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The dispute began when Kumar, a resident of Delhi, received an income tax notice soon after depositing Rs 8 lakh in his bank account
The Income Tax Appellate Tribunal ruled that the assessing officer and appellate commissioner exceeded their jurisdiction, invalidating the tax assessments and demands. (File Photo)
In a significant ruling, the Income Tax Appellate Tribunal (ITAT) in Delhi, quashed a 6-year-old tax case against a resident after finding that the assessing officer and the appellate commissioner had acted beyond their jurisdiction. The case revolves around a cash deposit of Rs 8.68 lakh that led to a prolonged legal battle between the taxpayer and the Income Tax Department.
The dispute began when Kumar, a resident of Delhi, received an income tax notice soon after depositing Rs 8 lakh in his bank account. The department treated the amount as income from his business and initiated proceedings under Section 44AD of the Income Tax Act, which deals with presumptive taxation for small businesses.
Kumar contended that the assessment was based purely on assumptions without any substantive evidence linking the deposit to business income. Despite his appeal before the Income Tax Commissioner being dismissed, Kumar approached the ITAT, where the matter finally came to rest in his favour on September 22, 2025.
The tribunal noted that the original enquiry, conducted under Section 143(2) of the Act, was limited solely to examining cash deposits in the bank account. However, the assessing officer went beyond the permitted scope, treating the entire deposit as undisclosed business profit without obtaining prior approval from the Commissioner of Income Tax (CIT).
Relying on a precedent set by the Calcutta High Court, the ITAT ruled that such an expansion of enquiry was not legally tenable. It observed that both the assessing officer and the appellate authority had exceeded their jurisdiction in classifying the bank deposits as taxable income.
Declaring the entire investigation invalid, the tribunal set aside all related assessments and tax demands. As a result, Kumar is no longer liable to pay any tax or penalty in connection with the disputed amount.
October 31, 2025, 17:09 IST
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