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2020 (3) TMI 961 - AT - Income TaxConversion of “Limited Scrutiny” into “Complete Scrutiny” - Expanding the scope of limited scrutiny assessment without necessary approval - expanding the scope to changing the head of income without taking necessary approvals of higher authority as required by the instructions given by CBDT - denying the deduction claimed under section 54 - HELD THAT:- On perusal of the notice for “Limited Scrutiny” we find that there was no mentioning/whisper about examination of the fact whether the assessee was engaged in the business of property development. Assessing Officer has exceeded his jurisdiction by denying the deduction claimed u/s 54 of the Act on the reasoning that the assessee is engaged in the business of property development as the same was not mandated under the ‘’Limited Scrutiny” notice issued under section 143(2) of the Act. DR before us has not brought anything on record justifying that the “Limited Scrutiny” was converted by the Assessing Officer under normal scrutiny after obtaining necessary approval from the appropriate authority. We are also not convinced with the argument of the DR that the issue raised by the AO is limited to the activity of the sale of the property only. It is because if we admit the contention of the learned DR then the head of income from capital gain will also get change to the business income despite the fact that there was no question raised in the notice issued for the limited scrutiny under section 143(2) of the Act. The right course of action for the AO was to take the approval from the competent authority for expanding the scope of Limited Scrutiny to the regular assessment but he failed to do so. Thus, in our considered view inaction of the AO should not cause any harassment to the assessee. In holding so we draw support and guidance from the order of Rajesh Jain vs. ITO [2005 (4) TMI 629 - ITAT CHANDIGARH] held that CBDT Circular clarifies that the Assessing Officer does not have the powers to make the entire assessment of income in limited scrutiny cases. There is no doubt that the power of the Commissioner (Appeals) is co-terminus with the power of the AO In the instant case, when the Assessing Officer did not have the power to make a full-fledged assessment in limited scrutiny cases, the Commissioner (Appeals)’s power could not be enlarged beyond the power of the Assessing Officer in limited scrutiny cases. So, it was considered appropriate to remit the issue relating to allowance of depreciation in respect of the plinth to the file of the Assessing Officer for the purpose of fresh decision in accordance with law. Since the notice under section 143(2)(i ) was issued for limited scrutiny, the Assessing Officer was precluded from considering any other issue while making the assessment under section 143(3) under limited scrutiny. The decision of the Commissioner (Appeals) in considering the other claim of the assessee not covered in the notice issued under section 143(2)(i) for limited scrutiny was contrary to the provisions of the Act and, accordingly, was set aside. We are not convinced with the finding of the authorities below. As such the entire issue should have been limited to the extent of the dispute raised in the notice under section 143(2) of the Act for the limited scrutiny but the AO in the present case has exceeded his jurisdiction as discussed above. Thus the ground of appeal of the assessee is allowed
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