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2016 (4) TMI 909 - AT - Income TaxApplicability of CBDT Instruction F.No.225/26/2006-ITA-II(Pt.) dated 08.09.2010 on A0 - ex-parte order - AO while computing capital gain and denying benefit of section 54 to the assessee, has contravened the said instructions, thereby rendering the assessment order invalid? - Held that:- The proper course for the AO before making the additional enquiries would have been to take approval from the administrative Commissioner to widen the scrutiny. This, however, was not done and therefore, the action of the AO is violative of the CBDT Instruction. Apropos the ld. CIT(A)'s order, obviously the ld. CIT(A) has erred in confirming the assessment order. The ld. CIT(A) had erred in holding that the AO has not violated the CBDT Instruction. The ld. CIT(A) has gone wrong in observing that the AO has limited his enquiries to the source of cash deposits. True, the AO is duty bound to see whether the assessee has correctly declared taxable value of the long term capital gains from the sale of her residential house. However, as noted, in a case like the present one, where it has been picked up for scrutiny on the basis of the AIR information, the CBDT Instruction has to be strictly abided by. Herein, since the AIR information was only with regard to cash deposits of ₹ 25 lakhs and the assessee had duly and adequately explained the source thereof, the AO, it cannot be gainsaid, transgressed his competency in issuing the further query and in asking the assessee to produce Smt. Balbir Kaur and Smt. Kamaljit Kaur, the executants of the other agreement to sell which had nothing to do with the cash deposits. Moreover, it cannot, in view of the above discussion, at all be said that the objections raised by the assessee were merely to divert the attention of the AO to come to a logical conclusion. The objections taken by the assessee are well raised and the AO, at the cost of the repetition, could not have gone beyond the specific CBDT Instruction. It is held that since the assessment order, passed ex-parte by the AO, was in violation of specific CBDT Instruction, the same is not legally sustainable. - Decided in favour of assessee
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