A retired school teacher from Mysore who deposited ₹1.33 crore in cash across bank accounts and had not filed an income tax return for assessment year 2015-16 has won his tax dispute before the Income Tax Appellate Tribunal (ITAT), Bangalore. According to reports from Mint, the tribunal did not rule that the cash deposits were automatically tax-free but quashed the reassessment proceedings after finding that the income tax department's Section 148 notice was issued beyond the permissible limitation period.
The case arose after information available under the Central Board of Direct Taxes' (CBDT) risk management system flagged several transactions in the taxpayer's bank accounts. As reported by Mint, these included a ₹13 lakh cash deposit in Bank of Baroda, a ₹60 lakh cash deposit in Canara Bank, another ₹60 lakh through two cash deposits of ₹50,000 or more, and ₹12,701 of bank interest. The transactions together amounted to ₹1,33,12,701. The taxpayer's stated sources of income included agriculture and interest from savings bank accounts.
The Assessing Officer first issued a notice under Section 148A(b) on 26 March 2022, asking the taxpayer to explain why reassessment proceedings should not be initiated. According to Mint, the taxpayer did not respond to the notice. On 26 April 2022, the Assessing Officer passed an order under Section 148A(d) and issued the consequential notice under Section 148 for AY 2015-16. The taxpayer subsequently filed an ITR, but it was treated as invalid because it was not e-verified. The assessment proceedings continued and the Assessing Officer eventually determined his total income at about ₹48.85 lakh.
The central issue before the tribunal was not whether the cash deposits themselves constituted undisclosed income, but whether the department had the legal jurisdiction to reopen AY 2015-16 in the first place. As reported by Mint, for AY 2015-16, the relevant limitation period under the earlier reassessment regime expired on 31 March 2022. The ITAT consequently held that the Section 148 notice issued on 26 April 2022 was beyond the permissible period, even after taking into account the permissible period connected with the Section 148A proceedings. The surviving period did not extend beyond 12 April 2022, making the notice invalid and quashing the reassessment order passed under Section 147.
The ruling is significant because it underscores an important distinction for taxpayers that a large cash deposit can trigger scrutiny, but the tax department must still exercise its reassessment powers within the statutory framework. According to Mint, compliance with the procedural requirements under Section 148A cannot revive a reassessment notice that is otherwise barred by limitation. The taxpayer had initially challenged the reassessment before the Commissioner of Income Tax (Appeals), but lost before successfully approaching the ITAT Bangalore.
