Scope of Limited Scrutiny Assessment

► Date : Jun 30, 2022

Kolkata ITAT recently examined the scope of Limited Scrutiny Assessment in the case of I.T.A. No. 2307/KOL/2018 M/s. Income Tax Officer Vs. Godhuli Dealcom LLP where the assessee by cross objection has raised a legal question with regard to the jurisdiction of Assessing Officer in Limited Scrutiny Assessment on the ground that the case of the assessee was selected for limited scrutiny but the AO made additions beyond the scope of limited scrutiny without taking approval of the competent authority.

Facts of the Case

The assessee-LLP electronically filed its first return of income in A.Y. 2015-16 on being converted from Private Limited Company to Limited Liability Partnership, which is the year under appeal. The case of the assessee is selected for limited scrutiny for the following two reasons:- (i) Low income in comparison to High Loan/Advances/investment in shares; (ii) High interest expenditure against new capital added in work-in-progress or addition made to fixed assets. Assessing Officer (AO) examined the various details and while going through the source of the investment details, also went on to examine the security premium and share capital transferred from the Private Limited Company and concluded that the security premium of Rs.12,87,23,000/- which was received in the Pvt. Limited Company before being converted into the assessee LLP cannot be transferred under the head “Reserve & Surplus” of the newly incorporated LLP and since the assessee transferred to reserve and surplus, the security premium reserve of Rs.12,87,23,000/- is to be considered as income of the LLP and accordingly added the same to the income of the Assessee.

Legal question

If the AO has travelled beyond the scope of limited scrutiny while framing the assessment under section 143(3) of the Act by going for complete scrutiny in place of the limited scrutiny without prior approval of the competent authority

ITAT Decision

ITAT observed that limited scrutiny is carried out with the assistance of computers and is based on the data filled by the assessee in their ITR return certain parameters inserted by the Department in the computer software, which helps to pin points/captures certain aspects of the financial transactions of an assessee, comparing the same with the previous years’ data like increase and decrease in turnover/profits/loans/fixed assets/capital, low profit rates, vis-a-vis high turnover and various others permutations. Based on such information through the computer software, the case is selected for limited scrutiny. Once a case is selected for limited scrutiny, though the role of the AO is confined to examine the issues for which the case is selected for limited scrutiny but then the AO has to go into the depth of such issue and minutely examine the facts attached thereto. AO just cannot casually examine the issue and come to the conclusion because the reasons are just indicative in nature and to reach the depth of the issue raised in the limited scrutiny, the AO has to make the examination deeper and deeper examining all the aspects linked to such reason. In case of the complete scrutiny, AO has to examine all the financial transactions carried out by the assessee during the year, whereas in limited scrutiny’s issues are limited but the same needs more intense, accurate and deep examination of the issue and facts attached to it.

In assessee’s case was selected for limited scrutiny and the first issue is low income in comparison to high loans/advances/investment in shares. The reason is just an indication for the AO to examine various aspects. Once the low income is to be examined, it has to be seen in consonance of the higher loans standing in the balance sheet and while examine the same in detail AO asked the assessee about the source of investment and in the present case, the interest income is shown only at Rs.14.29 lakhs, whereas the loans and advances are standing to the tune of Rs.13.97 crores. The  AO went on to examine this aspect of low income . While examining the loans and advances, AO came to know that this is the first year of incorporation and the LLP has been converted from the company.  AO then enquired about the source of investment in reply to which the assessee submitted that the source is the share capital and security premium of the erstwhile company before being converted to LLP and therefore the AO went on to examine the issue of security premium reserve.

Further, for the second reason for high interest expenditure against new capital added in work in-progress or addition made to fixed assets and the catch words are high interest expenditure, new capital added which in this case is partner’s capital and Reserve & Surplus (Security Premium Reserve). Even though the reasons are not very specific but it is also a fact that any detailed questionnaire is not supplied to the AO as to what he needs to examine for a particular reason. There are few catchy words in the reasons which are only supplied to the AO and thereafter AO needs to decide at his own end to examine a particular reason.

