KRISHNA DEVI AGGARWAL,NEW DELHI V. ITO WARD - 47(1), NEW DELHI

ITA 4845/DEL/2019

AI Insights

The case involves Late Smt. Krishna Devi Aggarwal, represented by her legal heir Shri Puneet Aggarwal, who appealed against the order of the Commissioner of Income Tax (Appeals)-16, New Delhi. The appeal was directed against the assessment order for the Assessment Year 2014-15, which included additions to the assessee's income that were not part of the issues selected for limited scrutiny. The primary issue was the addition of various construction and labor charges which the Assessing Officer treated as bogus. The Tribunal noted that the Assessing Officer had expanded the scope of scrutiny beyond the specific issues of understatement of sale consideration, which was the reason for selecting the case for limited scrutiny. The Tribunal referenced a similar case involving Ms. Nisha Goel, where it was held that such an expansion without proper authorization was impermissible.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 31726 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-01-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: H
• Assessment Year: 2014-2015
• Other Referred Cases: Ms. Nisha Goel vs. ITA No.2768/Del/2023, PCIT Vs. Sukhdam Infrastructures LLP, CBS International Projects Pvt. Ltd. Vs. ACIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AMIT KATOCH
• Assessee Lawyers: SURESH GUPTA
• Keywords: Set aside; Capital asset; Capital Gains; Bogus
• Section: 144; 143(3); 142(1); 143(2); 143(1); 20

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH, ‘H’: NEW DELHI BEFORE MS. MADHUMITA ROY, JUDICIAL MEMBER AND SHRI BRAJESH KUMAR SINGH, ACCOUNTANT MEMBER ITA No.4845/Del/2019 [Assessment Year: 2014-15] Late Smt. Krishna Devi Aggarwal through legal heir Shri Puneet Aggarwal, 13, Sudharshan Apartment, I.P. Extension, Patparganj, Delhi-110098 Vs Income Tax Officer, Ward-47(1), New Delhi PAN-AAFPA2096M Assessee Revenue Assessee by Shri Suresh Gupta, CA Revenue by Shri Amit Katoch, Sr. DR Date of Hearing 26.11.2024 Date of Pronouncement 22.01.2025 ORDER PER BRAJESH KUMAR SINGH, AM, This appeal by the assessee is directed against the order of the Ld. Commissioner of Income Tax (Appeals)-16, New Delhi, dated 27.03.2019, pertaining to Assessment Year 2014-15. 2. At the outset, it was informed by the Ld. AR that the assessee had deceased on 11.06.2024 and her legal heir Shri Punit Aggarwal was brought on record and fresh Form 36 duly signed by Shri Punit Aggarwal, legal heir of the assessee was filed dated 15.11.2024. 3. The grounds of appeal raised by the assessee reads as under:- 2 ITA No.4845/Del/2019 “1. Because the action is being challenged on facts & law for making additions other than the issues for which assessee's case has been selected for limited scrutiny ie. sale consideration of the property in ITR is less than sale consideration of property reported in AIR. Therefore assessment order passed in violation of Board's instruction, which are binding upon the AO & hence assessment order passed is bad in law & void-ab-initio. 2. Because the action is being challenged on facts & law for making addition of Rs.43,41,770/- (out of Rs. 58,07,395/- claimed relating to construction of building) treating the construction bills as bogus bills. Alternatively & without prejudice to above, assessee disputes the quantum of addition. 3. Because the action is being challenged on facts & law for making addition of Rs.15,04,946/ - (out of Rs. 16,51,571/- claimed relating to Labour Charges for construction). Alternatively & without prejudice to above, assessee disputes the quantum of addition. 4. Because the action is being challenged on facts & law for making addition of Rs.72,135/ - (out of Rs.2,64,135/ - claimed relating to registration charges). Alternatively & without prejudice to above, assessee disputes the quantum of addition.” 4. Brief facts of the case:- The assessee is an individual and filed her return of Income declaring total income of Rs. 12,40,400/- on 17.11.2014. The same was processed u/s 143(1) of the Income Tax Act, 1961. The case was selected for limited scrutiny through CASS. The reason for selection of case under scrutiny was 'Sale consideration of the property in ITR is less than sale consideration of property as reported in AIR'. Statutory notices were issued and served upon the assessee. A perusal of the AIR data revealed that the assessee, Smt. Krishna Devi Agarwal jointly with Smt. Nisha Goel had sold property at Narela for a total consideration of Rs.2,99,00,000/-, with her 50% share being Rs 1,49,50,000/- which was reflected in the return of income. The assessee had shown Long-Term Capital Gains on this sale at Rs.8,57,658/- after claiming indexed cost of acquisition of Rs 1,40,62,342/-. The AO disallowed the assessee's claim of material for building, labour charges, registration expenses and indexed 3 ITA No.4845/Del/2019 cost of land of Rs.1,40,62,342/- in the absence of any documentary evidence to support the claim of expenses incurred. 