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Facts
The assessee's case was selected for limited scrutiny based on large cash deposits and property transfers. However, the Assessing Officer (AO) made additions regarding the purchase of an immovable property, which was outside the scope of the limited scrutiny. The assessee argued that the AO exceeded his jurisdiction by investigating the purchase of property when the scrutiny was limited to the transfer (sale) of property by the assessee.
Held
The Tribunal held that the AO's addition regarding the purchase of the immovable property was beyond the scope of the limited scrutiny. The limited scrutiny was focused on the sale of properties by the assessee, not the purchase. Therefore, the AO's action violated CBDT Circular No. 20/2015.
Key Issues
Whether the Assessing Officer exceeded the scope of limited scrutiny by making additions related to the purchase of property when the scrutiny was limited to the transfer of property by the assessee.
Sections Cited
56(2)(vii)(b), 143(3), 271(1)(c)
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Income Tax Appellate Tribunal, RAIPUR BENCH “SMC”, RAIPUR
Before: SHRI PARTHA SARATHI CHAUDHURY
आदेश / ORDER
PER PARTHA SARATHI CHAUDHURY, JM
The present appeal preferred by the assessee emanates from the order of the Ld.CIT(Appeals)/NFAC, dated 31.12.2025 for the assessment year 2016-17 as per the grounds of appeal on record.
2. In this case, the case of the assessee was selected for limited scrutiny through CASS for the following reasons: (i) Large cash deposit in Bank account; (ii) The assessee has also transferred one or more properties.
1. However, as per Para 3, the A.O has made addition with regard to the purchase of the property by the assessee which did not form part of the limited scrutiny subject. The relevant Para 3 of the assessment order is extracted as follows: “3.As per the reply filed by the assessee along with other co- purchases namely Shri Hemant Bhatia, Smt. Kanchan Chhablani and Shri Manohar lal Bhaita have purchased immovable property of Rs.10156100/- from Smt. Mangin Bai Sahu and other three co-sellers land of 707 sq. meter situated at kamal Vihar of Raipur Development authority on 03.08.2015. The total investment including the stamp duty and registration is Rs.10872322. As per the reply the assessee share in the ownership and payments assessee is 25% As such investment made by the assessee is Rs.2718080/- . In the reply the details of amount paid to seller given which are as under- i) Dt. 31.07.2015 Rs.7300000/- Finance by ICICI bank
3 Renu Lata Bhatia Vs. ITO, Ward-3(1), Raipur Dt. 30.05.2015 Rs.1,00,000/- paid by Renulata Bhatia from ICICI OD Account iii) Dt. 31.07.2015 Rs.26,54,539/- Paid by Hemant Bhatia
(iv) Dt. 31.07.2015 Rs.1,01,561/- TDS Total Rs.1,01,56,100/- In the reply sources of payments of Rs.6,34,800/- for stamp duty and Rs.81,422/- as registration fee are not given. In the reply the assessee has not filed the evidence. Regarding the loan and finance of Rs.73,00,000/- from ICICI Bank. The assessee has not yet filed the copy of her bank statements for her bank accounts. The assessee has not filed any supporting documents relating to payment of Rs. 26,54,539/- by Shri Hemant Bhatia so as to prove his financial capability and genuineness of the transactions. The assessee has not furnished copy of her capital account statement of affairs for A.Y. 2016-17 and earlier year to prove her financial capability and also not filed bank statement of her bank 'account in spite of so many opportunities afforded to the assesse by this office of notice issued on various dates. Therefore I have no alternate but to treat the amount of Rs. 27,18,080/- as her share has been invested by her, in purchase of immovable property, from her undisclosed income of A.Y. 2016-17. Therefore the undisclosed investment of Rs.27,18,080/- is treated as her income for A.Y. 2016-17 and added to her total income and charged to tax. Penalty proceeding u/s 271(1)(c) is initiated on this issued as the assessee has concealed the particulars of her income.”
In the present case, the scope of limited scrutiny is crystal clear that the A.O shall enquire regarding viz. (i) large cash deposits in Bank account; and (ii) the assessee has also transferred one or more properties. In other words, the properties which were transferred by the assessee.
4 Renu Lata Bhatia Vs. ITO, Ward-3(1), Raipur The inquiry is restricted to transfer of property by the assessee which means sale of properties while additions on the other hand has been made regarding purchase of immovable property or acquiring of immovable property which was, therefore, outside the purview of limited scrutiny and violative of the CBDT Circular No.20/2015, dated 29.12.2015. That in exactly similar facts and circumstances, the ITAT, Division Bench, Raipur in the case of Rahul Bajpai Vs. DCIT (2025) 171 taxmann.com 500 (Raipur-Trib) held and observed as follows: “17. Ostensibly, it is a matter of fact discernible on a perusal of the notice issued by the A.O u/s. 143(2) of the Act, dated 19.09.2016, Page No.116 of APB that the case of the assessee was selected for “limited scrutiny” for examination of the following issues: (i) sale of property mismatch; (ii) mismatch in income/Capital Gain on sale of land or building; (iii) deduction claimed under the head Capital Gains; and (iv) tax credit mismatch.
