If a case is manually selected for the inspection, CIT needs to manifest the application of mind for granting approval for scrutiny.
Details of M/s Brothers & Sisters Enterprise Vs JCIT Lawsuit
The argument, in this case, is that the selection of this case for the assessment was done by AO manually in the year 2010-11. And the Income Tax Commissioner also granted the approval without any application of mind.
As per the counsel of assessee, it is a breach of guidelines given by the CBDT (Central Board of Direct Taxes) for selecting a case for scrutiny of tax assessment.
On the other side, the Ld. Department representative exhibited the order of Ld. CIT along with the guidelines in question. It was also mentioned that these guidelines cannot be interpreted to be Income Tax Rules as they were laid down with the intent to have a smooth functioning of the Income Tax Department. He also requested that the order of Ld. CIT should be sustained.
If a case is manually selected for the inspection, CIT needs to manifest the application of mind for granting approval for scrutiny.
There are 25 such cases that were selected for investigation by the AO, and it is one of those cases. The approval was granted for the scrutiny of the 24 claims, while it was refused for only one case.
The assessee deposited the photocopy of the proposal by the AO where reasons for selecting the assessee’s case for investigation have been mentioned, and they are as follow:
The net profit, in this case, seems to be lower and hence requires verification concerning the expenditures claimed by the assessee insured mortgage of Rs &9, 07,960 and miscellaneous lenders for Rupees 3,255 were to be vindicated.
The bench said that the criteria for the selection of the case by the Assessing Officer were examined carefully and it was found that the guidelines as mentioned earlier allow the AO to choose any case for scrutiny once he records the reasons and gets approval for the same by the CCIT/CIT. However, the case under this classification should be picked if the reasons are convincing and the case has been selected through Computer Selected Scrutiny System or CASS.
In this case, the requirements of the directives were found to have been followed by the Assessing Officer. Talking about the approval given by the Ld. CIT, apparently the application of mind suggests that recommendation of the AO to pick the Suparna Bose case do not show any consent of the Ld. CIT.
Also, the Circular does not need any reasons in writing for giving the approval. In any such occurrence, the internal guidelines are provided for the effective and smooth functioning of the Income Tax department. The need to acquire the consent of CCIT/CIT, in this case, cannot be associated with the essentialities mentioned under the law in Section 151(1) Act.
Hence, in this case, the conviction held by the assessee based on the decision of the Kolkata “B” bench of the same tribunal for the case of ITO vs. Ajanta Financial services is irrelevant, and hence the criterion for the selection of case for the investigation was held invalid.
So, according to the sections in the Income Tax Law, the selection of assessee’s case was found to be in accordance with income tax regulations, and hence the appeal of the assessee was rejected on the grounds that assessee’s reliance on the other similar case was not valid. The bench held the selection of this case for the investigation is in compliant with the law. If a case is manually selected for the inspection, CIT needs to manifest the application of mind for granting approval for scrutiny
