Vudatha Vani Rao Vs ITO (ITAT Visakhapatnam)
Income Tax Appellate Tribunal (ITAT) Visakhapatnam bench, in the case of Vudatha Vani Rao vs. Income Tax Officer (ITO), addressed the critical question of whether an Assessing Officer (AO) can extend inquiries beyond the defined scope of a limited scrutiny assessment. The tribunal’s decision, pronounced on January 11, 2024, partly allowed the assessee’s appeal, focusing on cash deposits made during the demonetisation period.
Case Background: The assessee, Vudatha Vani Rao, an individual engaged in saree designing, filed her income tax return for Assessment Year (A.Y.) 2017-18, declaring an income of Rs. 3,54,500. Her case was selected for ‘limited scrutiny’ under the Computer Assisted Scrutiny Selection (CASS) system specifically to examine cash deposits made during the demonetisation period.
Following the selection, statutory notices were issued to the assessee, requesting explanations and documentary evidence for the cash deposits. Despite these notices, the assessee initially failed to provide the requested information. However, she later uploaded a bank account statement from Oriental Bank of Commerce, which revealed total cash deposits of Rs. 10,80,000 made between November 5, 2016, and December 17, 2016.
The AO, noting the lack of satisfactory documentary evidence from the assessee regarding the source of these deposits, concluded that the entire Rs. 10,80,000 was unexplained income. This amount was subsequently added to her income under Section 69A of the Income Tax Act, 1961, as income from “other sources.”
