Ladderup Finance Limited Vs Circle 14(1)(1) (ITAT Mumbai)
Limited Scrutiny Means Limited Powers: Additions Beyond CASS Scope Quashed by ITAT
The Mumbai Bench of the ITAT held that in a case selected for limited scrutiny under CASS, the Assessing Officer has no jurisdiction to examine or make additions on issues beyond the specific reasons for selection, unless the case is formally converted into complete scrutiny with prior written approval of the Pr. CIT/CIT, as mandated by CBDT Instruction No. 20/2015 dated 29.12.2015.
In the present case, the assessee’s return for AY 2015-16 was selected for limited scrutiny for verification of short-term capital gains, foreign remittances (Form 15CA), and sale of property (Form 26QB). However, the AO proceeded to make extensive additions and disallowances relating to section 14A read with Rule 8D, addition to book profits under section 115JB, and interest disallowance under section 36(1)(iii)—issues admittedly outside the limited scrutiny mandate. There was no material on record to show conversion of the case into complete scrutiny with requisite approval.
Relying on binding CBDT instructions, the decision of the Mumbai ITAT in Arjun Transport Company Pvt. Ltd., and the Calcutta High Court ruling in PCIT v. Weilburger Coatings (India) (P.) Ltd., the Tribunal held that such action amounted to a jurisdictional defect going to the root of the assessment. Since the issue was purely legal and based on undisputed facts, the ITAT adjudicated it directly and set aside all additions made beyond the scope of limited scrutiny, without examining the merits.
Accordingly, the assessee’s appeal was allowed in full, and all other grounds were left open.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
