Adinarayana Raju Mandapati Vs ITO (ITAT Hyderabad)
Limited Scrutiny Can Examine the Source, but It Cannot Tax the Same Money Twice — Agricultural Receipts Subsumed in Cash-Deposit Addition
The Hyderabad Bench of the ITAT has held that where a case is selected for limited scrutiny to examine large cash deposits, the AO is entitled to verify the agricultural income claimed as the source of those deposits. Such verification does not amount to travelling beyond the scope of limited scrutiny. However, after treating the entire cash deposits as unexplained money u/s 69A, the AO cannot again make a separate addition of the agricultural receipts forming part of the very same deposits. That would result in double addition of the same amount.
The assessee, Adinarayana Raju Mandapati, filed his return for AY 2017-18 declaring nil taxable income and agricultural income of ₹12 lakh. His case was selected under CASS for limited scrutiny because substantial cash deposits were noticed in his bank accounts as compared with the income returned.
The AO issued notice u/s 143(2) and several notices u/s 142(1). As the assessee did not respond, the assessment was completed on the basis of information available on record. The AO treated cash deposits of ₹75,25,900 as unexplained money u/s 69A. He also separately added the declared agricultural income of ₹12 lakh as unexplained money.
