TMI Blog2022 (6) TMI 225X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer (AO) under s. 143(3) of the Income Tax Act, 1961 (the Act) concerning AY. 2015-16. 2. The ground of appeal raised by assessee reads as under: 1. On the facts in the circumstances of the case it is most respectfully submitted that the Ld. Principal Commissioner of Income Tax-4 has erred in Law and on Facts in holding that the order passed u/s. 143(3) of The Income Tax Act, 1961 dated 10/08/2017 as erroneous and prejudicial to the interest of revenue and direction of the Ld. Assessing Officer to make fresh assessment, by passing the Order U/s 263 of The Income Tax Act, 1961 dated 25/03/2020. 3. The brief facts of the case are that the assessee is a doctor (Gynecologist) by profession and has been running a hospital in Ahmedabad. The assessee had purchased an immovable property being sub-plot No. A/23 admeasuring 1371 sq.mtrs along with 194.07 sq.mtrs undivided share in the land used for internal common roads and common plots. Thus, the plot area has been worked out to 1565 sq. mtrs located in the scheme known as Gala Auram . The said plot has been purchased by the assessee through registered sale deed bearing No. AHD-04-PLD/3042 of 2014 dated 02.05.2014 for a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ow cause notice dated 13.01.2020 has been issued and served on the assessee through ITBA on 14.01.2020. This notice has also been served on the assessee by the Assessing Officer on 23.01.2020. In response to this notice, the assessee has filed a letter dated 24.01.2020 seeking adjournment of 10 days. Vide letter dated 25.01.2020, the assessee has intimated the new residential address. Vide this office notice dated 29.01.2020, the assessee has been asked to attend the hearing on 03.02.2020 either in person or through an authorized representative. In response to this notice, the reply to the show cause notice was submitted as under: i) The/tfasd was selected for limited scrutiny purpose as per the first notice issued u/s. 142(1) of the Act dated 26.07.2016 for verification of 7 different issues listed in the said notice and the points relating to verification of purchase sale of immovable property was not covered or mentioned in the said notice. Therefore, the A.O. was not supposed to verify the said details. He could have examined these issues only after taking due permission from the CIT/Pr. CIT which was not done. ii) The assessee had agreed to purchase the residentia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .07.2016, but the issue was identified for examination: i. Interest expenses ii. Income from heads of income other than business/profession mismatch iii. Details of Asset and Liabilities iv. Sales Turnover Mismatch v. Expenditure of personal nature vi. Salary Income mismatch It is pertinent to mention here that point relating to verification of purchase and sale of property was not covered/mentioned in the said notice. 5.1. In the case of Balvinder Kumar vs. PCIT [2021] 125 taxmann.com 83 (Delhi-Trib.), it was held as under: Section 263 of the Income-tax Act, 1961 - Revision - Order prejudicial to interest of revenue (Scope of) - Assessment year 2015-16 - Assessee's return was selected for limited scrutiny through CASS on issue of substantial increase in capital - Assessing Officer after considering requisite details filed by assessee, passed assessment order without finding any discrepancy on issue under consideration Subsequently, Principal Commissioner held that Assessing Officer accepted computation of capital gains by assessee without considering any details related to working of indexed cost of acquisition - Principal Commissioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and prejudicial to Revenue; and the impugned action of Ld. PCIT is akin to do indirectly what the AO could not have done directly. Thus it is noted that Ld. PCIT has ventured to exercise his revisional jurisdiction by issuing SCN dated 13.01.2020 without satisfying the essential condition precedent to invoke the jurisdiction u/s. 263 of the Act. Therefore the very initiation of jurisdiction by issuing SCN itself is bad in law and therefore it is quashed. Consequently all further actions/proceeding including the impugned order of Ld. PCIT is non-est in the eyes of law. For this we rely on the decision of this Tribunal in Sanjib Kumar Khemka in ITA No. 1361/Kol/2016 for AY 2011-12 dated 02.06.2017 wherein it has been held that: Now coming to the facts of the instant case, we find that the instant case was selected on the basis of AIR Information as evident from the order of AO under section 143(3) of the Act. There is also no whisper in the order of the AO for expanding the scope of limited scrutiny after obtaining the permission from the Administrative CIT. The ld. DR has also failed to bring anything contrary to the argument of the ld. AR. Therefore in our considered view the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue raised in AIR. Thus the order u/s. 143(3) of the Act beyond the points of AIR is invalid in law and so the same is with the order passed u/s. 263 of the Act. It is the further contention of the assessee that in the items which are not subject matter of AIR cannot subject matter of scrutiny. Such matters include salary of the assessee, loans interest on loans, payment of LIC, Commission brokerage income etc. It is the case of the assessee that in the assessment order passed u/s. 143(3) of the Act, the AO has travelled beyond the points of the AIR on the basis of which the case of scrutiny was selected under CASS module. It is the plea of the assessee that when no addition/disallowance can be made beyond the points mentioned in AIR in the assessment proceedings then same is the case with proceedings initiated u/s. 263 of the Act. 9. This tribunal's yet another decision in ITA No. 1011/Kol/2017 in Sri Hartaj Sewa Singh vs. DCIT, (IT), Circle-1(1), Kolkata decided on 27.04.2018 also decides the instant issue in assessee's favour on identical reasoning. We conclude in these facts and circumstances that the PCIT has erred in law and on facts in holding the impugne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 'Complete Scrutiny' through notices issued under section 143(2) of the Income-tax Act, 1961 'Act'). The procedure for handling 'Limited Scrutiny' cases shall be as under: a. In 'Limited Scrutiny' cases, the reasons/issues shall be forthwith communicated to the assessee concerned. b. The Questionnaire under section 142(1) of the Act in 'Limited Scrutiny' cases shall remain confined only to the specific reasons/issues for which case has been picked up for scrutiny. Further, the scope of enquiry shall be restricted to the 'Limited Scrutiny' issues? c. These cases shall be completed expeditiously in a limited number of hearings, d. During the course of assessment proceedings in limited Scrutiny' cases, if it comes to the notice of the Assessing Officer that there is potential escapement of income exceeding Rs. five lakhs (for metro charges, the monetary limit shall be Rs. ten lakhs) requiring substantial verification on any other issue(s), then, the case may be taken up for 'Complete Scrutiny' with the approval of the Pr. CIT/CIT concerned. However, such an approval shall be accorded by the Pr. CIT/CIT i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Assessing Officer under normal scrutiny after obtaining necessary approval from the appropriate authority. 