I have seen multiple events where an over-qualified practitioner was under-ranked as well as when an under-qualified practitioner was over-ranked.
It happens all the time.
Now, I believe that, as long as you're putting time into training at the dojo/studio/gym, and you're qualified, you should be promoted as high as you're skill set affords.
Rank in a dojo or system isn't just about prowess or skill, but about the dedication and earnest you display in the dojo and willingness to put it ahead of your personal ideas.
I understand this is a very silly notion these days, when you are the sole-representative for your physical abilities, but I prefer to return the ego back to the art, style, and school which affords me the skillset to be who I am, thereby bringing name and acclaim to the art as opposed to myself.
In this way, I believe in the short duration I have attended my dojo, I am legitamately skilled and trusted enough to be the ranks I am in the various arts I practice. Thus I prefer to relate my skill in terms of the arts I practice, as opposed to my own (or lack there of) physical ability.
Those who collect ranks and pick and choose pieces of arts are negligent to the breadth and width of, not only the classical fighting arts, but of the social, mental, and, in a way, spiritual benefits thereby derrived.
All of this is from my brief experience and in my own humble opinion.
In 5 short years of training traditional Japanese and Okinawan martial arts
2nd Dan, Iaido
1st Dan, Karatedo
4th Kyu, Jujutsu