Delhi ITAT: Reopening Based Only On “Unverified” Cash Deposit Held Invalid In Rajiv Kumar Vs DCIT

Background and Context

The Delhi Bench of the Income Tax Appellate Tribunal in Rajiv Kumar Vs DCIT (ITAT Delhi) has clarified that a reassessment cannot be initiated solely on the basis of information regarding a cash deposit in a bank account where the Assessing Officer (AO) merely notes that the source “remains unverified”. The Tribunal held that such a remark points only to the need for verification, not to a legally sustainable “reason to believe” that income chargeable to tax has escaped assessment as required under Section 147 of the Income Tax Act 1961.

This decision, pronounced on 29 September 2026 in ITA No. 3538/Del/2026 for Assessment Year 2011-12, sets aside the reassessment initiated under Sections 147 and 148 and thereby renders all consequential additions infructuous.

Key Facts of the Case

Original Return and Information Received

  • The assessee originally filed a return of income declaring ₹10,78,290 for AY 2011-12.
  • Subsequently, the AO received AIR/CIB information indicating that the assessee had deposited ₹22,50,000 in cash into a savings bank account with Axis Bank, Sector-18, Noida.

On examining the internal records, the AO juxtaposed:

  • Declared income: ₹10,78,290
  • Cash deposits (as per AIR/CIB): ₹22,50,000

In the recorded reasons for reopening, the AO noted that the nature and source of the cash deposit of ₹22,50,000 “remains unverified” and, on that basis alone, concluded that this sum represented income that had escaped assessment.

Initiation of Reassessment

  • Based on these recorded reasons, the AO sought sanction under Section 151(1).
  • The approving authority accorded approval with the endorsement “Yes I am satisfied”.
  • Consequently, a notice under Section 148 dated 28.03.2018 was issued.

The assessee filed a fresh return in response to the Section 148 notice on 14.08.2018, declaring total income of ₹13,28,290, including agricultural income of ₹2,50,000. The assessee participated in the reassessment proceedings and complied with notices under Section 142(1) by furnishing details and documents.

Additions Made in the Reassessment Order

In the reassessment order dated 27.12.2018, passed under Section 147 r.w.s. 143(3), the AO made the following additions:

  1. ₹22,50,000 under Section 69A –

    • Cash deposits in Axis Bank treated as unexplained money.

  2. ₹23,00,000 under Section 68 –

    • Credit entry in an ICICI Bank account treated as unexplained cash credit.

  3. ₹14,48,599 under Section 68 –

    • Credit entries in an HDFC Bank account treated as unexplained cash credit.

  4. ₹36,17,955 under Section 45 –

    • Treated as Long Term Capital Gains on sale of units of ICICI Prudential Mutual Fund.

The assessee challenged these additions before the CIT(A)/NFAC, but the appeal was dismissed by order dated 25.02.2026, both on jurisdiction (validity of reopening) and on merits.

Thereafter, the assessee appealed to the ITAT Delhi, contesting:

  • The jurisdiction to reopen under Sections 147/148, and
  • The substantive additions made in the reassessment.

Grounds Raised Before the Tribunal

Among several grounds, the core jurisdictional challenges (Ground Nos. 8 and 9) were:

  • The reassessment was without valid “reason to believe” and thus without jurisdiction.
  • The recorded reasons reflected only AIR/CIB information of cash deposit and a comparison with returned income, with no further enquiry or material linking the deposit to taxable escaped income.
  • The remark that the cash deposit “remains unverified” itself demonstrated that the AO was at a verification stage, not at the stage of a concluded belief of escapement.
  • The approval under Section 151 was mechanical, signified merely by the words “Yes I am satisfied”, without any indication of independent application of mind.

The assessee also argued that:

  • Cash deposits, by themselves, could originate from non-taxable or already taxed sources (such as past savings, loans, agricultural receipts, or sale of capital assets), and hence mere deposit data cannot be equated with undisclosed income.
  • Reopening based only on suspicion or a desire to make fishing enquiries violates settled law laid down by the Supreme Court and various High Courts.

The assessee’s written submissions on jurisdiction relied on a well-developed body of law regarding: