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S. 143(3) assessment void if case picked up contrary to CBDT’s Scrutiny Guidelines

S. 143(3) assessment void if case picked up contrary to CBDT’s Scrutiny Guidelines
 For AY 2006-07, the assessee filed a ROI declaring income of Rs. 3.97 crore.
·         The case was selected for scrutiny under clause 2(v)(b) of the Scrutiny Guidelines issued by the CBDT.
·         The said clause of the Scrutiny Guidelines provided that a case had to be selected for compulsory scrutiny if an addition/ disallowance of Rs. 5 lacs or more was pending in appeal before the CIT(A) and such identical issue also originated in the year under consideration.
The assessee claimed that as this condition stipulated in the Scrutiny Guidelines was not satisfied, the AO had no jurisdiction to select the case for scrutiny.
The AO & CIT(A) rejected the claim. On appeal by the assessee to the Tribunal, HELD allowing the appeal:
The CBDT’s instructions
for assumption of jurisdiction
for selection of cases of corporate assesses for scrutiny and assessment are issued u/s 119
and are binding on the AO and have to be followed by him in letter and spirit.

The burden lies on the authority assuming jurisdiction to show and establish that such instructions have duly been complied and satisfied in letter and spirit. On facts, as there was no disallowance of Rs. 5 lacs or more in the earlier years and as no identical issue had arisen in the present year, the notice issued u/s 143(2) was not in terms of the CBDT’s Scrutiny Guidelines and consequently the assumption of jurisdiction was illegal and the entire assessment proceedings were invalid (Nayana P. Dedhia 270 ITR 572 (AP) followed).


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