AO Cannot Travel Beyond Limited Scrutiny Without Pr. CIT’s Consent: ITAT reiterates CBDT Instruction, Deletes Addition u/s 36(1)(iii)

The Income Tax Appellate Tribunal (ITAT) has reaffirmed that an Assessing Officer (AO) cannot expand the scope of a limited scrutiny assessment beyond its initial parameters without the explicit prior approval of the Principal Commissioner of Income Tax (Pr. CIT). The ITAT reiterated a CBDT instruction to this effect and consequently deleted an addition made under Section 36(1)(iii) of the Income Tax Act. This ruling is crucial for maintaining procedural fairness in tax assessments. It prevents AOs from arbitrarily converting limited scrutiny cases into comprehensive investigations without proper authorization, thereby protecting taxpayers from undue harassment. It underscores the importance of adhering to internal guidelines and statutory provisions to ensure legitimate and targeted assessments.