Krishna Constructions Vs ITO (ITAT Hyderabad)
ITAT Hyderabad: AO Cannot Exceed Limited Scrutiny Scope – Entire Assessment Held Invalid
In this case, the assessee’s scrutiny was specifically limited to verification of cash deposits under CASS. However, the Assessing Officer (AO) went beyond this mandate and examined the entire bank credits, ultimately making additions of over ₹2.20 crore by treating them as business income and unexplained money.
The Tribunal held that such action is clearly beyond jurisdiction, as CBDT instructions strictly restrict the AO from expanding the scope of limited scrutiny without prior approval of the competent authority and without specific triggering information from enforcement agencies.
Since:
- No approval was taken for converting limited scrutiny into complete scrutiny
- No external information justifying expansion existed
- AO made additions on issues unrelated to the original scrutiny (cash deposits)
the ITAT concluded that the AO had violated binding CBDT instructions and travelled beyond jurisdiction.
Accordingly, the entire assessment was held invalid (void ab initio) and the additions were liable to be deleted.
In limited scrutiny cases, any addition beyond the specified issue-without proper procedure-renders the assessment itself unsustainable in law.
FULL TEXT OF THE ORDER OF ITAT HYDERABAD
This appeal by the Assessee is directed against the Order dated 03.07.2025 of the learned CIT(A)-National Faceless Appeal Centre [in short “NFAC], Delhi, for the assessment year 2017-2018.
