SMT. CHANDRA KANTA CHOUDHARY,BHILWARA vs. ITO, WARD-3,, BHILWARA

IN THE INCOME TAX APPELLATE TRIBUNAL, JODHPUR BENCH, JODHPUR BEFORE SHRI SANDEEP GOSAIN, JUDICIAL MEMBER AND SHRI MANOJ KUMAR AGGARWAL ACCOUNTANT MEMBER ITA No. 110/JODH/2018 (Assessment Year 2014-15) Smt. Chandra Kanta Choudhary, Vs. I.T.O. 135, Main Sector, Ward-3, Bhilwara. Bhilwara. PAN No. ABXPC 9134 H Assessee by Shri Sunil Porwal (CA) Revenue by Shri A.S. Yadav, JCIT-DR Date of Hearing 03.11.2020 Date of Pronouncement 29/01/2021 O R D E R PER: BENCH This is the appeal filed by the assessee against the order of the ld. CIT(A), Ajmer dated 10/01/2018 for the AY. 2014-15, wherein the assessee has raised the following grounds of appeal: “1. That on the facts and in the circumstances of the case, the ld. CIT(A) ought to have quashed the order passed by ld AO as the order passed by ld Ao without jurisdiction and also contrary to the guideline issued by the Hon’ble CBDT. 2. That on the facts and in the circumstances of the case, the ld. CIT(A) erred in sustaining addition of Rs. 89,39,398/- in respect of long term capital gain particularly when same was never subject matter of limited scrutiny. 3. That on the facts and in the circumstances of the case, the ld. CIT(A) erred in confirming addition made by ld AO which he could not have made as the jurisdiction of the ld AO was limited.

2 ITA 110/Jodh/2018 Smt. Chandra Kanta Choudhary Vs ITO 4. That on the facts and in the circumstances of the case, the ld. CIT(A) erred in sustaining addition of Rs. 89,39,398/- as long term capital gain particularly when the land sold by the assessee was an agricultural land not capital assets U/s 2(14) of the Act. 5. That on the facts and in the circumstances of the case, the ld. CIT(A) erred in holding that lands in dispute were within municipal limit particularly when same were outside the purview of Municipal limit and exempt from tax. 6. That on the facts and in the circumstances of the case, the ld. CIT(A) erred in applying provisions of Section 50C. 7. That on the facts and in the circumstances of the case, the ld. CIT(A) erred in charging interest U/s 234A, 234B and 234C.” 2. The hearing of the appeal was concluded through video conference in view of the prevailing situation of Covid-19 Pandemic.

3 ITA 110/Jodh/2018 Smt. Chandra Kanta Choudhary Vs ITO as facts and circumstances, the A.O. made additions of Rs. 89,39,398/- with regard to long term capital gain. Being aggrieved by the order of the A.O., the assessee carried the matter before the ld. CIT(A), who after considering the submissions as well as facts and details of the matter, uphold the order of the A.O. Against which the assessee is in further appeal before the ITAT by taking above mentioned grounds of appeal.

“THAT THE FACTS AND IN THE CIRCUMSTANCE OF THE CASE THE LD CIT(A) OUGHT TO HAVE QUASHED THE ORDER PASSED BY LD A.O. AS THE ORDER PASSED BY LD A.O. WITHOUT JURISDICTION AND ALSO CONTRARY TO THE GUIDELINE ISSUED BY THE HON'BLE CBDT.

4 ITA 110/Jodh/2018 Smt. Chandra Kanta Choudhary Vs ITO (1) The Ld. CIT(A) vide appeal order no. 437/2016-17 dated 10.01.201 dismissed the assessee's appeal without considering the legal & other aspects as below:-

Before coming to the main issues of appeal it is requested to consider the first, legal aspect of the Ao's order; that whether the A.O. has within norms laid clown by CBDT has passed the order or has violated the norms this ground has never raised before A.O., ld. CIT(A) but is must to consider first before discussing the other issues.

