Sheela Devi Vs ITO (ITAT Agra)
Cash Deposits Above ₹50 Lakh Do Not Automatically Justify Reopening Beyond Three Years Under Section 149(1)(b)
Background of the Case
The assessee challenged reassessment proceedings initiated on the basis of information concerning substantial cash deposits in her savings bank account.
The initial information referred to cash deposits of ₹85,25,000 in ICICI Bank. However, during assessment proceedings, the Assessing Officer recorded that the cash deposited during the relevant year amounted to ₹59,60,000.
An order under Section 148A(d) and a notice under Section 148 were issued on 30 March 2022 for Assessment Year 2015-16.
In response, the assessee filed her return on 27 April 2022, declaring total income of ₹1,59,530.
Since reopening occurred beyond three years from the end of the assessment year, the dispute centred on satisfaction of the ₹50 lakh escaped-income threshold under Section 149(1)(b).
Agricultural Land Sale Explained the Deposits
To explain the source of the deposits, the assessee furnished documents including sale deeds of ancestral agricultural land, a purchase deed, bank statements, computation of income and certified agricultural revenue records.
The Assessing Officer examined the property transactions and considered that the agricultural land had been converted into commercial or residential plots before sale.
He therefore rejected the assessee’s claim under Section 54B, taking the view that the transaction did not qualify for the agricultural land exemption claimed.
The resulting disallowance was ₹30,10,588, which was added to the returned income.
Thus, the assessment ultimately concerned denial of the capital gains exemption rather than an addition treating the entire cash deposits as unexplained money.
CIT(A) Treats Deposits as Sufficient for the Threshold
Before the CIT(A), the assessee challenged the validity of reopening on the ground that the income allegedly escaping assessment was below ₹50 lakh.
The CIT(A) rejected that objection. It considered that the information concerning deposits of ₹85,25,500 or ₹59,60,000 revealed escaped income exceeding the statutory threshold.
It also noted that the Assessing Officer had issued the Section 148A(b) show-cause notice, considered the reply, passed an order under Section 148A(d) and obtained approval under Section 151.
The reassessment was accordingly upheld.
Additional Legal Grounds Admitted
Before the Tribunal, the assessee raised additional grounds challenging limitation and jurisdiction.
The Tribunal admitted them because they were legal grounds capable of determination from facts already available on record, relying on the Supreme Court’s decision in National Thermal Power Corporation Ltd. v. CIT, 229 ITR 383.
Since these objections went to the root of the reassessment, the Tribunal examined them before considering the Section 54B dispute.
No Finding That Escaped Income Reached ₹50 Lakh
The assessee argued that the Section 148A(d) order contained no finding quantifying escaped income at ₹50 lakh or more, after considering her explanation and supporting documents.
She also challenged the approval, which stated that the income or gain likely to have escaped assessment appeared to exceed ₹50 lakh, without an underlying finding by the Assessing Officer establishing that position.
The Department maintained that cash deposits of ₹59,60,000 represented escaped income exceeding the threshold.
The Tribunal rejected that approach.
On examining the Section 148A(d) order, it found that the Assessing Officer had not recorded that the material in his possession suggested escaped income of ₹50 lakh or an amount likely to exceed ₹50 lakh.
That finding was a precondition for invoking the extended limitation period in the present case.
Transaction Amount Cannot Be Equated With Escaped Income
The Tribunal held that information showing deposits exceeding ₹50 lakh did not, by itself, establish that income chargeable to tax escaping assessment exceeded that amount.
The Assessing Officer was required to verify the information and categorically record the amount of escaped income. That exercise was absent.
The Tribunal therefore disagreed with the CIT(A)’s conclusion that the deposit figures themselves satisfied Section 149(1)(b).
It also held that the approval could not be sustained without material demonstrating how the escaped income reached, or was likely to exceed, the required threshold.
Reassessment Quashed
The Tribunal held the Section 148 notice dated 30 March 2022 to be bad in law and void ab initio.
Consequently, the assessment order dated 11 March 2023 was declared invalid and quashed.
The appeal was allowed. The remaining grounds, including the merits of the Section 54B exemption, became academic and were left open.
Author’s Comments
The ruling draws a critical distinction between the amount of a financial transaction and the income potentially escaping assessment.
