Case summary, Income Tax

Disallowances regarding issues not covered in limited scrutiny: Jurisdiction of an assessing officer

Case: SHRI SITA RAM SWAMI vs ITO, WARD-4(5)

Outcome: Assessee

Facts

  • The Assessee was an individual engaged in the business of wholesale trading and repairs of electronic items. He filed his return of income declaring total income of Rs. 2.05 lakhs which was selected for limited scrutiny under CASS to examine capital gain on sale of the property and thereafter, the assessment was completed under section 143(3) wherein the addition of Rs. 10 lakhs was made being an unexplained investment in the property under section 69 of the Act.
  • The Assessee challenged the jurisdiction of Assessing Officer as its case was initially selected for limited scrutiny and without seeking permission from the competent authority to convert limited scrutiny into complete scrutiny, the addition was made by the Assessing Officer in respect of another transaction towards unexplained investment in the purchase of property whereas no addition was made towards the transaction pertaining to the sale of immovable property for which the matter was initially selected for limited scrutiny.

Key Points

  • The Tribunal placed reliance on a consistent position taken by various benches of the Tribunal including Jaipur Benches, wherein it was concluded that where the Assessing Officer had taken up a fresh issue without converting limited scrutiny to complete scrutiny by taking prior approval of the competent authority, then the said order passed by the Assessing Officer would be nullified as the same was beyond his jurisdiction.
  • Therefore, in light of the above discussions and in the entirety of facts and circumstances of the case, the order passed by Assessing Officer under section 143(3) was set aside and quashed.

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