The Income Tax Appellate Tribunal (ITAT), Ahmedabad bench comprising of Shri Mahavir Prasad, JM & Shri Waseem Ahmed, AM held that the AO can convert the Limited Scrutiny to Complete scrutiny on certain requirements only with the approval of PCIT in writing.
The appellant is a doctor running a hospital in Ahmedabad. The assessee had purchased an immovable property through a registered sale deed for a total sale consideration of Rs.1,42,27,200/-The jantri value as per the stamp duty authority has been worked out to Rs.2,59,34,694/- and the appellant paid the stamp duty of Rs.12,70,800/-. There was a difference of Rs.1,17,07,495/between the jantri value of Rs,2,59,34,694/- The Assessing Officer taxed this difference as income by the provisions of section 56(2)(vii)(b) of the I.T. Act.
The appellant contended that notice was issued by the AO u/s 142(1) of the Income Tax Act for limited scrutiny to the verification of 7 different issues listed in the said notice and the points relating to verification of “purchase & sale of immovable property” was not covered or mentioned in the said notice. The appellant made payment through Overdraft with Bank of Baroda and charged interest of Rs.2,20,524/- in the profit & loss account which was not to be allowed as business expenditure. The A.O. has allowed the interest of Rs.2,20,524/- as Revenue expenses
It was observed that as per the CBDT instruction the Assessing Officer in the case of “Limited Scrutiny” can only examine those issues for which the case has been selected or the issue mentioned therein. If the AO is of the view that there is a potential escapement of income, he may convert the “Limited Scrutiny” into “Complete Scrutiny” but such a view should be a reasonable view based on credible information or material available on record. Further observed that requiring substantial verification on any other issue(s), then ‘Complete Scrutiny’ can be done with the approval of the PCIT/CIT concerned in writing after being satisfied with the merits of the issue(s) necessitating ‘Complete Scrutiny’
The Tribunal observed that the PCIT has exceeded power for requiring the details of sales and purchase of the immovable property in limited scrutiny and allowed the appeal. Shri P. B. Parmar appeared on behalf of Appellant and Shri Mod. Usman & Shri Purshottam Kumar appeared on behalf of the respondent.
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