A deposit exceeding ₹50 lakh may require enquiry, but the extended limitation condition must be supported by a finding concerning escaped taxable income after considering the available explanation.
Although the assessee also relied on the eventual addition being below ₹50 lakh, the Tribunal’s decisive reasoning was the absence of the necessary escaped-income finding in the Section 148A(d) proceedings. The order should therefore not be reduced to a proposition that every reassessment automatically fails whenever the final addition falls below ₹50 lakh.
List of Cases Discussed:
1. National Thermal Power Corporation Ltd. Vs CIT (Supreme Court); (1998) 229 ITR 383. Followed. The Tribunal relied on the Supreme Court’s ruling concerning admission of additional legal grounds where the relevant facts are already available on record.
2. Jute Corporation of India Ltd. Vs CIT (Supreme Court); (1991) 187 ITR 688. Discussed in the Supreme Court passage reproduced in the additional grounds. The decision concerns the powers of appellate authorities to entertain additional grounds.
3. Adal Singh Vs ITO 1(1)(1), Agra (ITAT Agra); ITA No. 615/Agr/2025. Relied upon by the assessee. The cited decision concerned reassessment proceedings initiated on an assumed escaped-income amount exceeding ₹50 lakh when the actual escapement was stated to be ₹27 lakh.
FULL TEXT OF THE ORIGINAL ORDER OF ITAT AGRA
This appeal is directed against the impugned order dated 19.02.2026 passed in appeal No NFAC/2014-15/10233333 by the learned Commissioner of Income Tax (Appeals), NFAC, Delhi (hereinafter referred to as the “CIT(A)), u/s. 250 of the Income Tax Act, 1961 (hereinafter referred to as the “Act”) for the A.Y. 2015-16, wherein ld. CIT (A) has dismissed assessee’s appeal.
2. In this case, the AO had an information as under :
“The assessee has made cash deposits in ICICI Bank with her savings accounts of Rs.85,25,000/- during the year under consideration i.e. A.Y. 2015-16.”
2.1 Subsequently, order u/s.148A(d) of the Act dated 30.03.2022 was passed and the notice u/s. 148 of the Act dated 30.03.2022 was issued and served upon the assessee. In response to the said notice , the assessee filed her return of income on 27/04/2022 declaring total income of Rs. 1,59,530/-. During the course of assessment proceedings, it was noted by the AO that during the year under consideration, the assessee had deposited an amount of Rs.59,60,000/- in cash in her ICICI savings bank account. To explain the source, the assessee submitted sale deeds of ancestral agricultural land, purchase deed, computation of income, return of income filed u/s. 148 of the Act, bank statements, Bainama, certified Khasra Fasali etc. The AO, after examining the facts, noted that the plot sold by the assessee was by converting the agricultural land to commercial / residential plots. The AO further observed that the commercial operation does not constitute to be considered for granting exemption as per the provisions of section 54B of the Act, which was purely for transfer of agricultural land. Accordingly, the AO disallowed the claim of deduction of Rs.30,10,588/- and added to the total income of the assessee . The AO added the disallowance of Rs 30,10,588/- to the total income of Rs 1,59,530/- declared by the assessee in her return of income filed on 27.04.2022 in response to the notice u/s 148 of the Act dated 30.03.2022.
2.2 Aggrieved with the said order, the assessee filed an appeal before the learned CIT(A).
2.3 Before the learned CIT(A), the assessee challenged the jurisdiction/legality of the notice issued u/s.148 of the Act on the ground that the escaped income was less than Rs.50,00,000/- and the assessment was reopened after a lapse of three years on 30.03.2022 from the end of the assessment year 2015-16. However, the learned CIT(A) did not agree with the same and noted that the information available with the AO clearly revealed that income chargeable to tax represented in the form of cash deposits amounting to Rs.85,25,500/- or Rs.59,60,000/- exceeded Rs.50,00,000/-. In this regard, the relevant finding of the learned CIT(A) in para 5.2.10 is reproduced as under :
“5.2.10 In view of the above detailed discussion and analysis, I find that the reassessment proceedings initiated under section 147 of the Income Tax Act, 1961 vide notice dated 30.03.2022 under section 148 of the Act are valid and in accordance with law. The Assessing Officer has satisfied all the conditions laid down under section 148A and section 149(1)(b) of the Act before issuing notice under section 148 of the Act. The information available with the Assessing Officer clearly reveals that income chargeable to tax represented in the form of cash deposits in bank account amounting to Rs.85,25,500/- or Rs.59,60,000/- which has escaped assessment exceeds fifty lakh rupees. The Assessing Officer has issued show cause notice under section 148A(b) of the Act, has considered the reply of the appellant, and has passed order under section 148A(d) of the Act recording his satisfaction that it was a fit case to issue notice under section 148 of the Act. The approval under section 151 of the Act has been obtained before issuing notice under section 148 of the Act. Therefore, the reassessment proceedings are valid and the assessment order passed in pursuance of such valid reassessment proceedings cannot be held to be void-ab-initio. Accordingly, Ground Nos. 1, 2, 3 and 4 of the appeal are hereby dismissed.”
