2018 (1) TMI 1069 - AT - Income Tax

AO exceeding his jurisdiction in the limited scrutiny - case was selected for scrutiny through CASS - addition of capital gain - Held that - AO has not exceeded its jurisdiction in limited scrutiny by verifying and consequently making an addition on account of capital gain. The appellant has pleaded that the jurisdiction of the AO is limited to examining the source of cash deposit. However, it s only in the process of examining the source of cash deposit that the AO verified the claim of the appellant and thereby ended up making the addition on account of capital gain. Thus, this ground of assessee s appeal is dismissed

Summary

Issues involved:
1. Challenge to the jurisdiction of the Assessing Officer for extending the area of scrutiny without higher authorities' approval.
2. Merits-based challenge on additions made by the Assessing Officer for long-term capital gain, expenses, and deduction under section 80C.

Analysis:
1. The appeal challenged the Assessing Officer's jurisdiction for extending scrutiny without higher authorities' approval. The case was selected for scrutiny due to a cash deposit of ?25,10,000 with the State Bank of India. The Assessing Officer reviewed the capital gain transaction and made an addition of ?30,76,748 based on this deposit. The Commissioner of Income-tax (Appeals) dismissed the legal ground raised by the assessee, stating that the Assessing Officer was within the right to verify the capital gain claim related to the cash deposit. The CIT(A) found no jurisdictional violation and upheld the additions made by the Assessing Officer, leading to the dismissal of Ground No. 1 & 2 of the appeal.

2. The grounds 3 to 7 challenged the additions made by the Assessing Officer for long-term capital gain, disallowed expenses, and deduction under section 80C. The CIT(A) did not adjudicate on these merits-based grounds. The Tribunal directed the CIT(A) to pass a speaking order on these grounds, restoring the issue for adjudication. The Tribunal allowed grounds 3 to 7 for statistical purposes, providing the assessee with a proper opportunity to be heard. Ground No. 8, being general in nature, did not require adjudication. Consequently, the appeal was partly allowed for statistical purposes, with the issue on merits remanded back to the CIT(A) for detailed consideration.