ITAT Pune Upholds Reassessment Validity for Cash Deposits Exceeding ₹50 Lakh: Section 69A Addition Confirmed

In a significant ruling concerning the limitation period for reopening income tax assessments, the Income Tax Appellate Tribunal (ITAT), Pune Bench ‘B’, has reinforced the Department's authority to initiate reassessment proceedings beyond the standard three-year window when the escaped income surpasses the statutory threshold.

The case of Sandip Kailasappa Lakade Vs ITO serves as a critical reminder for assessees regarding the consequences of failing to explain the source of substantial cash deposits and the futility of challenging jurisdiction when the monetary quantum clearly justifies extended limitation periods.

Case Background and Factual Matrix

The dispute arose from the assessment proceedings for the Assessment Year (AY) 2016-17. The assessee, an individual, had initially filed a return of income using ITR-4S on December 20, 2016. However, this return was deemed invalid by the Central Processing Centre (CPC).

Subsequent to the filing, the Revenue Department identified specific financial intelligence indicating that the assessee had engaged in high-value transactions. Specifically, information in the possession of the Assessing Officer (AO) revealed that the assessee had deposited cash aggregating to Rs. 1,55,38,905/- in a bank account held with M/s. Shri Renuka Mata Multi State Urban Co-operative Credit Society Ltd during the financial year relevant to the assessment year in question.

Initiation of Reassessment Proceedings

Based on this substantial financial activity, the AO initiated proceedings to reopen the assessment. This action was taken in alignment with the jurisprudence established by the Hon’ble Supreme Court in the landmark case of Union of India vs. Ashish Agrawal (Civil Appeal No.3005/2022, order dated 04.05.2022).

The procedural timeline followed by the Revenue was as follows:

  1. Notice under Section 148A: The AO issued a show-cause notice to the assessee to explain the transactions.
  2. Order under Section 148A(d): Upon considering the case, the AO passed an order deciding that it was a fit case for reassessment.
  3. Notice under Section 148: A formal notice reopening the assessment was issued on July 27, 2022.

The Assessee’s Non-Compliance

In response to the notice under Section 148, the assessee filed a return of income on August 27, 2022, declaring a total income of merely Rs. 6,42,330/-. Following this, the AO attempted to scrutinize the return by issuing statutory notices under Section 143(2) and Section 142(1) of the Income Tax Act 1961.

The assessee displayed a consistent pattern of non-compliance:

  • No submissions were made in response to the statutory questionnaires.
  • A final show-cause notice regarding the completion of assessment on an ex-parte basis was ignored.

Consequently, the AO was compelled to finalize the assessment under Section 144 (Best Judgment Assessment). Due to the complete lack of evidence regarding the source of the funds, the entire cash deposit of Rs. 1,55,38,905/- was treated as unexplained money and added to the assessee's income under the provisions of Section 69A of the Act.

Proceedings Before the CIT(A)

Aggrieved by the high-pitched assessment, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals) / National Faceless Appeal Centre (NFAC).