In view of above reasons and on thorough examination of the financial statements of the LLP, ITAT held that the reasons for selecting the case for limited scrutiny which covers various aspects of the assessee including low income, high loans, advances, investment in shares, high interest expenditure, new assets added in work-in-progress and additions in fixed assets and therefore the AO carried out the assessment proceedings only within the parameters provided under “limited scrutiny” and has fairly done well by reaching to the depth of the issue and was well within the jurisdiction to examine the source of investment i.e. share capital, Security Premium and unsecured loan of erstwhile Private Limited Company made during the year which were the source of investments fetching very low income. The source of investment as evident from the balance-sheet of LLP, is the share capital and security premium which was carried over from the Private Limited Company. ITAT, thus , held that AO has not exceeded the jurisdiction and has not travelled beyond the reasons for selecting the case of the limited scrutiny and AO has not done complete scrutiny of the case and has restricted his scrutiny proceedings only with regard to the two reasons mentioned hereinabove for carrying out limited scrutiny.


 Legal issue raised by the assessee in the Cross Objection has no merit and is dismissed.

Crux of Case Law

Once a case is selected for limited scrutiny, though the role of the AO is confined to examine the issues for which the case is selected for limited scrutiny but then the AO has to go into the depth of such issue and minutely examine the facts attached thereto.  AO just cannot casually examine the issue and come to the conclusion because the reasons are just indicative in nature and to reach the depth of the issue raised in the limited scrutiny, the AO has to make the examination deeper and deeper examining all the aspects linked to such reason. All parameters examined due to its attachment with the reason for limited scrutiny fall within the scope of limited scrutiny assessment.

Read full order

Name : Meenakshi Jain

View Profile

► Tags : #LimitedScruitiny #CASS #ScopeofLimitedScruitinyAssessment #IncomeTaxAct1961 #ITAT #IncomeTax

Leave a Reply

Ssgnru(1 hour Ago)

buy cheap generic naproxen purchase cefdinir for sale buy prevacid generic

Sgzzgc(1 day Ago)

buy lanoxin 250mg online brand digoxin order molnupiravir 200 mg pills

Yygjuz(2 days Ago)

acetazolamide 250 mg tablet buy diamox generic azathioprine online order

Ghiuce(3 days Ago)

coreg drug order coreg 25mg without prescription buy aralen sale

Tmozok(5 days Ago)

order clobetasol cream clobetasol cream amiodarone for sale

Tqzkzx(5 days Ago)

how to get olmesartan without a prescription order generic depakote depakote 250mg generic

Pgjnip(6 days Ago)

mesalamine 800mg drug order mesalamine 400mg generic order irbesartan 150mg for sale

Oybtpr(1 week Ago)

oral vardenafil 20mg order levitra 20mg sale buy hydroxychloroquine 200mg generic

Pidkqf(1 week Ago)

purchase altace sale glimepiride canada buy generic arcoxia 60mg

Rclzbr(1 week Ago)

levitra 20mg uk cheap vardenafil 20mg where to buy hydroxychloroquine without a prescription

Avrgfx(1 week Ago)

buy generic furosemide for sale order furosemide pills order albuterol pills

Pdrdvr(1 week Ago)

ivermectin 1% cheap ed drugs purchase prednisone online cheap

Xlpppd(1 week Ago)

buy azipro online cheap prednisolone 40mg generic buy generic gabapentin for sale

Ssroqc(1 week Ago)

online cialis how much is cialis purchase cialis online cheap

Yrdvds(2 weeks Ago)

isotretinoin 10mg us amoxicillin usa cost zithromax 500mg

Tfbqli(2 weeks Ago)

catapres 0.1 mg without prescription buy generic clonidine over the counter buy tiotropium bromide 9mcg