2.4 Aggrieved with the said order, the assesee is in appeal before us on the following grounds of appeal :
“1. Because, The Honble CIT Appeal failed to appreciate that the initiation of reassessment proceedings was bad in law & on facts u/s 148/149(1)(b) of the Income Tax Act, 1961.
2. Because, The Honble CIT Appeal failed to appreciate that after consideration of reply and evidences furnished by the appellant regarding source of cash deposits in the bank account, no mention was made by the Assessing Officer vide order u/s 148A(d) that the information still indicated that the capital gain chargeable to tax was likely to exceed the threshold limit specified u/s 149(1)(b).
3. Because the additions in reassessment proceedings were to the tune of Rs. 31,70,210/-which was well below the threshold limit of Rs. 50,00,000/-prescribed u/s 149(1)(b), hence the assumption of jurisdiction u/s 148 was invalid.
4. Because the appellants request vide reply dated 22.03.2022, u/s 148A(b) for a short adjournment in view of holi festival was not considered against the principal of natural justice hence the further proceedings were invalid.
5. Because, The Honble CIT Appeal failed to appreciate that the appellant was not provided the copy of approval u/s 151 despite a specific request made, which was relevant to the appellant to know that on what basis the approval was granted u/s 151/149(1)(b) of the Act, rendering the subsequent proceedings as illegal.
6. Because, The Honble CIT Appeal failed to appreciate the relevant evidence or to get verified that in the two years preceding the sale of agriculture land, agriculture operations were carried out for wheat, paddy & other crops as per certified revenue record filed by the appellant.
7. Because, The Honble CIT Appeal had failed to appreciate the relevant evidence that the appellant had purchased agriculture land within two years from the date of sale of agriculture land, on which agriculture operations were carried on.
8. Because, The Honble CIT Appeal and the Assessing Officer had misconstrued the provisions of section 54B, in confirming the disallowance of the appellants claim of deduction u/s 548.
9. Because, The Honble CIT Appeal had failed to appreciate that the assessing officer had passed the order u/s 148A(d) stating incorrect facts of amount of cash deposit at Rs.8525000 instead of Rs.5960000, which was illegal.
10. Because, the notice u/s 148 was issued by Jurisdictional Assessing Officer as against requirement of the same being issued by faceless unit after 29.03.2022 notification.
11. Because, the appellant craves leave to add, alter, withdraw any grounds of appeal on or before the hearing.”
2.5 Further, during the course of hearing before us, the assessee filed following additional grounds of appeal :
Additional Grounds
“1.1 BECAUSE, the Id CIT (A) has erred in law and on facts in upholding the validity of notice issued under section 148 of the Act, which is barred by limitation under section 149(1)(a) of the Act, consequently the entire reassessment proceedings are void ab-inito and without jurisdiction.
1.2 BECAUSE, the ld CIT (A) failed to appreciate that for AY 2015-16 the statutory limitation of three years expired on 31.03.2019, whereas the notice under section 148 was issued on 30.03.2022, much beyond the permissible time limit.
2 BECAUSE, the ld CIT (A) has grossly erred in holding that section 149(1)(b) is applicable merely on the basis of aggregate cashdeposits, without there being any income escaping assessment exceeding Rs. 50.00 lakh, as mandatorily required under Law. Even, as per assessment order, the addition made is Rs. 30,10,588.00 which is far below of the threshold of Rs. 50.0 lakh and therefore reopening beyond three years is impermissible in law. (Reliance is placed on ITAT, Agra in case of in ITA 615/Agr/2025- Adal Singh.
