Mohammad Parvez Alam Vs ITO (ITAT Raipur)
Scope of Limited Scrutiny Breached -AO Cannot Travel Beyond Limited Scrutiny without proper approval
Assessee had taken loan of Rs. 12,34,078/- from his wife Smt. Raziya Khan. AO, while scrutinising the balance sheet, enquired into the genuineness & creditworthiness of the loan & since the Assessee failed to furnish supporting documents, AO made addition of Rs. 12,34,078/- u/s 68. CIT(A) upheld the addition.
Before Tribunal, it was argued that the case was selected for limited scrutiny only for verifying cash deposits during the year. AO, after due enquiry, accepted the cash deposits & made no addition on that count. However, by making addition u/s 68 towards unsecured loan, AO had travelled beyond the scope of limited scrutiny without prior approval of competent authority. Revenue fairly conceded to this argument.
Tribunal observed that once the case was confined to limited scrutiny for verifying cash deposits, AO could not have examined unrelated issues like genuineness of loan without converting the case into complete scrutiny with due approval. Relying on Supreme Court in Union of India Vs. Rajeev Bansal (469 ITR 46), it held that an order passed without jurisdiction is nullity & any action beyond statutory scope is invalid. Further, Article 265 of the Constitution mandates that no tax shall be levied or collected without authority of law. Since AO acted beyond jurisdiction, the addition made was held to be perverse & bad in law. Accordingly, Tribunal set aside CIT(A)’s order & directed AO to delete the addition. The appeal was thus allowed in favour of the Assessee.