5. Aggrieved by the above order, the assessee appealed before the Ld. CIT(A). Before the Ld. CIT(A), the assessee challenged the disallowance of Rs.1,40,65,342/- being the cost of capital assets sold claimed by the assessee on merits and also on legal ground that the AO was not justified in disallowing the said cost of the capital asset sold ignoring the reason of the limited scrutiny under which this case was selected for scrutiny. Further, the assessee also took the legal ground with regard to the scope of the limited scrutiny by way of additional ground. The Ld. CIT(A) allowed partial relief towards the cost of the capital assets sold during the year. However, she dismissed the legal ground filed by the assessee after considering Instruction No.20/2015 and Instruction No.15/2016 of the CBDT in respect of scope of scrutiny in cases selected through Computer Aided Scrutiny Selection (CASS) and the scope of enquiry in cases under ‘limited scrutiny’ by observing as under:- “From a perusal of the above, it is clear that:  Specific issue-based enquiry is to be conducted only in the scrutiny cases which have been selected on the parameters) of AIR/CIB/26AS data. In such cases, the Assessing Officer, shall also confine the Questionnaire only to the specific issues pertaining to AIR/CIB/26AS data.  The Questionnaire under section 142(1) of the Act in 'Limited Scrutiny' cases shall remain confined only to the specific reasons/issues for which case has been picked up for scrutiny. Further, the scope of enquiry shall be restricted to the 'Limited Scrutiny issues. Here, the specific issue was sale consideration but in the context of the taxability of capital gains in the hands of the appellant. So, any finding or examination of one side of the capital gains equation would perforce mean an examination of the other side of the equation. Sale consideration cannot be considered separate and distinct from cost of 4 ITA No.4845/Del/2019 acquisition of property, the sale consideration of which is under the lens of revenue authorities. If the meaning attributed by the appellant to the concept of limited scrutiny is accepted, it would result in an anomalous situation where only a technical breach/issue would be examined without application of mind as in the instant case where sale consideration would be considered as separate from cost of the property, which was definitely not the intention of the concept of 'Limited scrutiny' as instituted by the CBDT. I, therefore, I hold that the AO in his order has not exceeded his jurisdiction in any way and has confined his inquiry and addition to the issue of sale consideration of property and the concomitant issue of cost of property which has been sold. The order of the AO is within the ambit of the CBDT Instructions as extracted and discussed supra. The ground of the appellant thus, has no locus standi. I hold that there is no infirmity in the order of the AO on this account.” 6. Against the above order, the assessee is in appeal before the Tribunal. 7. At the outset, the ld. Counsel for the assessee submitted that similar disallowance of the cost of improvement/construction in respect of the same property (jointly owned by the assessee) was made in the case of Ms. Nisha Goel (PAN No.AIFPG0671A) for AY 2014-15. It was submitted that the case of Ms. Nisha Goel was also selected under limited scrutiny with the reason “sale consideration of property is less than the sale consideration of property reported in AIR”, like in the case of the present assessee. It was further submitted that in the case of Ms. Nisha Goel, the AO had disturbed the cost of construction/improvement from Rs.2,20,57,920/- to Rs.65,32,500/-, which was not covered by the reason for limited scrutiny selection as the reason in question was for under statement of sale consideration. The Ld. AR submitted that the Co-ordinate Bench in ITA No.2768/Del/2023, for AY 2014-15 in the case of Ms. Nisha Goel, allowed the claim of the assessee and quashed the assessment order dated 30.12.2016 u/s 143(3) of the Act for the AY 2014-15 on the ground that the AO had expanded the limited scrutiny by tinkering within the cost 5 ITA No.4845/Del/2019 of construction/improvement and totally recasting the capital gain shown by the assessee when there was nothing on record to suggest that AO obtained any permission to convert limited scrutiny in to complete scrutiny, which was clearly in violation of CBDT Instruction. 8. On the other hand, the ld. DR relied upon the orders of the authorities below. 