- The Assessing Officer issued a notice under section 143(2) only for the investigation of mismatch of income with form 26AS.
- However, in the present case, the Assessing Officer converted the limited scrutiny into complete scrutiny and added the capital receipt as business receipt without obtaining any approval from the higher authority.
- The Central Board of Direct Taxes’ Circular clarifies that the Assessing Officer does not have the powers to make the entire assessment of income in limited scrutiny cases. The right course of action for the Assessing Officer was to take the approval from the competent authority for expanding the scope of Limited Scrutiny to the regular assessment. However, in the present case, The Assessing Officer failed to do so.
- Thus, the Assessing Officer had exceeded his jurisdiction by denying the deduction claimed under section 54 of the Act on the reasoning that the Assessee was engaged in the business of property development and the same was not mandated under the ‘’Limited Scrutiny” notice issued under section 143(2) of the Act.
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