3. BECAUSE, upon the facts and in overall circumstances of the case the Id CIT (A) failed to appreciate that there is no mention about approval under section 151 of the Act. There is no whisper regarding approval and its reference number in assessment order. Moreover, if it is assumed that approval was obtained by the ld AO before issuing show cause under section 148A(b) and for passing of order under section 148A(d) and issue of Notice under section 148 of the Act, the same has been granted by the specified authority on totally incorrect facts. Initially the ld AO had alleged that the appellant deposited cash Rs. 85,25,500.00 in ICICI Bank and then he mentioned that cash Rs. 59,60,000.00 was deposited in ICICI Bank and finally he made an addition of Rs. 30,10,588.00 only. This clearly shows complete non application of mind by the specified authority while granting approval under section 151 and the same has been given based on “totally incorrect facts”.
4-Because, the ld CIT (A) grossly erred in confirming the reassessment proceedings initiated by the Id AO. Pertinent to note that no addition was made by the ld AO for “undisclosed cash”, alleged information based on which the reassessment proceedings were initiated. The Id AO came to a conclusion that income as per alleged reasons/information did not escape assessment. In such a situation nothing survive. The Id AO does not have jurisdiction to assess any other income which comes to his notice subsequently, once he found that the information/ reason mentioned in notice under section 148 was incorrect or non- existent.
In the case of National Thermal Power Corporation Ltd. vs. CIT reported as (1988) 229 ITR 383 (SC), it has been held that:-
“Under section 254 of the Income-tax Act, the Appellate Tribunal may, after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit. The power of the Tribunal in dealing with appeals is thus expressed in the widest possible terms. The purpose of the assessment proceedings before the taxing authorities is to assess correctly the tax liability of an assessee in accordance with law. If, for example, as a result of a judicial decision given while the appeal is pending before the Tribunal, it is found that a non-taxable item is taxed or a permissible deduction is denied, we do not see any reason why the assessee should be prevented from raising that question before the Tribunal for the first time, so long as the relevant facts are on record in respect of that item. We do not see any reason to restrict the power of the Tribunal under section 254 only to decide the grounds which arise from the order of the Commissioner of Income-tax (Appeals). Both the assessee as well as the Department has a right to file an appeal/cross-objections before the Tribunal. We fail to see why the Tribunal should be prevented from considering questions of law arising in assessment proceedings although not raised earlier.
“In the case of Jute Corporation of India Ltd. v. CIT [1991] 187 ITR 688, this court, while dealing with the powers of the Appellate Assistant Commissioner observed that an appellate authority has all the powers which the original authority may have in deciding the question before it subject to the restrictions or limitations, if any, prescribed by the statutory provisions. In the absence of any statutory provision, the appellate authority is vested with all the plenary powers which the subordinate authority may have in the matter. There is no good reason to justify curtailment of the power of the Appellate Assistant Commissioner in entertaining an additional ground raised by the assessee in seeking modification of the order of assessment passed by the Income-tax Officer. This court further observed that there may be several factors justifying the raising of a new plea in an appeal and each case has to be considered on its own facts. The Appellate Assistant Commissioner must be satisfied that the ground raised was bona fide and that the same could not have been raised earlier for good reasons. The Appellate Assistant Commissioner should exercise his discretion in permitting or not permitting the assessee to raise an additional ground in accordance with law and reason. The same observations would apply to appeals before the Tribunal also.”
PRAYER
In view of above it is humbly prayed that the Honorable members of ITAT may graciously be please to admit the additional grounds, being purely legal in nature and can be adjudicated on the basis of material available on record.”
3. The additional grounds of appeal filed by the assessee are legal in nature and the facts are available on record. Therefore, in view of the decision of the Hon’ble Apex Court in the case of National Thermal Power Corporation Ltd. vs. CIT reported as (1988) 229 ITR 383 (SC), these additional grounds are admitted. Since, ground No. 2 & 3 of the original appeal and additional grounds No. 1.1 to 4 challenge the validity of proceedings, which go to the root of the matter and therefore, same are taken up for adjudication first.
