Weilburger Coatings (India) Pvt. Ltd. Vs DCIT (ITAT Kolkata)
In a recent ruling, the Income Tax Appellate Tribunal (ITAT) Kolkata, in the case of Weilburger Coatings (India) Pvt. Ltd. vs. DCIT, has quashed an assessment order, citing that the Assessing Officer (AO) exceeded the defined scope of a limited scrutiny. The Tribunal’s decision, pronounced on March 28, 2023, underscores the binding nature of Central Board of Direct Taxes (CBDT) instructions regarding the conversion of limited scrutiny cases to complete scrutiny.
The case revolved around the assessment year 2015-16. Weilburger Coatings (India) Pvt. Ltd. had its case selected for “limited scrutiny” under Section 143(2) of the Income Tax Act, 1961. The notice for limited scrutiny specifically identified four areas for examination: receipt of large foreign remittances, mismatch in payments to related persons under Section 40A(2)(b), unsecured loans from individuals who had not filed income tax returns, and losses from currency fluctuations.
However, during the assessment proceedings, the AO delved into an issue not included in the initial limited scrutiny notice: the set-off and carry-forward of unabsorbed losses and depreciation. The AO rejected this claim, arguing a change in shareholding patterns that, in their view, impacted the beneficial ownership of the company. This additional line of inquiry led to an addition in the assessment order.
