Nawal Kishore Rajgarhia Vs DCIT (ITAT Kolkata)
ITAT Kolkata held that addition made outside the prescribed scope of limited scrutiny, without proper conversion to complete scrutiny, is arbitrary and invalid. Accordingly, addition deleted.
Facts- The return of the assessee was selected for limited scrutiny on two specific issues i.e. gross interest shown in Schedule OS of ITR is less than interest receipt reported in 26AS and large Value Sale of Option in securities (derivative) in a recognized stock exchange and no business income declared by the assessee (STT Code-4)
However, during the assessment proceedings, AO made addition of Rs.6,47,446/- on account of proceeds from sale of shares of M/s Shree Digvijay Cement Company by invoking section 68 of the Act and denied a claim of long-term capital loss of Rs.1,11,746/-. Furthermore, the Assessing Officer added a sum of Rs.15,10,175/- as interest income without considering that this amount had already been accounted for as ‘income from other sources’ after deducting interest expenses on a loan.
CIT(A) dismissed the appeal. Being aggrieved, the present appeal is filed.
Conclusion- Held that as per the Income Tax guidelines, a limited scrutiny case cannot be exceeded without proper conversion to complete scrutiny. The Assessing Officer was not justified in making addition or disallowance on the issues as the Assessing Officer was not supposed to examine any other issue except the issue for which the scrutiny assessment was ordered. The Assessing Officer was supposed to get approval of the competent authority for converting the aforesaid limited scrutiny into full scrutiny. On this aspect, various judicial precedents have held that when the Assessing Officer fails to convert a limited scrutiny case to complete scrutiny case, any addition made outside the prescribed scope is arbitrary and invalid.