4. At the time of hearing, learned AR, referring to the order u/s. 148A(d) of the Act dated 30.03.2022, submitted that the AO in the said order has not given any finding regarding the quantum of escapement of income in this case, which was a mandatory condition to invoke the provisions of section 148 of the Act. The Ld. AR submitted that the AO can assume jurisdiction to reopen the case beyond three years from the end of the assessment year only if the condition that the escapement of income was Rs.50,00,000/- or likely to be more than Rs.50,00,000/- is satisfied. The learned AR also referring to the case history noting (order sheet details) placed at page Nos. 12 to 15 of the paper book, stated that the remark of the Principal Commissioner of Income-tax, approving the proceedings u/s. 148 by noting that “Approved, as the amount of income/gain likely to have escaped assessment prima facie appears to be above Rs. 50 lakh”, is also not based on any such finding of the AO in the impugned order u/s 148A(d) of the Act dated 30.03.2022 and therefore, such approval was also bad in law. The learned AR further submitted that it is undisputed that the assessed income of Rs.30,10,588/- on account of alleged escapement of income was less than Rs.50,00,000/-. In this regard, the learned AR relied upon the order of this Bench in the case of Adal Singh vs. ITO 1(1)(1), Agra in ITA No. 615/Agr/2025, where it is held that the facts present on record where the actual escapement of income was only Rs.27,00,000/- whereas the escapement of income assumed for invoking the provisions of section 148 of the Act was beyond Rs.50,00,000/-, then the same would render the impugned notice u/s. 148 as bad in law and consequently, quashed the re-assessment proceedings.
5. On the other hand, the learned Sr. DR supported the orders of the authorities below. In this regard, the Ld. DR referred to the observation of the AO in the impugned order u/s. 148A(d) of the Act dated 30.03.2022 where the AO has noted as under:
5.1 On the basis of the above observation, the Ld. DR submitted that the cash deposits of Rs. 59,60,000/- during the year amounted to the escapement of income which was more than Rs. 50,00,000/-.
6. We have heard both the parties and perused the material on record. In this case, we have perused the order u/s. 148A(d) of the Act dated 30.03.2022. On careful perusal of the same, we note that after considering the reply of the assessee, there is no finding by the AO that the material in his possession suggested the quantification of escapement of income was Rs.50,00,000/- or likely to exceed Rs.50,00,000/-, which was a pre-condition as per the provisions of section 149 (1) (b) of the Act for reopening the present case as it has been reopened after the elapse of 3 years on the end of the assessment year A.Y. 2015-16. In absence of such a finding by the AO, the approval of the Pr. Chief Commissioner of Income-tax without bringing on record as to how the income escaped was Rs.50,00,000/- or likely to be more than Rs.50,00,000/-, is not valid. In this regard, we do not agree with the finding of the learned CIT(A) that the information available with the Assessing Officer clearly revealed that income chargeable to tax escaping assessment was Rs.50,00,000/- or likely to be more than Rs. 50,00,000/- represented in the form of cash deposits in bank account amounting to Rs.85,25,500/- or Rs.59,60,000/-. In this regard, we are of the considered view that the AO cannot reopen the assessment on the basis of information available with the Assessing Officer which revealed that there were cash deposits in bank account of the assessee amounting to Rs. 85,25,500/- or Rs. 59,60,000/-, and thus it exceeded Rs. 50,00,000/- as noted by the Ld. CIT (A) but the AO upon verification of the said information has to categorically record the amount of escapement of income, which is clearly absent in this case. Further, we also do not agree with the submission of the Ld. DR that the observation of the AO as reproduced above in the order u/s 148A(d) of the Act dated 30.03.2022 would amount to the escapement of income more than Rs. 50,00,000/- in absence of any specific finding of the escapement of the income as required as per the provision of section 149 (1) (b) of the Act. Therefore, in view of these facts, notice u/s. 148 of the Act dated 30.03.2022 is bad in law and void ab initio in this case and consequently, the assessment order dated 11.03.2023 in this case is held to be invalid and quashed. Ground No. 2 of the original appeal and grounds No. 1.1 & 1.2 of the appeal are allowed. In view of the above grounds of appeal being allowed, the other grounds of appeal become academic and are left open in this case.
7. In the result, appeal of the assessee is allowed.
Order pronounced in the open court on 12/10/2026.
