Dipten Bhowmick v. ITO

Case snapshot

Sections / provisions: CBDT instruction No.20; 2015 dated 29; 12; 2015

Questions before the Court / Tribunal

• In matters relating to condonation of delay, court has to adopt liberal approach. it is not open for the Assessing Officer to travel beyond the reasons for selection of the scrutiny for limited scrutiny.
• What factual, statutory and procedural conditions control the relief?
• How does the operative order apply to the parties and the challenged proceeding?

Material facts and procedural background

Assessee by : Shri Gaurang Khakhar, A.R. Revenue by : Shri Shramdeep Sinha, CIT DR

The captioned appeal has been filed at the instance of the assessee against the order of the Ld. Commissioner of Income Tax (Appeals) (in short the Ld. CIT(A)), National Faceless Appeal Centre, Delhi dated 11/06/2021 arising in the matter of assessment order passed under Section 143(3) of the Income Tax Act, 1961 (here-in-after referred to as "the Act") relevant to the Assessment Year 2016-17.

2. The assessee has raised following grounds of appeal: “1) On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in holding the delay in filing the appeal cannot be condoned. The appellant prays that the delay be condoned and appeal should be taken up for hearing.

7,54,7000/- u/s 40A(3) of the Income Tax Act, 1961. The appellant prays that the same may kindly be heard and allowed.

4) That the assessee craves leave to urge such other ground or grounds before or at the time of hearing of appeal.”

Appellant / assessee submissions

9. The assessee before the learned CIT(A) submitted that for the year under consideration i.e. A.Y. 2016-17, he furnished return after demonetization period showing substantial cash in hand as on 31-03-2016. Therefore, the return of income was selected for limited scrutiny to verify the genuineness of cash in hand. In this regard, he furnished necessary details and the AO after the verification accepted the genuineness of cash balance Rs. 41,18,857/- as on 31-03-2016. However, the AO in the assessment order made disallowances under section 40A (3) of the Act on account of cash payment exceeding Rs. 20000/- in a day. Thus, the AO exceeded his jurisdiction by extending the scope of verification and consequently in making the disallowances on account of cash payment.

12. The learned AR before us filed paper book running from page 1 to 47, compilation case laws and contended that the case of the assessee was selected under limited scrutiny and therefore the scope of the scrutiny was Ltd to the extent of verification of cash balance until and unless some approval is obtained from the higher authorities for converting limited scrutiny into regular scrutiny. But, the AO has not done so and therefore, no addition under the provisions of section 40A(3) of the Act is warranted.

Revenue / respondent submissions

The packaged judgment does not separately label the respondent's submissions in an independently extractable passage. No contention is inferred; read the full order.

Court / Tribunal analysis and reasoning

4. At the outset, we note that there was the delay in filing the appeal by the assessee for 556 days before the learned CIT (A) which was not condoned by him. However, we find that the learned CIT (A) has also decided the issue raised by the assessee on merit. It is the trite law that if the appeal is not maintainable in view of the fact that there was the delay in filing the appeal as the assessee couldn’t justify the reason for the same. Thus the appeal filed by the assessee should have been dismissed in limine without going into the merit of the case. But what is arising from the order of the learned CIT (A) that the ld. CIT-A has decided the issue raised by the assessee on merit which implies that the learned CIT (A) by his action has condoned the delay but he has recorded just one line in his order that the delay is not condoned without any speaking order.

