AO cannot make additions beyond limited scrutiny scope without Pr. CIT written approval per CBDT Instruction, rendering them without jurisdiction.

आदेश/ORDER

PER MAKARAND VASANT MAHADEOKAR, AM:

This appeal by the assessee is directed against the order dated 29.09.2025 passed by the Addl./JCIT (A)-1, Delhi from the Office of Ld. Commissioner of Income Tax (Appeals) [hereinafter referred to as “CIT(A)”] under section 250 of the Income-tax Act, 1961 [hereinafter referred to as “the Act”]for Assessment Year 2015–16, arising out of the assessment order dated 29.12.2017 passed by the Ld. Assessing Officer under section 143(3) of the Act. Facts of the Case

2. The assessee is a company engaged in the business of investment and finance and financial and management consultancy. The assessee filed its return of income for the year under consideration on 29.09.2015, declaring a total income of Rs. 73,59,060/-.The case was selected for limited scrutiny under CASS for the following reasons:

i. Large short term capital gains declared under section 111A,

ii. Receipt of large value foreign remittance as reported in Form 15CA, and

iii. Sale of property reported in Form 26QB.

3. Notice under section 143(2) was issued and served upon the assessee. During the course of assessment proceedings, the Ld. Assessing Officer issued several notices under section 142(1) along with questionnaires calling for details and explanations. The assessee furnished submissions and supporting details from time to time, which were placed on record.

4. During the course of assessment, the Ld. Assessing Officer noted that the assessee had earned dividend income of Rs. 15,06,989/-, claimed exempt under section 10(34), and long-term capital gains of Rs. 2,73,06,313/-, claimed exempt under section 10(38).The assessee had suo motu made a disallowance of Rs. 2,95,770/- under section 14A read with Rule 8D, which according to the Ld. Assessing Officer was not commensurate with the expenditure incurred in relation to exempt income.

4.1. The Ld. Assessing Officer, after recording dissatisfaction with the assessee’s working, invoked the provisions of section 14A read with Rule 8D and computed total disallowance at Rs. 41,94,302/-, out of which an amount of Rs. 38,98,532/- was added back to the total income, after reducing the amount already disallowed by the assessee.

4.2. The Ld. Assessing Officer further held that the disallowance made under section 14A was also required to be added to the book profit computed under section 115JB, in terms of clause (f) of Explanation 1 thereto.

4.3. The Ld. Assessing Officer also observed that the assessee had taken interest-bearing loans and advanced interest-free funds to its director and a related concern. According to the Ld. Assessing Officer, the assessee failed to establish that such advances were made out of its own funds. Accordingly, interest expenditure of Rs. 7,08,213/- was disallowed under section 36(1)(iii) of the Act.

4.4. Further, a sum of Rs. 2,800/- was disallowed under section 94(7) of the Act on account of dividend stripping, which was accepted by the assessee during the course of assessment proceedings. Penalty proceedings under section 271(1)(c) were initiated separately.

4.5. Aggrieved by the assessment order, the assessee preferred an appeal before the Ld. CIT(A).Before the Ld. CIT(A), the assessee challenged the validity of the assessment on the ground that the Assessing Officer travelled beyond the scope of limited scrutiny and other disallowances as detailed above.

4.6. The assessee contended that adequate interest-free funds were availa