INCOME TAX ACT, 1961

Section 143(3)

Assessment - Conversion of limited scrutiny into complete scrutiny - Passing of order making addition on the very next day of conversion - Even draft assessment order passed prior to seeking approval from Pr. CIT

Originally case of assessee was selected for limited scrutiny for verification of large sale premium received by assessee. AO got approval to convert limited scrutiny case into complete scrutiny on 1-1-2016. On the very next day, i.e., on 2-12-2016, AO passed order under section 143(3) wherein he made addition on account of unsecured loan which was not at all part of the limited scrutiny criteria. Held: The day on which case was converted into full scrutiny, i.e., on 21-12-2016, AO on the very next day passed order of assessment by making addition which was beyond the scope of limited scrutiny. Further, looking at notices, dated 3-5-2016 under section 142(1) notice, dated 26-6-2016 under section 142(1), notice, dated 21-7-2016 under section 142(1) and further notice, dated 15-9-2016 under section 142(1), it was apparent that AO started making roving enquiries on the issue which was not the subject matter of limited scrutiny. He even framed draft assessment order and then sought approval of Pr. CIT for conversion into full scrutiny from limited scrutiny. Had Pr. CIT applied his mind on the case, looking at draft assessment order itself, approval should have been refused, as it was clear violation of Instruction No. 5 of 2016, dated 14-7-2016. Accordingly, addition made on account of unsecured loan could not be upheld.

Relied:Smt. Manju Kaushik v. Dy. CIT [ITA. No. 1419 (Jp) of 2019, dated 9-12-2019] : 2019 TaxPub(DT) 8293 (Jp-Trib)

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2014-15

INCOME TAX ACT, 1961

Section 56

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