2024 (7) TMI 132 - AT - Income Tax

Assessment Officer exceeded jurisdiction adding property valuation differences in limited scrutiny without proper approval

Jyoti Chatuvedi Versus The Income Tax Officer Ward-4 (1), Raipur (C.G.)

Jyoti Chatuvedi Versus The Income Tax Officer Ward-4 (1), Raipur (C.G.) - TMI Issues Involved:1. Scope of Limited Scrutiny2. Addition under Section 56(2)(vii)(b)3. Jurisdiction of Assessing Officer (AO)4. Procedural lapses in communication5. Charging of interest under Section 234A and Section 234BIssue-wise Detailed Analysis:1. Scope of Limited Scrutiny:The primary issue revolves around whether the Assessing Officer (AO) exceeded the scope of limited scrutiny. The assessee contended that the AO made an addition on an issue not stipulated for limited scrutiny under Computer Aided Scrutiny Selection (CASS). The case was selected for limited scrutiny to verify 'large cash deposits in her bank account.' However, the AO made an addition under Section 56(2)(vii)(b) based on the difference between the Fair Market Value (FMV) of the property and the actual consideration. The Tribunal observed that the AO traversed beyond his jurisdiction by making an addition on an issue that did not form the basis for the limited scrutiny selection.2. Addition under Section 56(2)(vii)(b):The AO added Rs. 22,13,000 to the assessee's income under Section 56(2)(vii)(b) of the Income-tax Act, 1961, based on the difference between the FMV of the property (Rs. 66,13,000) and the actual consideration (Rs. 44,00,000). The Tribunal noted that this addition did not fall within the scope of the limited scrutiny, which was confined to verifying large cash deposits. The Tribunal cited several judicial pronouncements to support the view that the AO cannot exceed the scope of limited scrutiny without proper approval.3. Jurisdiction of Assessing Officer (AO):The Tribunal emphasized that the AO can only traverse beyond the scope of limited scrutiny after obtaining approval from the Principal Commissioner of Income Tax/Commissioner of Income Tax. In this case, no such approval was obtained. The Tribunal referred to the CBDT Instruction No. 20/2015, which mandates that scrutiny in cases selected through CASS should be confined to the specific reasons/issues for which the case was picked up. The Tribunal concluded that the AO's action of making an addition under Section 56(2)(vii)(b) was beyond his jurisdiction.4. Procedural lapses in communication:The assessee argued that the CIT(Appeals) sent notices to the wrong email ID, despite updating the ITBA portal. This led to a violation of natural justice as the appellant could not make submissions. The Tribunal noted that the CIT(Appeals) had issued multiple notices, but there was no response from the assessee. The Tribunal cited judicial pronouncements emphasizing that an appeal does not merely mean filing but effectively pursuing it. The Tribunal upheld the CIT(Appeals) decision due to the assessee's non-compliance and failure to respond to the notices.5. Charging of interest under Section 234A and Section 234B:The assessee contested the charging of interest under Sections 234A and 234B. However, the Tribunal did not delve into detailed discussions on this issue as it was consequential to the primary issues discussed above. The Tribunal disposed of this ground in the same terms as the primary issues.Conclusion:The Tribunal allowed the appeal of the assessee, setting aside the order of the CIT(Appeals) and vacating the addition of Rs. 22,13,000 made by the AO under Section 56(2)(vii)(b). The Tribunal emphasized that the AO had exceeded his jurisdiction by making an addition on an issue that did not form the basis for the limited scrutiny selection. The Tribunal reiterated the importance of adhering to the scope of limited scrutiny and obtaining proper approvals before expanding the scope. The procedural lapses in communication were also acknowledged, but the primary focus remained on the jurisdictional overreach by the AO.