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During the assessment, the AO estimated Kumar’s concern income nether Section 44AD — thing wholly extracurricular the scope of the archetypal notice. (AI image)
Making currency deposits of ample amounts successful your slope account? Be alert of a lawsuit wherever a currency deposit attracted the attraction of the Income Tax Department, and the assessing serviceman deemed it arsenic presumptive concern income.
When Mr. Kumar deposited Rs 8.68 lakh successful his slope account, helium didn’t expect a full-blown taxation battle. What began arsenic a elemental query implicit a currency deposit soon snowballed into an aggravated ineligible combat — 1 that went each the mode up to the Income Tax Appellate Tribunal (ITAT), Delhi. But Mr Kumar won the case, and here’s what the full substance was about:Initially, the income taxation section treated his lawsuit arsenic a “limited scrutiny” — a focused appraisal meant lone to verify the root of the currency deposit.
But during the process, the Assessing Officer (AO) decided to instrumentality things further. He added the magnitude to Kumar’s income arsenic “presumptive concern income” nether Section 44AD of the Income-tax Act, efficaciously treating it arsenic concern profits.Also Read | Income Tax section doubts Rs 10 lakh acquisition - member gets taxation announcement for currency received from sisters; however helium appealed & won the caseKumar appealed earlier the Commissioner of Income Tax (Appeals), oregon CIT(A), but lost. Refusing to springiness up, helium approached the ITAT Delhi — and connected September 22, 2025, helium yet won.
Cash deposits: Why ITAT ruled successful favour of the depositor who got taxation notice
According to an ET study quoting Dr. Suresh Surana, Chartered Accountant and laminitis of RSM India, the lawsuit (ITA No. 4778/Del/2025) progressive scrutiny for the Assessment Year 2017–18, constricted lone to examining currency deposits.But during the assessment, the AO estimated Kumar’s concern income nether Section 44AD — thing wholly extracurricular the scope of the archetypal notice. Under CBDT’s (Central Board of Direct Taxes) ain rules, immoderate enlargement of specified a constricted lawsuit into a afloat 1 requires anterior support from a Principal Commissioner.Surana explains, “The AO’s jurisdiction was confined strictly to verifying the root of currency deposits. Any enquiry beyond that needed ceremonial support to person the lawsuit into a implicit scrutiny.”After reviewing submissions from some sides, the ITAT Delhi recovered that the Assessing Officer and the CIT(A) had so gone beyond their powers. The Tribunal cited CBDT Instruction No. 5/2016 and consequent communications that explicitly pass officers not to widen the scope of constricted scrutiny cases.Also Read | Landlord vs tenant eviction case: Supreme Court rules successful favour of landlord contempt tenant’s lad not signing rent receipts - here’s what the ruling meansThe ITAT besides relied connected a cardinal Calcutta High Court determination — PCIT vs. Weilburger Coatings India (P) Ltd (2023) 155 Taxmann.com 580 (Cal) — which had already established that taxation officers cannot grow the scope of scrutiny without higher approval.Quoting from the ruling, the ITAT observed that “both the AO and the Commissioner (Appeals) exceeded their jurisdiction by making and sustaining additions unrelated to the constricted scrutiny issue.”The CBDT’s vigilance part had earlier, successful November 2017, issued a stern reminder to officers aft uncovering respective cases wherever constricted scrutiny was wrongly expanded. It adjacent suspended 1 serviceman for failing to grounds reasons oregon question support earlier widening a case.This discourse weighed heavy successful the Tribunal’s mind, the ET study said. The ITAT reiterated that these rules beryllium to guarantee transparency, fairness, and accountability successful the appraisal process.Also Read | TDS error: Father gets income taxation announcement aft selling ancestral onshore jointly with lad - however helium won the lawsuit successful Income Tax Appellate Tribunal
What the ITAT ruling means for taxpayers
Experts accidental the ITAT Delhi ruling volition service arsenic a benchmark. The ITAT’s ruling has wide implications for taxpayers facing “limited scrutiny” assessments — a mechanics designed to support investigations constrictive and efficient. It ensures that officers don’t overstep their jurisdiction oregon taxable tiny taxpayers to unnecessary harassment.In Kumar’s case, the Tribunal ruled that the taxation serviceman had exceeded his powers by turning a constricted scrutiny into a afloat appraisal without required approvals.This determination reinforces the boundaries of powerfulness wrong the income taxation system. Limited scrutiny cases are meant to trim payer load and guarantee faster resolutions.
