Scrutiny notice not valid if it's not issued as per CBDT's instruction for selection of a case for assessment

CRYSTAL PHOSPHATES LTD. V. ACIT (Delhi Tribunal)

In the instant case, assessee’s case was selected for scrutiny by way of notice under section 143(2) of the Act, under the CBDT Instructions contained in Scrutiny Guidelines. The assessee challenged the assumption of jurisdiction. However, the Addl. CIT held that notice was issued in accordance with law. The CIT (A) upheld the order of Addl. CIT.

The Tribunal quashed the scrutiny notice and held as under:

• As per the CBDT’s instructions contained in scrutiny guidelines, for compulsory scrutiny of corporate assessee’s cases, there has to be an addition or disallowance of Rs. 5 lakhs or more against which an appeal is pending and such an issue must also arise in the year under consideration. All these facts must be available with the AO on the date of assumption of jurisdiction;
• In the instant case, there was no disallowance of Rs. 5 lakhs or more and in any case, no finding was available from the order of the authorities below that an identical issue had arisen in the year under consideration;
• Thus, once the CBDT has issued instructions for assumption of jurisdiction for selection of cases of corporate assessees for scrutiny and assessment thereof, the same have to be followed in letter and spirit by the AO;
• The burden lies on the authority assuming jurisdiction to show and establish that such instructions have duly been complied with and satisfied in letter and spirit. However, in the instant case, instructions issued by the CBDT were not shown to have been complied with for assumption of jurisdiction. Hence, the notice and the assessment framed were held to be without valid jurisdiction and were quashed.