(a) That case selected under "LIMITED SCRUTINY" for verification of cash deposited Rs. 67,30,000.00 in S.B A/c Indian Bank on various dates & vide CBDT notification no DGIT (Vig.)HQ/SI/2017-18/dated 30.11.2017 & further vide instruction no. 20/2015 dated 29/12/2015 vide clause 3(d) of said instruction it was made clear if it comes to the notice of the A.O. that there is potential escapement of income exceeding Rs. 5.00 Lakhs, requiring substantial verification of any other issue than the case may be taken for complete scrutiny with the approval of PCIT;

Further vide instruction no. 5/2016 dated 14.07.2016; the board has clearly settle the steps, procedure for converting "LIMITED SCRUTINY" to "COMPLETE SCRUTINY".

The A.O. is not empowered to decide the issue at his own. An appellant before the tribunal can raise any new or additional point for the first time in appeal before the Tribunal — CIT V/s Kerala

5 ITA 110/Jodh/2018 Smt. Chandra Kanta Choudhary Vs ITO State Co.-operative Marketing Federation Ltd. (1992) 193 ITR 624 (Ker.) Similarly as decided in case of CIT V/s Mayur Foundation (2005) 274 ITR 562 (Guj.) it has been held that "The proceedings before the tribunal are meant to assess the correct tax liability of an assessee. If that be so, it follows that assessment proceeding cannot be said to be complete, and is pending till the appeal is heard and disposed to by the Tribunal and the order of the Tribunal is given effect to by the assess ng authority for computing the correct tax liability of the assessee. In these circumstances, the Tribunal is well within its jurisdiction to entertain the new ground by which the assessee claims any benefit under section 11(2) and then to adjudicate the tax liability of the assessee."

(b) Under these circumstances; the order as passed by A.O. is against the provisions of law & requested to quash.”

6 ITA 110/Jodh/2018 Smt. Chandra Kanta Choudhary Vs ITO discernable from the notice issued by the A.O. For the ready reference, we reproduce the notice U/s 143(3) of the Act issued by the A.O. to the assessee as under:

7 ITA 110/Jodh/2018 Smt. Chandra Kanta Choudhary Vs ITO

8 ITA 110/Jodh/2018 Smt. Chandra Kanta Choudhary Vs ITO We also reproduce the notice U/s 142(1) of the Act issued by the A.O. to the assessee as under:

9 ITA 110/Jodh/2018 Smt. Chandra Kanta Choudhary Vs ITO

10 ITA 110/Jodh/2018 Smt. Chandra Kanta Choudhary Vs ITO The specific query raised in the said notice was with regard to “large cash deposits in savings bank account. As per the ITS details generated through system it was revealed that the assessee has deposited Rs. 67,30,000/- in her savings bank account situated at India Bank, Shastri Nagar, Bhilwara. Thus, the A.O. raised specific queries under limited scrutiny in respect of “large cash deposits in the savings bank account” and in this respect, information U/s 133(6) of the Act was also called from the Indian Bank which was received by the A.O. on 17/08/2016. There was no query raised about the long term capital gain earned by the assessee on the sale of immovable properties. Therefore, the said issue with regard to earning of long term capital gain on the sale of immovable property cannot be treated as part of the limited scrutiny under CASS when none of the queries raised in the scrutiny relating to earning of long term capital gain but all are with regard to “large cash deposits in the savings bank account. Thus, we find that the issue which was taken up by the A.O. while passing the order U/s 143(3) of the Act determining the long term capital gain was not within the scope of scrutiny assessment.

