Additions Beyond Limited Scrutiny Scope Without Conversion Deleted: ITAT Delhi

Dahila Infrastructure Pvt. Ltd. Vs DCIT (ITAT Delhi)

Summary: ITAT Delhi allowed the assessee’s appeal for AY 2015-16 and deleted additions relating to short-term capital loss of Rs.5,46,97,033/- on forfeiture of share warrants and disallowance under section 14A read with Rule 8D, holding that both additions travelled beyond the scope of the limited scrutiny proceedings. The assessee, a private limited company engaged in infrastructure development, had filed its return declaring a loss of Rs.3,92,92,800/-. Its case was selected under CASS for limited scrutiny for the reason “large other expenses claimed in Profit & Loss account”.

During appeal, the assessee raised additional legal grounds challenging the jurisdiction of the AO to make the two additions. Relying on NTPC Ltd., the Tribunal admitted the additional grounds as purely legal issues requiring no further factual verification. On examining the accounts, the Tribunal found that although loss on share warrants of Rs.5,46,97,033/- appeared under “Other expenses” in the Profit & Loss account, the assessee had itself added that amount back while computing business income.

The remaining other expenses were only Rs.14,683/-, comprising rent and taxes of Rs.600/-, auditor’s remuneration of Rs.14,045/- and printing and stationery of Rs.38/-. Thus, no “large other expenses” had actually been claimed in the return under business or profession. The Tribunal held that once the assessee had itself disallowed the large expense, the AO’s scope under limited scrutiny ended.