2019 (1) TMI 582 - AT - Income Tax

Capital gain computation - adoption of correct cost of acquisition - this case being converted to the limited scrutiny case in the ITD/STT system - whether the Assessing Officer can over reach his jurisdiction in the case of limited scrutiny cases ? - Held that - Assessing Officer has to make correct assessment as it is trite to say that the Assessing Officer has to make correct assessment under section 143(3) and he is obliged to entertain the claim made during the proceedings and the tax cannot be levied on ignorance of law but income has to be computed in accordance with the provisions of law. The correct income has to be assessed and there is no bar for not entertaining the claim/issue raised by the assessee in limited scrutiny proceedings, if the same has been raised by the assessee, we clarify that according to the CBDT Instruction No. 7 of 2017 certainly there is bar on the jurisdiction of the Assessing Officer to go beyond the subjected issue(s) under limited scrutiny cases, however, he is not restrained to adjudicate the issue(s) raised by the assessee. Hence, in view of the above, the case is remanded to the file of the Assessing Officer to adjudicate the claim of the assessee - Appeal filed by the assessee is allowed for statistical purpose.

Summary

Issues Involved:
1. Rejection of cost of acquisition by Assessing Officer and Commissioner of Income-tax (Appeals).
2. Jurisdiction of Assessing Officer in limited scrutiny cases.
3. Interpretation of CBDT Circulars regarding limited scrutiny cases and assessment procedures.

Analysis:

Issue 1: Rejection of cost of acquisition
The assessee filed an appeal against the order rejecting the cost of acquisition at ?5,35,000 instead of ?1,15,000 for computing long-term capital gain on the sale of land. The Assessing Officer insisted on filing a revised return under section 139(5) of the Income-tax Act, citing a Supreme Court judgment. The Commissioner of Income-tax (Appeals) upheld this decision, stating that in limited scrutiny cases, issues beyond the scope of scrutiny cannot be entertained. The Tribunal noted the discrepancy and emphasized the need for correct assessment, directing the case to be remanded to the Assessing Officer for proper adjudication in accordance with the law.

Issue 2: Jurisdiction of Assessing Officer in limited scrutiny cases
The crux of the matter revolved around whether the Assessing Officer can exceed jurisdiction in limited scrutiny cases. The assessee argued that the officer should be able to entertain claims raised during proceedings to ensure a correct assessment. Referring to CBDT Circulars, the Tribunal clarified that while the officer's inquiry should be limited to specified issues, they are not prohibited from addressing claims raised by the assessee. The Tribunal emphasized the Assessing Officer's duty to make a correct assessment under section 143(3) and directed the case to be reconsidered with proper opportunities for the assessee to be heard.

Issue 3: Interpretation of CBDT Circulars
The Tribunal delved into the interpretation of CBDT Circulars, particularly Circular No. 7 of 2017, which restricts the scope of inquiry in limited scrutiny cases. While acknowledging the limitations on the Assessing Officer's jurisdiction, the Tribunal highlighted that the officer is not precluded from addressing issues raised by the assessee during proceedings. By emphasizing the need for a correct assessment and adherence to the law, the Tribunal clarified that the Assessing Officer must consider claims raised by the assessee within the limited scrutiny framework.

In conclusion, the Tribunal allowed the appeal for statistical purposes, remanding the case to the Assessing Officer for a fresh assessment in line with the law and providing the assessee with the opportunity to present their case effectively.