11 ITA 110/Jodh/2018 Smt. Chandra Kanta Choudhary Vs ITO authority. The said issue of determination of long term capital gain is beyond the jurisdiction of the A.O. under the limited scrutiny. Since this issue was not raised by the assessee before the lower authorities and it requires verification of the assessment record to ascertain whether the A.O. obtained approval of competent authority for conversion of the limited scrutiny to the comprehensive scrutiny. If the issue of determination of long term capital gain is taken up by the A.O. without expansion or conversion of the limited scrutiny to comprehensive scrutiny then such act of A.O. is beyond his jurisdiction and the order passed by the A.O. U/s 143(3) of the Act would be illegal and void ab initio. This Tribunal has taken a consistent view on this issue in a series of decisions relied upon by the ld. Counsel for the assessee. In the case of CBS International Projects P Ltd. Vs CIT order dated 28/02/2019, the Delhi Benches of the Tribunal has considered relevant instructions issued by the CBDT for limited scrutiny under CASS and held in para 13 to 16 as under:

“13. CBDT Instruction No. 20/2015 is as under:

“Scrutiny Assessments-some important issues and scope of scrutiny in cases selected through Computer Aided Scrutiny Selection (‘CASS’)- reg. The Central Board of Direct Taxes (‘CBDT’), vide Instruction No.7/2014 dated 26.09.2014 had clarified the extent of enquiry in certain category of cases specified therein, which are selected for scrutiny through CASS. Further clarifications have been sought regarding the

12 ITA 110/Jodh/2018 Smt. Chandra Kanta Choudhary Vs ITO scope and applicability of the aforesaid Instruction to cases being scrutinized. 2. In order to facilitate the conduct of scrutiny assessments and to bring further clarity on some of the issues emerging from the aforesaid Instruction, following clarifications are being made: i. Year of applicability: As stated in the Instruction No.7/2014, the said Instruction is applicable only in respect of the cases selected for scrutiny through CASS-2014. ii. Whether the said Instruction is applicable to all cases selected under CASS: The said Instruction is applicable where the case is selected for scrutiny under CASS only on the parameter(s) of AIR/CIB/26AS data. If a case has been selected under CASS for any other reason(s)/parameter(s) besides the AIR/CIB/26AS data, then the said Instruction would not apply. iii. Scope of Enquiry: Specific issue based enquiry is to be conducted only in those scrutiny cases which have been selected on the parameter(s) of AIR/CIB/26AS data. In such cases, the Assessing Officer, shall also confine the Questionnaire only to the specific issues pertaining to AIR/CIB/26AS data. Wider scrutiny in these cases can only be conducted as per the guidelines and procedures stated in Instruction No. 7/2014. iv. Reason for selection: In cases under scrutiny for verification of AIR/CIB/26AS data, the Assessing Officer has to intimate the reason for selection of case for scrutiny to the assessee concerned. 3. As far as the returns selected for scrutiny through CASS-2015 are concerned, two type of cases have been selected for scrutiny in the current Financial Year-- one is ‘Limited Scrutiny’ and other is ‘Complete Scrutiny’. The assessees concerned have duly been intimated about their cases falling either in ‘Limited Scrutiny’ or ‘Complete Scrutiny’ through notices issued under section 143(2) of the Income-tax Act, 1961 (‘Act’). The procedure for handling ‘Limited Scrutiny’ cases shall be as under: a. In ‘Limited Scrutiny’ cases, the reasons/issues shall be forthwith communicated to the assessee concerned. b. The Questionnaire under section 142 (1) of the Act in ‘Limited Scrutiny’ cases shall remain confined only to the specific reasons/issues for which case has been picked up for scrutiny.