9.3 We are also not convinced with the argument of the learned DR that the issue raised by the AO is limited to the cash in hand available at the end of the financial year under consideration. It is because if we admit the contention of the learned DR then the same will be beyond the scope of limited scrutiny as there was no question raised in the notice issued for the limited scrutiny under section 143(2) of the Act for the cash balance. 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. 9.4 In holding so we draw support and guidance from the order of the Hon'ble Chandigarh Tribunal in case of Rajesh Jain vs. ITO reported in 162 taxman 212 where it was held as under: The jurisdiction of the Assessing Officer in such cases where the notices are issued for limited scrutiny is confined to the claims he has set out in the noti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 10. In the result, the appeal of the assessee is partly allowed. 5.4. In the matter of Shri Narendrakumar Rameshbhai Patel vs. DCIT in ITA No. 981/Ahd/2019 order dated 20.03.2020, the co-ordinate bench held as under: 4. Brief fact is that the assessee is an individual and claimed to have earned income under the head capital gain and other sources. The assessee during the year under consideration along with 4 other co-owners sold a piece of land admeasuring 4234 square meters in which he held his share for 30%. The assessee declared capital of Rs. 1,48,86,543/- after claiming deduction of Rs. 2,03,58,578/- under section 54 of the Act. 5. Subsequently, the return of the assessee was selected for limited scrutiny and the notice was issued under section 143(2) of the Act for examining the issues as detailed under: (i) Sale of property mismatch (ii) Mismatch in income/capital gain on sale of land or building (iii) Deduction claimed under the head capital gain (iv) Increase in capital During the proceedings the AO observed from the submission of the assessee and information received from the Revenue authority that the impugned land was purch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urpose scrutiny and the A.O. did not obtain the prior approval of the Pr. CIT for converting the same into complete scrutiny as per the existing instructions of the CBDT. Vide letter dated 24.08.2017, the appellant has requested to examine the mismatched figures of sales, capital gain income for the sold property and capital gain income shown in the return of income. It has been noticed that the case was selected for limited purpose for sale of property and consequent capital gain and deduction form capital gain. Therefore, the A.O. has examined these issues revolving around the charging of capital gain, claim deduction there from u/s. 54F of the Act and the A.O. did not even touch the issues beyond these issues such as income from house property, profit of the business etc. Thus, he has not travelled beyond the limited jurisdiction and not contravened the instructions of the Board issued from time to time and quoted by the appellant through paper book. The appellant's contention that the AO has treated the land transaction as an adventure in the nature of trade instead of allowing the capital gain without obtaining the approval of the competent authority and thus expanded the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on in respect of A.Y. 2001-02 wherein the scope of powers of the A.O. u/s. 143(2)(i) were examined in the given set of facts in that case. Since in the present case of the appellant, the facts are quite different and cannot be compared with the facts of the relied upon case. Similarly, the reliance placed on the case of Rajesh Jain v/s ITO [2007] 162 Taxman 212 (Chandigarh) is also not of any help to the appellant as the facts are clearly distinguishable. Considering the factual and legal aspects of the issue of limited scrutiny assessment, the ground no. 1 is rejected. 9. Being aggrieved by the order of the Ld. CIT(A) the assessee is in appeal before us. 10. The Ld. AR before us filed 3 paper books namely paper book-I, II and III running from pages 1 to 74, pages 1 to 94 and pages 1 to 130 and drew our attention on page 1 to 2 of the paper book-I where the notice for Limited Scrutiny issued u/s. 143(3) of the Act was placed. The Ld. AR further claimed that the Assessing Officer has converted the Limited Scrutiny to the normal/regular scrutiny u/s. 143 of the Act, on the basis of document received from Revenue authority without taking necessary approval from the appr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ings in 'limited Scrutiny' cases, if it comes to the notice of the Assessing Officer that there is potential escapement of income exceeding Rs. five lakhs (for metro charges, the monetary limit shall be Rs. ten lakhs) requiring substantial verification on any other issue(s), then, the case may be taken up for 'Complete Scrutiny' with the approval of the Pr. CIT/CIT concerned. However, such an approval shall be accorded by the Pr. CIT/CIT in writing after being satisfied about merits of the issue(s) necessitating 'Complete Scrutiny' in that particular case. Such cases shall be monitored by the Range Head concerned. XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXX 2. In order to ensure that maximum objectivity is maintained in converting a case falling under 'Limited Scrutiny' into a 'Complete Scrutiny' case, the matter has been further examined and in partial modification to Para 3(d) of the earlier order dated 29.12.2015, Board hereby lays down that while proposing to take up 'Complete Scrutiny' in a case which was originally earmarked for 'Limited Scrutiny', the Assessing Officer ('AO') shall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . As the issue involved is different, then the bench is not bound to follow the decision of the coordinate bench taken in the case of the co-owner. 16. The Ld. 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. 17. We are also not convinced with the argument of the learned 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. 18. In holding so we draw support and guidance from the order of the Hon'ble Chandigarh T ..... X X X X Extracts X X X X X X X X Extracts X X X X
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