The assessee partnership firm filed its return of income, subsequently selected for compulsory scrutiny under the CBDT guidelines in Clause 2(q) for the financial year 2006-07.  During the assessment proceedings, the assessee firm failed to explain the difference between the value of plant and machinery claimed to be purchased in the Balance Sheet as on 31-03-2004 and the balances carried forward as on 01-04-2004 in the books of accounts.  The assessee raised the issue of selection of its case under compulsory scrutiny in violation of the CBDT’s circular/guidelines, particularly Clause 2(q) for the financial year 2006-07. 

On appeal, the Hon’ble Court held that there is no violation of the procedure laid down in the CBDT’s circular for selection of the cases for the financial year 2006-07 and accordingly, the order passed by the ITAT upholding the assessment order making addition u/s 69A of the Act was sustained. (AY. 2007-08)