2019 (12) TMI 495 - AT - Income Tax

Rectification of mistake u/s 154 - scope of limited scrutiny under CASS - determining the fair market value of the property as on 01/04/1981 - HELD THAT - There was no query raised about the fair market value of the property in question as on 01/04/1981, therefore, the said issue cannot be treated as part of the limited scrutiny under CASS when none of the queries raised under the scrutiny relating to the computation of the capital gain but all are regarding deduction claimed under Chapter IV and particularly U/s 54 of the Act and the variation of the sale consideration shown in the ITR and TDS return as well as the deposits made in the bank account. Thus, we find that the issue which was taken up by the A.O. while passing the order U/s 154 of the Act determining the fair market value of the property as on 01/04/1981 was not within the scope of scrutiny assessment. If the A.O. has taken up the issue of determining fair market value of the property in question as on 01/4/1981 without converting the limited scrutiny to comprehensive scrutiny by taking the prior approval of the competent authority then the said order passed by the A.O. will be nullity as beyond his jurisdiction. AO neither in the assessment order nor in the assessment proceedings sheet has mentioned about any proposal of converting the limited scrutiny to comprehensive scrutiny and consequential approval of the Competent Authority being Principal CIT/DIT. Assessee has produced the certified copy of the assessment proceedings sheet which does not contain any such proposal of the AO for expanding the limited scrutiny to complete scrutiny. Further, the revenue has also not produced anything to show that the AO has obtained the necessary approval from the Competent Authority for conversion of the limited scrutiny to comprehensive scrutiny. Accordingly, the issue which is taken up by the AO in the proceedings under section 154 is illegal and void being beyond his jurisdiction to frame the limited scrutiny assessment. Accordingly, we set aside and quash the order passed by the AO under section 154 of the Act. Since we have quashed the order passed by the AO under section 154 of the Act for want of his jurisdiction on this issue, therefore, we do not propose to take up the other grounds raised by the assessee in this appeal.

Issues Involved:

1. Jurisdiction of the Assessing Officer (A.O.) in passing the order under Section 154 of the Income Tax Act, 1961.
2. Validity of the notice issued under Section 154/155 based on the Departmental Valuation Officer's (DVO) report.
3. Calculation of long-term capital gain.
4. Adoption of fair market value of the property as of 01/04/1981.
5. Legality of referring the matter to the DVO under Section 55A beyond the scope of Limited Scrutiny Assessment.

Detailed Analysis:

1. Jurisdiction of the A.O. in Passing the Order Under Section 154:

The assessee argued that the A.O. erred in passing the order under Section 154 after the assessment order under Section 143(3), claiming it was without jurisdiction and thus null and void. The Tribunal noted that the issue of determining the fair market value of the property as of 01/04/1981 was beyond the scope of limited scrutiny under CASS (Computer Aided Scrutiny Selection). The limited scrutiny was confined to specific issues such as deductions under Chapter IV and discrepancies in sale consideration and cash deposits. Therefore, the A.O.'s action to determine the fair market value was beyond his jurisdiction without converting the limited scrutiny to comprehensive scrutiny with prior approval from the competent authority.

2. Validity of Notice Issued Under Section 154/155 Based on DVO Report:

The assessee contended that the notice issued under Section 154/155 based on the DVO report received after the assessment order was invalid. The Tribunal found that the issue of fair market value was not part of the limited scrutiny scope. Hence, the notice based on the DVO report was beyond the A.O.'s jurisdiction under limited scrutiny, making the order under Section 154 void.

3. Calculation of Long-Term Capital Gain:

The assessee disputed the calculation of long-term capital gain at ?75,25,770/- as against ?14,71,577/- claimed by the assessee. Since the Tribunal quashed the order under Section 154, it did not delve into the merits of the capital gain calculation.

4. Adoption of Fair Market Value of the Property as of 01/04/1981:

The assessee argued against the adoption of the fair market value at ?1,57,000/- instead of ?8,01,749/-. The Tribunal reiterated that the determination of the fair market value was beyond the scope of limited scrutiny and thus invalid without proper jurisdiction.

5. Legality of Referring the Matter to the DVO Under Section 55A:

The assessee raised an additional ground stating that referring the matter to the DVO under Section 55A was beyond the scope of limited scrutiny. The Tribunal admitted this ground, finding it purely legal and going to the root of the matter. The Tribunal agreed that without converting the limited scrutiny to comprehensive scrutiny, the A.O.'s action was beyond jurisdiction, making the order under Section 154 illegal and void.

Conclusion:

The Tribunal quashed the order passed by the A.O. under Section 154 for lack of jurisdiction, as the issue of determining the fair market value of the property was beyond the scope of limited scrutiny. Consequently, the appeal of the assessee was allowed. The Tribunal did not address other grounds raised by the assessee, as the primary issue of jurisdiction rendered the order void.

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