ITAT Visakhapatnam Orders De Novo Examination of Cash and Time Deposit Additions in Reassessment for AY 2016-17

1. Background of the Appeal

This appeal by the assessee, Sayibbi Shaik Vs ITO (ITAT Visakhapatnam), arose from the order dated 25.11.2025 passed by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, for Assessment Year 2016-17. The assessment had been framed under Section 147 read with Section 143(3) and Section 144B of the Income Tax Act 1961, and the appellate order had been passed under Section 250.

The core dispute concerns:

  • Addition of ₹54,16,000 as unexplained cash deposits under Section 69A,
  • Addition of ₹10,00,000 as unexplained investment in time deposit under Section 69, and
  • Enhancement of assessed income by ₹16,50,000 by the CIT(A) under Section 251(2).

The assessee, a housewife who had not originally filed a return under Section 139 for AY 2016-17, disputed both the reassessment jurisdiction and the additions made on account of bank transactions.

2. Grounds Raised Before the Tribunal

The assessee’s grounds were broadly in the following categories (recast in simpler form, without changing the substance):

2.1 Validity of Reassessment and Appellate Order

  • The assessee contended that the reassessment order under Section 147 read with Section 143(3) and Section 144B, and the appellate order under Section 250, were contrary to facts and law.
  • It was argued that the conditions for assumption of jurisdiction under Section 147 and the procedure under Section 148A were not properly satisfied.

2.2 Enhancement of ₹16,50,000 by CIT(A) and Alleged Double Taxation

  • The assessee challenged the enhancement of ₹16,50,000 on the footing that:
    • The CIT(A) allegedly enhanced an “unknown credit” without placing the relevant document or entry on record or issuing a proper questionnaire.
    • The assessee claimed that this sum of ₹16,50,000 was already embedded in the cash deposit figure of ₹54,16,000 assessed by the AO, and that therefore the enhancement resulted in double counting.
    • The assessee invoked the ratio of GKN Drive Shaft (India) Ltd. vs ITO, 259 ITR 19 (SC) regarding the requirement to furnish reasons and materials.

2.3 Jurisdictional Objections Regarding JAO/FAO and Notices

  • It was argued that:
    • Notices under Section 148A and Section 148 were issued by a Jurisdictional Assessing Officer (JAO) who allegedly had no authority under the faceless regime, and that such power vested only in the Faceless Assessing Officer (FAO).
    • This was claimed to be in violation of Section 144B and Section 151A.

In support, the assessee referred to:

  • Smt. Prameela Pasumarthi Vs DCIT,(2025) 146 TLC 365; (2025) 180 taxmann.com 131 (AP High Court),
  • Kankanala Ravindra Reddy Vs ITO,(2023) 156 taxmann.com 178 (Telangana),
  • Kolakaluru Primary Agricultural Cooperative Credit Society Limited vs ITO,(2025) ITA No.456/Viz/2025 dated 05/12/2025.

2.4 Quantification of “Income Escaped Assessment” and Interpretation of Section 149

  • The assessee argued that:
    • The AO mechanically treated the entire cash deposits as “income escaped” without determining whether they represented taxable income or non-taxable receipts such as gifts, agricultural income, exempt income, or capital receipts.
    • There must be a specific quantification of “income chargeable to tax” that is alleged to have escaped assessment, particularly at the stage of Section 148A(d).

In this context, reliance was placed on:

  • Sanath Kumar Murali Vs. Income-tax Officer,[2023] 152 taxmann.com 231 (Karnataka); [2023] 294 Taxman 80 (Karnataka); [2023] 455 ITR 370 (Karnataka), including the extracts interpreting Section 149 and the expression “income chargeable to tax”.

2.5 Approval and Procedure Under Reassessment

  • It was alleged that:
    • Approvals from higher authorities were allegedly obtained in a mechanical manner.
    • Such approvals were not reproduced or discussed in the assessment order, making it difficult to assess whether there was proper application of mind.

The assessee also referred again to GKN Drive Shaft (India) Ltd. vs ITO, 259 ITR 19 (SC) for procedural safeguards.

2.6 Classification Under Section 69 vs Section 69A and Telescoping