- From perusal of the said issues, the issue on payment to related persons mismatch did not have a specific name of a party for which the information was to be called. It was general phrase that mismatch in payment to related persons needed to be examined.
- The additions made by the Assessing Officer was related to the transactions with the related party i.e. M/s. Rai Metal Works Pvt. Ltd. Therefore, since the limited scrutiny notice had one of the issue related to payments made to related concern hence, the Assessing Officer was well within his jurisdiction to examine all the transactions with the related parties.