14. We have heard the rival contentions of both the parties and perused the relevant materials available on record before us. Admittedly, the case of the assessee was selected under “Limited Scrutiny” scheme as evident from the notice issued u/s 143(2) of the Act, placed on page 35 of the paper book-I. Before going into the fact of the case on hand, we note that the CBDT in instruction No.20/2015 dated 29/12/2015 has laid down that the Assessing Officer in case of “Limited Scrutiny” can only examine those issues for which the case has been selected or the issue mentioned therein. If the AO notice that there is a potential

17. The right course of action for the AO was to take the approval from the competent authority for expanding the scope of Limited Scrutiny to the regular assessment but he failed to do so. Thus, in our considered view inaction of the AO should not cause any inconvenience to the assessee. In holding so we draw support and guidance from the order of the Hon’ble Chandigarh Tribunal in case of Rajesh Jain vs. ITO reported in 162 taxman 212 where it was held as under: “The jurisdiction of the Assessing Officer in such cases where the notices are issued for limited scrutiny is confined to the claims he has set out in the notice for verification. This position of law was further elaborated by the CBDT in its Circular No. 8/2002, dated 27-8- 2002.

Operative decision and relief

Since the appellant does not fall in any category of exceptions as such the reply has no force. 7. The addition is upheld, appeal stands dismissed, delay is not condoned.”

Officer. So, however, in the instant case, when the Assessing Officer did not have the power to make a full-fledged assessment in limited scrutiny cases, the Commissioner (Appeals)’s power could not be enlarged beyond the power of the Assessing Officer in limited scrutiny cases. So, it was considered appropriate to remit the issue relating to allowance of depreciation in respect of the plinth to the file of the Assessing Officer for the purpose of fresh decision in accordance with law. Since the notice under section 143(2)(i ) was issued for limited scrutiny, the Assessing Officer was precluded from considering any other issue while making the assessment under section 143(3) under limited scrutiny. The decision of the Commissioner (Appeals) in considering the other claim of the assessee not covered in the notice issued under section 143(2)(i) for limited scrutiny was contrary to the provisions of the Act and, accordingly, was set aside.”

18. In view of the above and after considering the facts in totality as discussed above, we are not convinced with the finding of the authorities below. As such the entire issue should have been limited to the extent of the dispute raised in the notice issued under section 143(2) of the Act for the limited scrutiny but the AO in the present case has exceeded his jurisdiction as discussed above. Thus, we hold the addition made by the AO without having valid jurisdiction cannot be sustained. Hence, the ground of appeal of the assessee is allowed.

19. In the result, the appeal filed by the assessee is allowed.

Ratio and legal principle

• The packaged judgment addresses In matters relating to condonation of delay, court has to adopt liberal approach. it is not open for the Assessing Officer to travel beyond the reasons for selection of the scrutiny for limited scrutiny. The precise proposition must be read with the Court/Tribunal's reasoning and operative directions.
• Reliance depends on matching the statutory version, jurisdiction, procedural stage and material evidence recorded in the judgment.

Why this judgment matters

This decision is relevant to practitioners and affected parties dealing with in matters relating to condonation of delay, court has to adopt liberal approach. it is not open for the assessing officer to travel beyond the reasons for selection of the scrutiny for limited scrutiny. Its value lies in showing how the adjudicating forum connected the applicable rule to the proved facts and procedural posture.

Practitioner action points

• Match the statutory version, jurisdiction, procedural stage and decisive evidence before relying on the result.
• Verify current appellate, review and SLP history and any later amendment or controlling authority.
• Attach the complete judgment to the working paper or filing and cite the paragraph/page supporting the proposition.

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Section / provision impact

• CBDT instruction No.20 - apply the exact version considered in the judgment.
• 2015 dated 29 - apply the exact version considered in the judgment.
• 12 - apply the exact version considered in the judgment.
• 2015 - apply the exact version considered in the judgment.

Case network

Similar issue / useful comparison

• Rajesh R. Hemrajani v. ITAT - Bombay High Court
• Pujya Sindhi Panchayat Trust v. ITO(E) - ITAT Mumbai
• Annamma Samkutty v. ITO - ITAT Pune

Different outcome / possible distinction

• Pr. CIT (Central)-4 v. DBM Geotechnics & Construction Pvt. Ltd. - Partly allowed
• Pr. CIT (Central)-1 v. Surendra L. Hiranandani - Dismissed

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