9. We have considered the rival contentions and perused the material available on record. We have perused the order of the Co-ordinate Bench in the case of Ms. Nisha Goel (supra) and find that the facts are identical in the case of the present assessee. The relevant discussions are reproduced hereunder for ready reference:- 10. Heard rival submissions. There is considerable force in the submissions of the Ld. Counsel for the assessee. It is not in dispute that the case of the assessee was selected for limited scrutiny as is evident from the assessment order as well as the screenshot placed by the assessee at page 4 of the Paper Book. The screenshot of the IT portal suggest that the assessment was taken up for limited scrutiny and the reason for scrutiny selection is stated to be “sale consideration of the property in ITR is less than sale consideration of property reported in an AIR”. Perusal of the notices dated 19.01.2015 and 24.09.2015 issued u/s 143(2) of the Act which is placed at pages 3 & 56 of the Paper Book respectively suggest that the AO has not intimated the scope of scrutiny in both these notices. It is also observed from the notice issued u/s 142(1) of the Act dated 18.07.2016 the AO required the assessee to furnish the following details/documents: “1. Detailed note giving the nature of business activities, and its modus operandi carried out during the year. Whether nature of business activities are identical to the earlier year or there is any change. 2. Details of all bank accounts maintained by you either personal or for business purpose alongwith narration of Debit/Credit amounts of Rs.1,00,000/- and above. Documentary evidence of credits not forming part of total income may be submitted. Also file copy(s) of Saving Bank Account(s) with narration of all Debit Credit entries The details should include nature of account, account no.., name and address of bank. 6 ITA No.4845/Del/2019 3 Please furnish copy of computation of income and statement of affairs with all annexures/schedules for the AY 2013-14 & 2014-15.” 11. The above suggests that the AO issued notice u/s 142(1) of the Act for verifying various details and documents, bank statement, nature of business activities, details of bank whether used for business purposes or for personal purposes to explain the credits and debits in the bank account where amount succeeding Rs.1 lakh. All these goes to show that the AO exceeded the scope of enquiry what was mentioned in the limited scrutiny reasons. The AO also did not mention whether he has taken any approval to exceed the enquiries other than the one specified in limited scrutiny. Perusal of the assessment order shows that the AO recomputed the entire capital gains by reducing the cost of construction of improvement which is not covered under reason for limited scrutiny selection. As the limited scrutiny reason was only to verify the understatement of sale consideration. 12. In the case of PCIT Vs. Sukhdam Infrastructures LLP the Hon’ble Kolkata High Court in ITA No.164 of 2023 dated 14.08.2023 held as under: “The short question involved in this appeal is whether the Assessing Officer, which had initially issued notice under section 143(2) of the Act for Limited Scrutiny of the return filed by the assessee on three aspects, could have expanded the scope prior to obtaining approval for a Complete Scrutiny by the appropriate authority. It is an admitted fact that on 26 July, 2016 an order for Limited Scrutiny came to be passed. Subsequently, the Assessing Officer expanded the scope on 20th February, 2017 and commenced certain enquiries. The order granting approval for Complete Scrutiny was passed only on 14th December, 2017, that is, much after the enquiry was commenced by the Assessing Officer on 20 February, 2017. The correctness of the same was tested by the assessee by filing an appeal before the Commissioner of Income Tax (Appeals) (CIT(A)]. The CITIA) though noted the said issue did not render a specific finding but went into the merits of the matter and granted relief to the assessee to the extent indicated in the said order. The assessee as well as the revenue carried the matter on appeal to the Tribunal. The learned Tribunal examined the jurisdictional issue alone and noted that the Assessing Officer had issued notice under Section 143(2), dated 28th July, 2016, for a Limited Scrutiny covering four issues namely, interest expenses, income from real estate business, sale turnover mismatch and other expenses claimed in the profit and loss account. Subsequently, by notice dated 20 February, 2017, issues under Section 142(1) of the Act, the Assessing Officer called for information on secured and unsecured loan deposits and this was admittedly prior to the Limited Scrutiny being converted into a Complete Scrutiny