INCOME TAX ACT, 1961

Section 143(3)

Assessment - Validity - Conversion of case from limited scrutiny to complete scrutiny prior to receipt of approval from Pr. CIT -

Assessee's case whereby AO initiated proceedings by issue notice under section 143(2) on 18-9-2015 as regards the issue of introduction of capital/incease in the capital. Subsequently, AO converted limited scrutiny into complete scrutiny and issued notice under section 142(1) on 25-11-2016, whereby AO proposed to disallow claim of deduction under section 54B. Assessee took plea of CBDT Instruction No. 5/2016, dt. 14-7-2016 and challenged validity of assessment framed by AO for want of jurisdiction to take up the issue of disallowance of deduction under section 54B without having necessary approval of conversion of limited scrutiny to comprehensive scrutiny. Revenue's case was that AO had sent proposal for conversion of limited scrutiny to full scrutiny vide letter dated 11-11-2016 and Pr.CIT vide his letter dated 24-11-2016 accorded approval thereto. Accordingly, notice issued under section 142(1) on 25-11-2016 was only after approval was accorded by Pr.CIT on 24-11-2016.Held: Though AO had mentioned that approval was accorded by Pr.CIT on 24-11-2016 and consequently he had initiated proceedings of complete scrutiny by issuing notice dated 25-11-2016, however, said approval of Pr. CIT was communicated to AO only on 29-11-2016. Thus it was apparent that AO had initiated proceedings for fully/complete/comprehensive scrutiny, prior to receipt of approval accorded by Pr. CIT, in anticipation of approval to be accorded by the Pr. CIT and since at the time of initiating complete scrutiny, the issue under limited scrutiny was not pending with AO as he was satisfied with reply and documentary evidence on the said issue. Disallowance of deduction under section 54B prior to necessary approval communicated to AO was not sustainable.

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2014-15

SUBSCRIBE FOR FULL CONTENT