The Ahmedabad Bench of Income Tax Appellate Tribunal (ITAT) has held that limited scrutiny can be changed to the regular assessment with the approval of the competent authority.
The assessee claimed to have earned income under the head capital gain and other sources. The assessee sold a piece of land in which he held his share for 7.5% only and declared a capital gain of Rs. 48,35,416/- after claiming a deduction of Rs. 36,11,780/- under section 54 of the Act. The return was selected for limited scrutiny and the notice was issued under section 143(2) of the Act for examining certain issues. The AO observed that the impugned land was purchased by the assessee along with the co-owner as agricultural land bearing 3 different survey numbers.
The appellant contended that the Assessing Officer has converted the “Limited Scrutiny” to the normal/regular scrutiny u/s 143(3) of the Act, on the basis of the document received from the Revenue authority without taking necessary approval from the appropriate authority.
It was observed that on perusal of the notice for “Limited Scrutiny” there was no mentioning/whisper about the examination of the fact whether the assessee was engaged in the business of property development and find that the Assessing Officer has exceeded his jurisdiction by denying the deduction claimed under section 54 of the Act on the reasoning that the assessee is engaged in the business of property development as the same was not mandated under the ‘’Limited Scrutiny” notice issued under section 143(2) of the Act.
The Tribunal Mr Suchitra Kamble, Judicial Member & Shri Waseem Ahmed, Accountant member has set aside the order by CIT-A and directed the AO to allow the exemption to the assessee under 54 of the Act. The assessee appeal was partly allowed.
Shri Anil Kshatriya appeared on behalf of the assessee and Shri V.K. Singhl appeared on behalf of the revenue.
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