Admittedly, the examination of the difference/variance in the purchase consideration of the property i.e. land situated at Mouja : Khapargaunge, Bilaspur (admeasuring 206.143 Aq. Mtrs.) that was purchased by the assessee for a consideration of Rs.5 lacs as against the FMV/stamp duty value of Rs.55,65,900/- in the backdrop of Section 56(2)(vii)(b) of the Act was not an issue for which the case of the assessee was selected for “limited scrutiny” u/s.143(2) of the Act.
Apropos, the addition of Rs.50,65,900/- made by the A.O u/s. 56(2)(vii)(b) of the Act with respect to difference in the Fair Market Value (FMV) i.e. stamp duty/segment rate of the aforementioned property viz. land situated at Mouja : Khapargaunge, Bilaspur (admeasuring 206.143 Sq. mtrs.) as 5 Renu Lata Bhatia Vs. ITO, Ward-3(1), Raipur
against the actual purchase consideration paid by the assessee vide registered deed, dated 29.04.2014, we find substance in the Ld. AR’s claim that the A.O had traversed beyond the scope of his jurisdiction and made the said addition. As the case of the assessee was selected for limited scrutiny, therefore, the A.O. could not have ventured into an issue that did not form the basis for taking up the case for such scrutiny assessment. We are of the view that the A.O without getting the said limited scrutiny converted into complete scrutiny as per the CBDT Circular No.20/2015 dated 29.12.2015, had traversed beyond his jurisdiction and made the impugned addition of Rs.50,65,900/- (supra). Our aforesaid view is fortified by the order of the ITAT, Raipur, in the case of Aryadeep Complex (P) Ltd. Vs. Pr. CIT, (2022) 219 TTJ 735 (Raipur), wherein the Tribunal, based on its exhaustive deliberations and after considering the CBDT Instruction No.20 of 2015 dated 29.12.2015 and drawing support from the order of the ITAT, Mumbai in the case of Su-Raj Diamond Dealers (P) Ltd. Vs. Pr. CIT (2020) 203 TTJ ( Mumbai) 137, had observed, that since the assessee’s case was selected for “limited scrutiny” under CASS with respect to certain specific issues, therefore, the jurisdiction of the A.O in the absence of getting the said case converted into complete scrutiny as per the CBDT Instruction No.20 of 2015 dated 29.12.2015, was confined only to the specific reason/issue based on which the case of the assessee was picked up for such scrutiny. Accordingly, on the basis of our aforesaid observations, we are of the considered view that the addition of Rs.50,65,900/- (supra) made by the A.O u/s.56(2)(vii)(b) is liable to be quashed for want of valid assumption of jurisdiction by the A.O while framing the “limited scrutiny” assessment vide his order u/s.143(3) of the Act, dated 15.12.2017. Thus, the addition of Rs.50,65,900/- made by the A.O. is vacated for want of valid assumption of jurisdiction.”
That on examination of the facts in the present case before me and upon the basis of the reasoning as enshrined in the aforesaid judicial pronouncement, placing reliance on the said CBDT Circular (supra), it is held that the case of the assessee was selected for limited scrutiny, wherein one of the parameters was to enquire regarding transfer of 6 Renu Lata Bhatia Vs. ITO, Ward-3(1), Raipur A.O was to enquire regarding sale transactions, if any, by the assessee and when the word ‘transfer of property by the assessee’ is used in the limited scrutiny, it cannot therefore, include purchase of property or acquiring of property by the assessee, hence making addition in regard to purchase of property, is violative of CBDT Circular (supra). The said limited scrutiny cannot be converted to complete scrutiny without the permission of the competent authority and it was not open for the A.O to venture into the purchase transactions of property when specifically limited scrutiny pertained to the transfer of property by the assessee. The Ld. Sr. DR could not place on record any evidence to show that the ‘limited’ was converted to ‘complete’ scrutiny through proper authorization from competent authority before completion of assessment by the A.O. Further, the word ‘transfer of property’ does not include ‘acquiring’ of property or ‘purchasing’ of property and only can be confined to ‘sale’ of property. In view thereof, I set-aside the order of the Ld.CIT(Appeals)/NFAC and direct the A.O to delete the additions from the hands of the assessee while providing appeal effect of this order.
In the result, appeal of the assessee is allowed as per afore-stated terms.
Order pronounced in open court on 6th day of April, 2026.