Krian Cinema Banquets Pvt. Ltd. Vs ACIT (ITAT Mumbai)
Section 68 Addition Quashed for Travelling Beyond Scope of Limited Scrutiny
The Mumbai ITAT (E Bench) allowed the appeal of Krian Cinema Banquets Pvt. Ltd. for AY 2016-17 and deleted the addition of ₹2.00 crore made under section 68, holding that the Assessing Officer had exceeded the scope of limited scrutiny without mandatory approval.
Key findings of the Tribunal:
- The case was selected for limited scrutiny solely to examine share premium under section 56(2)(viib).
- Without converting the case into complete scrutiny and without approval of higher authorities (as mandated by CBDT Instruction No. 20/2015), the AO made an addition under section 68, which is jurisdictionally invalid.
- The assessee had, in any case, discharged the onus under section 68 by furnishing PAN, bank statements, ITR acknowledgements, FEMA/RBI compliance documents (for NRI subscribers), valuation report, and confirmations.
- The CIT(A) erred in correlating section 56(2)(viib) with section 68 to sustain the addition.
- Reliance was placed on coordinate bench decisions, including DCIT v. Rakesh Arora and ACIT v. B.K. Sales Corporation, holding that additions beyond limited scrutiny issues are unsustainable without due conversion.
Accordingly, the ITAT quashed the assessment to the extent of the impugned addition and deleted ₹2.00 crore, leaving other grounds academic. The assessee’s appeal was allowed in full.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
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