Tribunal rules AO exceeded jurisdiction under limited scrutiny, Section 50C not applicable to sale of booking rights. Invalid additions.

The Tribunal allowed the appeal, ruling that the Assessing Officer exceeded jurisdiction under limited scrutiny. It held Section 50C inapplicable to the sale of booking rights for a flat under construction. The AO's additions were deemed invalid.

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Issues Involved:
1. Jurisdiction of the Assessing Officer (AO) under limited scrutiny.
2. Applicability of Section 50C of the Income Tax Act to the transaction of sale of booking rights/right to allotment of a flat.
3. Requirement of reference to the District Valuation Officer (DVO) under Section 50C(2) of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Jurisdiction of the Assessing Officer (AO) under limited scrutiny:
The case was selected for limited scrutiny based on two reasons: unsecured loans from non-filers of income tax returns and the sales consideration of property reported in the Income Tax Return (ITR) being less than that in Form 26QB. The AO did not make any addition on these issues but instead made an addition of Rs. 2,51,75,501/- under Section 50C and disallowed Rs. 8,36,298/- as the cost of acquisition of another land. The assessee contended that the AO exceeded his jurisdiction by not obtaining the required approval from the Principal Commissioner of Income Tax (Pr. CIT) to expand the scope of limited scrutiny. The Tribunal agreed with the assessee, noting that the AO had no valid basis to inquire into issues beyond the limited scrutiny without mandatory permission from the Pr. CIT. Therefore, the addition made by the AO was beyond his jurisdiction, and the assessee’s first ground of appeal was allowed.

2. Applicability of Section 50C of the Income Tax Act to the transaction of sale of booking rights/right to allotment of a flat:
The assessee argued that Section 50C, which applies to the sale of land or building, was not applicable as the transaction involved only the sale of booking rights to a flat under construction. The Tribunal found that the possession of the flat was not offered by the builder and the project was still under construction, as evidenced by a RERA order dated 6-10-2017. Therefore, the transaction was a transfer of booking rights, not the sale of land or building. Consequently, the Tribunal held that Section 50C was not applicable to the transaction, and the addition made by the AO under this section was invalid.

3. Requirement of reference to the District Valuation Officer (DVO) under Section 50C(2) of the Income Tax Act:
The assessee disputed the AO’s adoption of circle rates for the property, arguing that the AO should have referred the matter to the DVO under Section 50C(2). However, since the Tribunal held that Section 50C was not applicable to the transaction of selling booking rights, the issue of making a reference to the DVO became academic and was not adjudicated.

Conclusion:
The Tribunal allowed the appeal of the assessee, holding that the AO exceeded his jurisdiction under limited scrutiny and that Section 50C was not applicable to the sale of booking rights to a flat under construction. Consequently, the additions made by the AO were invalid.

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