Thulasidass Prabavathi Vs ITO (Madras High Court)
Madras High Court on Thursday set aside an income tax reassessment order and notice issued against Thulasidass Prabavathi, proprietor of M/s Venkateshwara Traders, for the Assessment Year 2017-18. The court’s decision was primarily based on the issue of limitation, relying heavily on the Supreme Court’s pronouncements in Union of India & Ors. vs. Ashish Agarwal (2023) and Union of India vs. Rajeev Bansal (2024).
The case originated from a cash deposit of Rs. 48,96,000 made by Ms. Prabavathi during the demonetization period (November 8, 2016, to December 31, 2016). The Income Tax Department noted that her cash balance as of March 31, 2016, was only Rs. 16,971, and she had not adequately explained the source of the cash deposit. She had filed her return of income for AY 2017-18 on November 3, 2017, declaring a taxable income of Rs. 21,14,624, without including the said cash deposit.
Initially, the Income Tax Officer (ITO) issued a notice under Section 148 of the Income Tax Act, 1961, on June 21, 2021, under the ‘old regime,’ asserting that income had escaped assessment. This was subsequently followed by a notice under Section 148A(b) of the Act on May 18, 2022, under the ‘new regime,’ asking Ms. Prabavathi to show cause why a notice under Section 148 should not be issued. She responded on May 31, 2022, objecting to the proposed initiation of proceedings.
