Priyanka Ashok Vs ACIT (ITAT Delhi)
The appeal before the ITAT Delhi concerned whether the Assessing Officer (AO) exceeded the scope of limited scrutiny while disallowing loan interest in Assessment Year 2015-16. The assessee’s case had been selected for limited scrutiny through CASS solely for the reason of “Increase in Capital.”
During assessment proceedings, the AO examined the assessee’s purchase of property at C-4, Jantar Mantar Road, New Delhi, acquired on 18.02.2014 as a business asset for ₹11.99 crore. The purchase was partly financed through an unsecured loan of ₹1.40 crore from M/s Pushpanjali Realms and Infratech Pvt. Ltd. The assessee furnished the loan agreement and submitted that the loan transaction pertained to Assessment Year 2014-15. However, the AO disallowed interest of ₹11,20,000 paid on the loan during Assessment Year 2015-16.
The assessee argued that the AO travelled beyond the scope of limited scrutiny, which was confined to examining increase in capital, and lacked jurisdiction to examine the loan transaction. The Department contended that increase in capital also represented fixed assets and therefore the examination was within the permissible scope. It was also submitted that Assessment Year 2014-15 had been reopened to examine the genuineness of the loan transaction.
The Tribunal observed that the property purchase and loan transaction related to Assessment Year 2014-15 and could not have been examined in Assessment Year 2015-16 under limited scrutiny proceedings. It further held that the unsecured loan transaction did not fall within the ambit of “increase in capital.” The ITAT stated that in limited scrutiny cases, the AO must confine examination to the specific issue for which the case was selected unless prior approval is obtained to expand the scope. Since no such approval was on record, the Tribunal held that the AO exceeded jurisdiction. The assessment order was quashed and the appeal was allowed.
