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2019 (11) TMI 599 - ITAT LUCKNOWScope of Limited Scrutiny - Converting the Limited Scrutiny to a Complete Scrutiny - Chargeability of capital gain u/s 54EC - large deduction u/s 5B, 54C, 54D etc. and large cash deposits in savings bank account - HELD THAT:- As is evident from the assessment order, in the present case, we find that the same is beyond the intent purpose and scope of the jurisdiction of the Assessing Officer, as the assessment has been made, exceeding his jurisdiction, because the case has been selected for limited scrutiny only on two issues, i.e. (i) Large deduction under section 54B, 54C, 54D etc., and (ii) Large cash deposits in savings account of the assessee; whereas the additions have been made on the indexed cost of acquisition at ₹ 17,59,545/- and indexed cost of improvement at ₹ 20,90,319/-, which is covered under section 48 of the Act, and is outside the scope and purview of the reasons of limited scrutiny. Moreover, the approval of the PCIT is mandatorily required for converting the Limited Scrutiny to a Complete Scrutiny. So, the proper course for the AO before making these additional enquiries would have been to take approval from the administrative Commissioner to widen the scrutiny. This, however, was not done and therefore, the action of the AO is violative of the CBDT Instruction. Thus, the addition so made by the Assessing Officer, in gross violation of the CBDT Instruction, is liable to be deleted. Finding merit in the grievance sought to be raised by the assessee by way of additional Ground No. 7, the same is accepted, resultant to which ground Nos. 1 to 3 originally raised by the assessee become infructuous, requiring no specific adjudication. Deduction under section 54EC - objection of the Assessing Officer that investment in excess of ₹ 50 lakhs is not permitted in a year was introduced in the statute by the Finance (No. 2) Act, 2014 w.e.f. 1/4/2015 i.e. relevant to assessment year 2015-16 - The case under consideration relates to assessment year 2014- 15, hence the same is not applicable to the facts of the present case. Secondly, the objection that the investment in bulk is not required and piecemeal is not permitted also does not hold good, as the assesse purchased Bonds of ₹ 50 lakhs on a particular date and claimed deduction of ₹ 16.80 lakhs in assessment year 2013-14 and ₹ 33.20 lakhs in ay 2014-15. There is no bar in the act that the Bonds for two different assessment years cannot be purchased en masse and that they should be purchased separately. The restriction is only to the extent that the bonds in excess of ₹ 50 lakhs cannot be purchased in one single financial year. Since the assessee has not exceeded the limit of ₹ 50 lakhs, this ground taken by the Assessing Officer is not a valid ground. Objection of the Assessing Officer that the plots were sold after the investment made in specified Bonds is not correct, as all the sale deeds (APB:620 to 195) were duly filed before the Assessing Officer by the assessee along with a chart (APB:51) depicting the sale of plots for the year under consideration. The assessee has also filed the calculation of capital gains accrued prior to the date of investment in REC Capital Gain Bonds on 31/5/2013 (APB:61), which shows long term capital gain upto 31/5/2013 at ₹ 60,03,311/- thus, deduction of ₹ 33,20,000/- was rightly available to the assessee. Findings of the Ld. CIT (Appeals) too is vitiated, as he has held that the Assessing Officer has further given a finding that the plots were sold after 31/05/2013 and that this fact has not been denied by the assessee. The assessee had written a letter (APB:44-46), dated 10/8/2017, to the Ld. CIT (A), categorically stating therein that the plots to the extent of ₹ 77,83,000/- have been sold upto 22/04/2013, whereas the investment in REC Bond was made on 31/05/2013 and also furnished the chart depicting the sale of plots for the year under consideration along with copies of sale deeds. Therefore, in our opinion, the disallowance of claim made by the assessee under section 54EC is not justifiable. We, therefore, set aside the order of the ld. CIT(A) on this issue and accept ground Nos.4 & 5 raised by the assessee. Deduction under section 54F - we find that the assessee had claimed deduction of ₹ 28,54,707/- against the investment of ₹ 41,76,800/- made in construction of house. The Assessing Officer, however, allowed deduction under section 54F of the Act at ₹ 36,37,346/-, which has been confirmed by the ld. CIT(A). Since we have set aside the orders of the authorities below relating to the claim under section 54EC of the Act, we set aside the orders of the authorities below on the issue relating to allowability of claim under section 54F of the Act and restore the same to the file of the Assessing Officer for final computation of the capital gains. Appeal of the assessee is partly allowed.
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