by order dated 14 December, 2017. The learned Tribunal while holding that such action of the Assessing Officer was impermissible 7 ITA No.4845/Del/2019 referred to the Circular issued by the Circular issued by the CBDT in Instruction no.5 of 2016, dated 14.7.2016. In the said Circular/Instruction, it was clarified by the CBDT that in cases under Limited Scrutiny the scrutiny assessment proceedings would initially be confined only to issues under Limited Scrutiny and questionnaires, enquiry, investigation etc. would be restricted to such issues. Further, it has been stipulated that only upon conversion of case to a Complete Scrutiny after following the procedure as outlined in the CBDT Instruction, the Assessing Officer may examine the additional issues besides the issue(s) involved in Limited Scrutiny. The learned Tribunal found that the procedure adopted by the Assessing Officer was in complete derogation to the Instruction issued by the CBDT. The learned Tribunal also took note of a decision of the coordinate Bench of the Delhi Tribunal in the case of Dev Milk Foods Pvt. Ltd. vs. Addl. CIT in ITA No. 6767/Del/2019, dated 12.06.2020, for the assessment year 2015-16. In the said decision, the learned Tribunal had taken note of the CBDT Instruction No.5 of 2016 and held that the procedure adopted by the Assessing Officer was unsustainable. The learned Tribunal in the case on hand after taking note of the decision in Dev Milk Foods Pvt. Ltd. held that the CBDT has clarified that in Limited Scrutiny, the scrutiny assessment proceedings would initially be confined only to the issues and questionnaires, enquiry and investigation would be restricted to such issue under the Limited Scrutiny. Thus, the learned Tribunal dismissed the appeal filed by the assessee.” 13. In the case of CBS International Projects Pvt. Ltd. Vs. ACIT in ITA No.144/Del/2019 dated 28.02.2019 the coordinate bench of Delhi held as under: “A perusal of the aforesaid instruction shows that the Assessing Officer can widen the scope of scrutiny even if it is selected for scrutiny assessment under CASS. However, the condition precedent for such action of the Assessing Officer is that he has to seek prior approval of the higher authorities. A perusal of the assessment order shows that the Assessing Officer has not mentioned as to when the permission from the PCIT was sought to make further enquiries in the case of the assessee. Considering the facts of the case in totality, in the light of the CBDT Instructions mentioned hereinabove, qua notice u/s 143(2) of the Act, we are of the considered opinion that the assessment order so framed by the Assessing Officer is not in consonance with Instruction of the CBDT and, therefore deserves to be quashed. The order of the ld. CIT(A) is accordingly set aside.” 14. The AO has expanded the limited scrutiny by tinkering with cost of construction/improvement and total recasting the capital gains shown by the assessee. There is nothing on record to suggest that the AO obtained any permission to convert limited scrutiny into complete scrutiny. Therefore, the action of the AO is clearly in violation of the CBDT Instructions. Thus, the assessment order passed u/s 143(3) of 8 ITA No.4845/Del/2019 the Act dated 30.12.2016 for the AY 2014-15 is in violation of the CBDT Instructions and, therefore, the same is quashed. Additional ground raised by the assessee is allowed.” 10. In the case of our assessee also, the AO expanded the scope of limited scrutiny by tinkering with the cost of construction/improvement and totally recasting the capital gains shown by the assessee, whereas, the scope of limited scrutiny was “Sale consideration of the property in ITR is less than sale consideration of property as reported in AIR”. Further, nothing has been brough on record by the Department to show that the AO had obtained any permission to convert limited scrutiny into complete scrutiny. Therefore, following the above decision, we hold that the assessment order passed u/s 144 of the Act dated 26.12.2016 for AY 2014- 15 in the case of the assessee is in violation of the CBDT Instructions and therefore the same is quashed. Ground No.1 of the appeal raised by the assessee is allowed. 11. Since the assessment is quashed on legal ground the other grounds raised by the assessee on merits are not gone into as the same would result in only academic exercise at this stage. 12. In the result, appeal of the assessee is partly allowed. Order pronounced in the open court on 22nd December, 2024. Sd/- Sd/- [MADHUMITA ROY] [BRAJESH KUMAR SINGH] JUDICIAL MEMBER ACCOUNTANT MEMBER Dated 22.01.2025 f f f f{x~{tÜ {x~{tÜ {x~{tÜ {x~{tÜ Copy forwarded to: 1. Assessee 2. Respondent 9 ITA No.4845/Del/2019 3. PCIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi, "