Retired senior citizen teacher deposited Rs 1.33 crore cash, but filed no ITR; taxman added Rs 48.73 lakh, ITAT quashes reassessment, here’s why

The cash deposits prompted the department to examine whether the senior citizen had any income that had not been disclosed. (Image for representative purpose only)

A retired school teacher from Mysore, Karnataka, found himself facing income tax reassessment proceedings after cash deposits totalling Rs 1.33 crore in his bank accounts were flagged under the Central Board of Direct Taxes’ (CBDT) risk management strategy (RMS).The Income Tax Department also noted that the individuals had not filed an income tax return (ITR) for the relevant year. This meant the department did not have details of the income he had earned during the period under scrutiny.The department was aware that agriculture and interest from savings bank accounts were his stated primary sources of income. What it did not have, however, was information about the actual income he had earned from either source.

What the case is about

The cash deposits consequently prompted the department to examine whether the senior citizen had any income that had not been disclosed for assessment year (AY) 2015-16. It began the reassessment process by sending him a tax notice.The transactions identified through the CBDT’s RMS for AY 2015-16 were:

It’s important to note that the first notice was issued to the senior citizen under Section 148A(b) on March 26, 2022. He did not respond to it.The next step came on April 26, 2022, when the Assessing Officer (AO) passed the order under Section 148A(d), determining that the case was fit for reopening the assessment for AY 2015-16 under Section 148,according to an ET report.A Section 148 notice was issued the same day, requiring the individual to file his ITR for AY 2015-16 within 30 days from the date on which he received the notice.This time the senior citizen did file an ITR in response to the notice. However, the income tax return was not e-verified and was therefore treated as invalid.The AO subsequently issued notices under Section 142(1) and show-cause notices on. The individual on his part complied with these notices only to a limited extent.The reassessment proceedings ultimately resulted in an order which was passed by the AO under Section 147 read with Section 144 on February 29, 2024. The senior citizen’s total assessed income was determined at Rs 48.85 lakh.The tax filer then challenged the assessment before the CIT (A), but the appeal was dismissed following the hearing. He then took the matter to the ITAT Bangalore.

What ITAT Bangalore ruled and why the person won the case

The SMC Bench of the ITAT heard the senior citizen’s appeal on April 15, 2026, and subsequently passed its order in his favour on July 10, 2026.The issue that proved decisive was not the amount of cash deposited, but the timing of the reassessment notice.For AY 2015-16, March 31, 2022 was the last date for issuing the reassessment notice. However, the Section 148 notice in this case was issued on April 26, 2022, 26 days after the limitation period had ended.The ITAT Bangalore took note of this delay and held that the notice had been issued after the prescribed period had already expired.Chartered Accountant Suresh Surana told ET that the ITAT Bangalore decided the matter on the question of jurisdiction arising from the limitation period. Once the tribunal found that the Section 148 notice had been issued beyond the prescribed period and was therefore invalid, the reassessment proceedings based on that notice could not continue.The tribunal considered decisions of earlier coordinate benches while examining the issue. It also relied on the principles laid down by the Supreme Court in the Rajeev Bansal case and by the Karnataka High Court in Mohammed Yaseen. These decisions clarified that, for AY 2015-16, reassessment notices issued after the expiry of the earlier six-year limitation period could not be sustained.The ITAT therefore quashed the Section 148 notice and the reassessment order passed under Section 147, and allowed the assessee’s appeal.