13 ITA 110/Jodh/2018 Smt. Chandra Kanta Choudhary Vs ITO Further, the scope of enquiry shall be restricted to the ‘Limited Scrutiny’ issues. c. These cases shall be completed expeditiously in a limited number of hearings. d. During the course of assessment proceedings in ‘Limited Scrutiny’ cases, if it comes to the notice of the Assessing Officer that there is potential escapement of income exceeding Rs. five lakhs (for metro charges, the monetary limit shall be Rs. ten lakhs) requiring substantial verification on any other issue(s), then, the case may be taken up for ‘Complete Scrutiny’ with the approval of the Pr. CIT/CIT concerned. However, such an approval shall be accorded by the by the Pr. CIT/CIT in writing after being satisfied about merits of the issue(s) necessitating ‘Complete Scrutiny’ in that particular case. Such cases shall be monitored by the Range Head concerned. The procedure indicated at points (a), (b) and (c) above shall no longer remain binding in such cases. (For the present purpose, ‘Metro charges’ would mean Delhi, Mumbai, Chennai, Kolkata, Bengaluru, Hyderabad and Ahmedabad). 4. The Board further desires that in all cases under scrutiny, where the Assessing Officer proposes to make additions or disallowances, the assessee would be given a fair opportunity to explain his position on the proposed additions/disallowances in accordance with the principle of natural justice. In this regard, the Assessing Officer shall issue an appropriate show-cause notice duly indicating the reasons for the proposed additions/disallowances along with necessary evidences/reasons forming the basis of the same. Before passing the final order against the proposed additions/disallowances, due consideration shall be given to the submissions made by the assessee in response to the show-cause notice. 5. The contents of this Instruction should be immediately brought to the notice of all concerned for strict compliance. 6. Hindi version to follow. Sd/- (Ankita Pandey) Under Secretary to Government of India” 14. With Instruction 7 of 2014, the Board has made it specifically clear that the scope of enquiry should be limited to verification of the particular aspects only. It has also been directed that an approval is required from

14 ITA 110/Jodh/2018 Smt. Chandra Kanta Choudhary Vs ITO the PCIT/DIT, in writing, after being specific about the merits of the other issues for comprehensive scrutiny.

“Instruction No. 7/2014

Government of India Ministry of Finance Department of Revenue (CBDT) Room No. 143E, North-Block, New-Delhi Dated the 26th of September, 2014 To AU Pr. Chief-Commissioners of Income-tax/Chief-Commissioners of Income-tax A All Pr. Directors-General of Income-tax/Directors-General of Income- tax Sir/Madam, Subject: - Scope of enquiry in cases selected for scrutiny during the Financial Year 2014-2015 on basis of AIR/C1B /26AS mis-match regarding It has come to the notice of the Board that during the scrutiny assessment proceedings some of the AOs are routinely calling for information which is not relevant, for enquiry into the issues to be considered. This has been causing undue harassment to the taxpayers and has also drawn adverse criticism from several quarters. Further, feedback and analysis of such orders indicates that many times the core issues, which formed the basis of selection of the case for scrutiny were not examined properly. Such instances primarily occurred in cases selected for scrutiny under Computer Aided Scrutiny Selection ('CASS') for verification of specific information obtained from third party sources which apparently did not match with the details submitted by the tax aver in the return of- income. 2. Therefore, for proper administration of the Income-tax Act, 1961 ('Act'), Central Board of Direct Taxes, by virtue of its powers under sect on 119 of the Act, in supersession of earlier

15 ITA 110/Jodh/2018 Smt. Chandra Kanta Choudhary Vs ITO instructions/guidelines on this subject, hereby directs that the cases selected for scrutiny during the Financial Year 2014-20(15 under CASS, on the basis of either AIR data or CIB information or for non re-conciliation with 26AS data the scope of enquiry should be limited to verification of these are particular aspects only. Therefore, in such cases, an Assessing Officer hall confine the questionnaire and subsequent enquiry or verification only to these specific point(s) on the basis of which the particular return has been selected for scrutiny. 3. The reason(s) for selection of cases under CASS are displayed to the Assessing Officer in AST application and notice u/s 143(2), after genera ion from AST, is issued to the taxpayer with the remark 'Selected under Computer Aided Scrutiny Selection (CASS)". The functionality in AST is being modified suitably to flag the reasons for scrutiny selection in AIR/CIB/26AS cases. This functionality is expected to be operationalised by 15th October, 2014. Further, the Assessing Officer while issuing notice under section 142(1) of the Act which is enclosed with the first questionnaire would proceed to verify only the specific aspects requiring examination/verification. In such cases, all efforts would be mad to ensure that assessment proceedings are completed expeditiously in minimum possible number of hearings without unnecessarily dragging the case till the time-baring date. 4. In case, during the course of assessment proceedings it is found that there is potential escapement of income exceeding Rs. 10 lakhs (f non -metro charges, the monetary limit shall be Rs. 5 lakhs) on any other issue(s) apart from the AIR/CIB/26AS information based on 14 which the case was elected under CASS requiring substantial verification, the case may be taken u for comprehensive scrutiny with the approval of the Pr. CIT/DIT concerned. However, such an approval shall be accorded by the Pr. CIT/DIT in writing after being satisfied about merits of the issue(s) necessitating wider and detailed scrutiny in the case. Cases so taken up for detailed scrutiny shall be monitored by the it. CIT/Addl. CIT concerned. 5. The contents of this Instruction should be immediately brought to the notice of all concerned for strict compliance. 6. Hindi version to follow. (Rohit Garg) Deputy Secretary to the Government of India”

