The present appeal was filed by the assesse against the order dated 13.09.2022 passed by the National Faceless Appeal Centre (NFAC), Delhi, for Assessment Year 2015-16. The assesse had originally filed its return of income declaring a total income of ₹52,72,810, and the case was selected for limited scrutiny.

During the course of assessment proceedings, the Assessing Officer examined issues beyond the scope of limited scrutiny and proceeded to treat rental income as business income, made disallowance under Section 14A read with Rule 8D, and completed the assessment under Section 143(3) of the Income-tax Act, 1961.

The assesse challenged the assessment on multiple grounds, primarily contending that the limited scrutiny assessment was unlawfully converted into complete scrutiny without obtaining the mandatory approval of the competent authority, as required under CBDT Instruction No. 20/2015 dated 29.12.2015.

It was further submitted that such unauthorized expansion of scope rendered the entire assessment proceedings invalid and void ab initio. In support of this contention, reliance was placed on departmental correspondence confirming that no approval for conversion from limited scrutiny to complete scrutiny was available on record.

The Department fairly conceded this factual position before the Tribunal.

After carefully considering the submissions of both parties and examining the record, the Tribunal observed that compliance with CBDT instructions is mandatory and binding on the Assessing Officer. Since the conversion of limited scrutiny into complete scrutiny was undertaken without the requisite approval, the resultant assessment order was held to be bad in law.

Accordingly, the Income Tax Appellate Tribunal, Lucknow Bench, quashed the assessment order in its entirety, without adjudicating the issues on merits, and allowed the appeal of the assesse.

This decision reinforces the settled legal position that any assessment made beyond the approved scope of limited scrutiny, without statutory authorization, cannot be sustained in law

Source Link- https://itat.gov.in/public/files/upload/1767595505-8pVKQS-1-TO.pdf


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