M/s Brothers & Sisters Enterprise vs. JCIT (ITAT Kolkata)
September, 18th 2017
CBDT guidelines for scrutiny of cases: Law explained as to how the CBDT Guidelines for manual selection of cases for scrutiny have to be interpreted and whether CIT in granting approval is required to show application of mind and give reasons for his decision
(i) The Criteria / Guidelines for Income tax Scrutiny dated 10th September 2011 authorize the Assessing Officer to select any return for scrutiny after recording the reasons and obtaining approval of the CCIT/CIT. The case under the category should be selected if, they are compelling the reasons and the case selected through CASS. These cases should be watched by CCIT / CIT in respect of the quality of assessment. In our view, the requirements of the guidelines have been met by the AO in this case. The term compelling reasons is a relative term and has to be viewed from the point of view of the AO.
(ii) Coming to the approval granted by Ld. CIT, the application of mind is evident from the fact that the proposal of the Assessing Officer to select the case of Suparna Bose at Sl. No. (25) has not been approved by the Ld. CIT. The Circular does not require recording reasons for giving approval. In any event, these are internal guidelines issued for effective functioning of the Department. The requirement of obtaining approval of CIT/CCIT, as required in this Departmental communication cannot be equated with the requirements specified under the statute in Section 151(1) of the Act. Section 151(1) and 151(2) of the Act require the Commissioner of Income Tax to record satisfaction, as compared to, mere approval in the case of Board’s circular.
(iii) The reliance placed by the assessee on the decision of Kolkata “B” Bench of this Tribunal in the case of Ajanta Financial Services Pvt. Ltd. vs. ITO in ITA No. 1426/Kol/2011 dated 21.05.2012 for the AY 2003-04 is not applicable as in that case, the criteria laid down for selection of case for scrutiny was not valid. Nowhere in this decision, it has been laid down that the Ld. CIT(A) while granting approval has to give details reasons. Similarly, the judgment in the case of Kirtilal Kalidas & Co. vs. DCIT (1998) 67 ITD 573 (Mad) does not applying to the facts of the case as it was a case of grant of approval by the CIT of ADIT before passing of an assessment order in terms of u/s 158BD of the Act. When the CIT is satisfied with the reasons given by the Assessing Officer, he in not once again give separate reasons or repeat the reasons recorded by the Assessing Officer and then give his approval for the same.
(iv) In the case of ITO vs. M/s Direct Sales (P) Ltd. in ITA No.3545/Del/2010 dated 25.02.2015 for the A.Y. 2002-03, the issue that was considered was satisfaction to be recorded u/s 151 of the Act and not mere grant of approval. Similarly, the Hon’ble Delhi High Court in the case of United Electrical Co. (P) Ltd. vs. CIT & Ors. 258 ITR 317 (Del) was considering the powers vested with Commissioner u/s. 151 of the Act. These case law cannot be applied to the issue on hand.