ITAT Kolkata Quashes Rs. 90 Lakh Addition for Jurisdictional Overreach

The assessee, a private limited company, filed its return of income for AY 2017-18 declaring a nominal income of Rs. 520. The case was selected for limited scrutiny, specifically to examine issues relating to the share premium. Statutory notices under Sections 143(2) and 142(1) were issued and complied with.

However, during assessment, the Assessing Officer made an addition of Rs. 90,00,000 under Section 68 on account of share application money, which was not part of the limited scrutiny mandate. The addition was confirmed by the NFAC.

On appeal, the assessee challenged the validity of the assessment as the AO went beyond the scope of limited scrutiny and lacked jurisdiction, as the assessment was completed by an officer different from the one who issued the notice under Section 143(2).

Main Issue:
Whether an Assessing Officer can make additions beyond the scope of limited scrutiny, and whether an assessment is valid when framed by an authority other than the one issuing notice under Section 143(2).

ITAT’s Order: The ITAT admitted the additional ground, holding that a pure question of law going to the root of jurisdiction can be raised at any stage. The Tribunal found that the case was selected for limited scrutiny to examine the share premium, whereas the AO made an addition under Section 68 in respect of share application money, which clearly fell outside the permitted scope. Such action was held to be beyond jurisdiction and invalid.

The Tribunal also held that the assessment was void, as the notice under Section 143(2) was issued by one Assessing Officer, while the assessment was framed by another officer without proper jurisdiction. The Tribunal quashed the assessment as a nullity.

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