16 ITA 110/Jodh/2018 Smt. Chandra Kanta Choudhary Vs ITO 16. A perusal of the aforesaid instruction shows that the Assessing Officer can widen the scope of scrutiny even if it is selected for scrutiny assessment under CASS. However, the condition precedent for such action of the Assessing Officer is that he has to seek prior approval of the higher authorities. A perusal of the assessment order shows that the Assessing Officer has not mentioned as to when the permission from the PCIT was sought to make further enquiries in the case of the assessee. Considering the facts of the case in totality, in the light of the CBDT Instructions mentioned hereinabove, qua notice u/s 143(2) of the Act, we are of the considered opinion that the 15 assessment order so framed by the Assessing Officer is not in consonance with Instruction of the CBDT and, therefore deserves to be quashed. The order of the ld. CIT(A) is accordingly set aside.”

Thus, if the A.O. had taken long term capital gain without converting the limited scrutiny to comprehensive scrutiny by taking prior approval of the competent authority then the said order passed by the A.O. will be nullity and beyond his jurisdiction. The A.O. neither in his assessment order nor in the assessment proceedings sheets has mentioned about any proposal of converting the limited scrutiny to comprehensive scrutiny and consequential approval of the competent authority being Pr.CIT/DIT. Entire order of assessment passed by the A.O. do not even whisper or mentions with regard to seeking any permission or making proposal of the A.O. for expanding the limited scrutiny to the complete scrutiny from the competent authority. Further the revenue has also not produced anything

17 ITA 110/Jodh/2018 Smt. Chandra Kanta Choudhary Vs ITO to show that the A.O. has obtained necessary approval from the competent authority for conversion of the limited scrutiny to the comprehensive scrutiny. Since, admittedly, the present case was selected under CASS for limited scrutiny on account of “large cash deposits in the savings bank account”, therefore, in such circumstances, the general scope of enquiry under scrutiny assessment proceedings is to be restricted to the relevant para meters which formed the basis for selecting the case for scrutiny. However, in the present case, the limited scrutiny was converted into complete scrutiny without forming a reasonable view that there is potential escapement of income above the prescribed monetary limit without the approval of administrative Pr.CIT/CIT/Pr.DIT/DIT and nothing has been placed on record to demonstrate that any such approval sought from the competent authority, therefore, in our view, the issue which was taken up by the A.O. in the proceedings U/s 143(3) of the Act is illegal and void being beyond his jurisdiction to frame the limited scrutiny assessment. Accordingly, we set and quash the order passed by the A.O. U/s 143(3) of the Act.

18 ITA 110/Jodh/2018 Smt. Chandra Kanta Choudhary Vs ITO 10. In the result, this appeal of the assessee is allowed. Order pronounced under Rule 34(4) of the Income Tax (Appellate Tribunal) Rules, 1962 by placing the details on the notice board.

Sd/- Sd/- (MANOJ KUMAR AGGARWAL) (SANDEEP GOSAIN) ACCOUNTANT MEMBER JUDICIAL MEMBER Jodhpur Dated 29/01/2021 *Ranjan Copy to: 1. The Appellant 2. The Respondent 3. The CIT 4. The CIT (A) 5. The DR 6. Guard File

Assistant Registrar Jodhpur Bench