New Delhi: If you’re planning to deposit a large amount of cash into your bank account, you might want to think twice before doing so without proper documentation. In one recent case, a hefty cash deposit caught the attention of the Income Tax Department. This led the assessing officer to classify it as presumptive business income. Here’s what happened and why such deposits can raise red flags with tax authorities.
Simple Cash Deposit Turned Into a Legal Battle
It all started when a Delhi resident, Kumar, deposited Rs 8.68 lakh in his bank account — a move that soon drew the attention of the Income Tax Department. Shortly after, he received a notice, as the department classified the amount as business income and initiated proceedings under Section 44AD of the Income Tax Act — a provision meant for presumptive taxation of small businesses. What seemed like a routine deposit soon escalated into a lengthy legal dispute.
ITAT Rules in Favour of Taxpayer After 6-Year Battle
After losing his first appeal before the Commissioner of Income Tax (Appeals), Kumar decided to take his fight to the Income Tax Appellate Tribunal (ITAT) in Delhi. His persistence paid off on September 22, 2025, the tribunal ruled in his favour, as reported by News18.
The ITAT observed that the original enquiry under Section 143(2) of the Income Tax Act was meant only to verify the source of the cash deposits. However, the assessing officer exceeded his authority by treating the entire amount as undisclosed business income without seeking prior approval from the Commissioner of Income Tax (CIT).
Tribunal Cites Legal Precedent
Drawing on a ruling by the Calcutta High Court, the ITAT concluded that expanding the scope of enquiry beyond its original purpose was not legally justified. The tribunal noted that both the assessing officer and the appellate authority had gone beyond their jurisdiction by treating the bank deposits as taxable income. Declaring the entire investigation invalid, the ITAT set aside all related assessments and tax demands — freeing Kumar from any tax or penalty on the disputed amount.
Disclaimer : This story is auto aggregated by a computer programme and has not been created or edited by DOWNTHENEWS. Publisher: ZEE News
