ITAT: Addition u/s 68 by AO without taking approval from Pr CIT/CIT is Invalid


a) The Guwahati bench of the Income Tax Appellate Tribunal (ITAT) has invalidated the addition made by the Assessing Officer without taking approval from the Pr CIT/CIT in terms of the circular issued by the Central Board of Direct Taxes (CBDT).

b) The assessee was aggrieved by the action of the AO to have expanded the assessment from ‘Limited Scrutiny’ to ‘Complete Scrutiny’ without following the procedure as laid by the CBDT Circular No. 20/2015 dated 29.12.2015; and subsequent instruction on the same dated 14.07.2016 (para 4) and circular dated 30.11.2017.

c) The Tribunal noted that the AO has not taken approval in writing from the Pr. CIT/CIT in this case before he ventured to expand the scope of assessment from ‘Limited Scrutiny’ to complete scrutiny as prescribed in the CBDT circular which is admittedly binding on him.

“A perusal of the order sheet placed at pages 5 to 9 of the paper book does not indicate that the AO has taken the approval of the Pr. CIT/CIT for expanding the assessment from Limited Scrutiny to Complete Scrutiny. The Ld. DR fairly conceded this fact after perusal of the order sheet that no approval in writing was taken by the AO for expanding the scope of assessment so as to make the addition u/s. 68 of the Act. Since the CBDT Circular issued u/s. 119 of the Act is binding on the department/AO as held by the Hon’ble Apex court and High Courts, the AO was bound by it and without taking approval in writing from Pr CIT/CIT could not have enquired into other issues other than the issue for which the assessment was selected for Limited Scrutiny. Here, the AO without following the procedure as stated, supra has expanded his jurisdiction without approval which action of AO is held to be without jurisdiction and, therefore, is bad in law and, therefore, the assessee succeeds and the addition made by the AO Rs.59,19,909/- is null in the eyes of law and, therefore, it has to be deleted and we order accordingly,” the Tribunal said.

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