The court upheld the validity of the complete scrutiny assessment and rejected the stay application due to insufficient evidence supporting the assessee's claims.

O R D E R

Per Bench:

This stay application has been filed by the assessee seeking stay over recovery of outstanding demand of Rs. 1,99,78,906/ - consisting of tax and interest created by assessment-order dated 16.12.2019 passed by DCIT/ ACIT-3(1), Indore [“AO”] u/ s 143(3) of Income-tax Act, 1961 for Assessment-Year [“AY”] 2017-18, which is impugned in ITA No.462/ Ind/ 2023 pending before ITA T, Indore.

2. Heard the learned Representatives of both sides and case records perused.

3. Ld. AR for assessee initially carried us to the assessment-order dated 16.12.2019 passed by AO to explain the facts giving rise to outstanding demand. Referring to same, Ld. AR showed that the assessee is engaged in the business of trading of lawn grass, plants, nursery, seaweeds, organic manure, etc. That for the year under consideration, the assessee declared presumption income u/ s 44AD from the said business. That the assessee deposited a total sum of Rs. 1,95,05,500/ - in bank accounts during the previous year 2016-17 relevant to AY 2017-18 out of which a sum of Rs. 1,51,16,500/ - was deposited during demonetization period from 09.11.2016 to 30.12.2016. That the AO treated entire deposit of Rs. 1,95,05,500/ - as unexplained and made addition u/ s 69A r.w.s. 115BBE and the AO also made a minor addition of Rs. 2,00,000/ - by disallowing the interest on house loan claimed by assessee as deduction. These additions have resulted in a demand of Rs. 2,04,78,906/ - against which the assessee has already deposited a sum of Rs. 5,00,000/ -, the remaining demand of Rs. 1,99,78,906/ - is outstanding. The assessee filed first-appeal to CIT(A) but did not get success. Therefore, the assessee has come in next appeal before ITAT which is pending before ITAT.

4. Then, the Ld. AR raised several contentions to show that the assessment made by AO and consequentially the impugned demand created therefrom, are suffering from several fallacies. Therefore, according to Ld. AR, the heavy demand created by AO will get quashed in the appeal filed by assessee which is pending before ITAT. Ld. AR submitted that the department is likely to take coercive action against assessee for recovery of demand and hence stay must be granted so as to save assessee from irreparable damage. Ld. DR for revenue made replies to the contentions raised by Ld. AR. We have considered rival submissions made before us by learned Representatives. We discuss below the contentions of both sides alongwith our conclusions.

5. The first contention raised by Ld. AR is such that the case of assessee must have been selected by AO under “Limited Scrutiny” for examining deposits made during demonetization period (which was Rs. 1,51,16,500/ - only) but the AO has made addition of Rs. 1,95,05,500/ - for deposits made by assessee during entire previous year 2016-17 as well as disallowance of interest expenditure. Therefore, according to Ld. AR, the assessment made by AO by travelling beyond the scope of “Limited Scrutiny” is bad. He pointed out that the assessee has also requested the AO to provide the documentation to show the nature of scrutiny, whether Limited or Complete, but there is no response from AO.

5.1 Replying to this, Ld. DR for revenue submitted that in Para No. 1 of assessment-order, the AO has clearly mentioned that the return was selected for “Complete Scrutiny” under CASS with the reason of “abnormal increase in cash deposits during demonetization period as compared to pre-demonetisation period”. Further, the notice u/ s 143(2) dated 09.08.2018 issued by AO filed in assessee’s Paper-Book Pages 8- 11 does not contain any marking of “Limited Scrutiny”. Therefore, the case of assessee was under “Complete Scrutiny” and the AO was required to make a minimum scrutiny of deposits during demonetization period but the AO’s