ABIL Realty Pvt. Ltd. Vs ITO (ITAT Pune)
The Income Tax Appellate Tribunal (ITAT), Pune Bench, has quashed a tax addition of over Rs 9.3 crore made against ABIL Realty Pvt. Ltd., holding that the Assessing Officer (AO) exceeded the scope of a limited scrutiny assessment without obtaining the required approval. The decision, dated March 19, 2025, highlights the binding nature of Central Board of Direct Taxes (CBDT) circulars on the Income Tax Department and the procedural limits of scrutiny assessments.
The case involves the Assessment Year 2016-17, for which ABIL Realty had filed its return declaring a loss. The case was selected for a “limited scrutiny” under the Computer Aided Scrutiny Selection (CASS) system. The specific reasons for the scrutiny included:
- Low income compared to high loans/advances.
- Low income compared to very high investments.
- Large other expenses claimed.
- Large current liability in comparison to total assets.
During the assessment, the AO identified that a significant portion of the company’s current liabilities was an advance of Rs 70 crore received from a sister concern, M/s. Shashbindu Constructions Pvt. Ltd. The AO, without converting the scrutiny into a complete one, proceeded to examine the nature of this transaction. He concluded that the advances were not for business purposes but were in the nature of loans and advances. Based on this, the AO invoked Section 2(22)(e) of the Income Tax Act and added Rs 9,30,66,244 as “deemed dividend,” representing the accumulated profits of the lending company. This addition was later upheld by the CIT(A).