Ytjtsy(2 weeks Ago)

order amoxicillin 500mg online purchase arimidex generic biaxin 250mg cost

Mehegg(2 weeks Ago)

buy indomethacin 50mg sale indomethacin cost brand suprax 100mg

Barnqh(3 weeks Ago)

buy generic nolvadex for sale cost nolvadex 10mg cefuroxime order online

Vdzshh(3 weeks Ago)

buy avanafil tablets buy generic cambia over the counter generic cambia

Ufbxud(3 weeks Ago)

brand cleocin 300mg purchase cleocin best pill for ed

Kmvmaw(3 weeks Ago)

buy generic mebendazole retin gel cheap tadalis without prescription

Pankti(3 weeks Ago)

purchase estradiol pill buy lamictal 200mg for sale prazosin 1mg drug

Jbvkno(3 weeks Ago)

buy fluconazole without prescription diflucan 100mg over the counter order cipro 1000mg online

Wawxfy(3 weeks Ago)

duricef 250mg us finasteride 5mg for sale order proscar online

Viwlgk(4 weeks Ago)

generic tegretol 400mg lincocin 500 mg oral purchase lincomycin for sale

Yfwazi(4 weeks Ago)

simvastatin brand oral valacyclovir sildenafil 100mg canada

Ktzmvd(1 month Ago)

starlix for sale online nateglinide price atacand 8mg us

Amxrwq(1 month Ago)

buy generic progesterone for sale tinidazole 300mg pill zyprexa 10mg pill

Mrbspn(1 month Ago)

buy betnovate without prescription buy anafranil medication sporanox 100mg us

Qdagwo(1 month Ago)

purchase clopidogrel sale buy plavix online cheap order nizoral for sale

Tvpizl(1 month Ago)

buy toradol 10mg online buy colchicine 0.5mg generic buy generic propranolol online

Qfrbvy(1 month Ago)

imitrex price buy sumatriptan without a prescription dutasteride buy online

Arsrny(1 month Ago)

buy crestor 20mg online order crestor 10mg pills motilium pills

Tfdlzg(1 month Ago)

losartan 50mg for sale topamax 100mg pill oral topiramate 200mg

Amybqj(1 month Ago)

vibra-tabs cost clavulanate for sale purchase augmentin online cheap

Cfdkgs(1 month Ago)

how to get albuterol without a prescription order synthroid 75mcg without prescription buy generic synthroid over the counter

Ppdomw(1 month Ago)

order generic isotretinoin order isotretinoin 10mg for sale purchase zithromax generic

Ywrgen(1 month Ago)

order amoxicillin 500mg generic azithromycin online prednisolone 20mg usa

Uxsfcn(1 month Ago)

modafinil 200mg tablet order phenergan for sale cheap prednisone 20mg

Dvamda(1 month Ago)

lipitor 80mg canada lipitor cost order viagra 100mg sale

Myflzi(1 month Ago)

buy cenforce generic buy aralen without a prescription glycomet 500mg uk

Puinbz(1 month Ago)

buy zyrtec 10mg without prescription order zoloft 100mg online buy zoloft 50mg online

Esrttt(2 months Ago)

order coumadin online cheap buy warfarin 2mg generic allopurinol 300mg uk

Gbzfar(2 months Ago)

levofloxacin 250mg brand purchase urso online cheap bupropion buy online

Prnhhr(2 months Ago)

order ezetimibe sale order generic zetia order methotrexate 10mg online

Dcvgrw(2 months Ago)

phenergan uk provigil over the counter tadalafil 40mg drug

Xvakwz(2 months Ago)

viagra generic cialis usa tadalafil 10mg for sale

Luzwrc(2 months Ago)

order alfuzosin 10mg generic order trazodone pills diltiazem 180mg drug

Zrsopm(2 months Ago)

buy generic dapsone 100mg asacol 800mg generic buy atenolol medication

Opinion Poll

Do you think there should be incentive for filing of early return instead of penalty for late return

Thought of the day


If you can't do great things, do small things in a great way - Napolean Hill

Upcoming Events

No Data