Hoskote Subbanna Sadananda Vs ITO (ITAT Bangalore)
Limited Scrutiny Means Limited Power – Bangalore ITAT Pulls Up AO for Going Beyond Demonetisation Issue
The Bangalore ITAT held that where a case is selected for limited scrutiny only for verification of cash deposits during demonetisation, the AO cannot travel beyond that issue without obtaining approval from higher authorities as mandated under CBDT Instructions. The Tribunal therefore restricted the scope of enquiry only to demonetisation-period deposits and restored the matter back to the AO for fresh verification.
The assessee had filed a return showing only income from house property and other sources. The case was selected for limited scrutiny to examine cash deposits during demonetisation. However, the AO treated total cash deposits of ₹1.21 crore as unexplained u/s 69A, including ₹88.48 lakh relating to periods outside demonetisation. The assessee argued that the AO exceeded the jurisdiction permitted under CBDT Instructions No. 20/2015 and 5/2016 governing limited scrutiny cases.
Before the Tribunal, the assessee also contended that the AO’s computation itself was incorrect. According to the assessee’s SBI bank statements, total cash deposits during the entire year were only ₹71.92 lakh and deposits during demonetisation were merely ₹10.47 lakh, whereas the AO had mechanically adopted figures of ₹1.21 crore and ₹33.08 lakh respectively without clarity regarding the basis of computation.
The ITAT accepted the legal contention that the AO could not widen the scope of limited scrutiny without obtaining prior approval from the PCIT/CIT. Since the Revenue could not demonstrate that such approval had been taken, the Tribunal held that additions relating to non-demonetisation period cash deposits were beyond jurisdiction.
Further, noting serious discrepancies in the computation of cash deposits and absence of clarity even before the Tribunal regarding the figures adopted by the AO, the Bench restored the matter back to the AO for fresh verification of the exact quantum of demonetisation-period cash deposits and examination of the assessee’s explanation that deposits belonged to newspaper agency collections of his brother.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
This appeal is filed by HOSKOTE SUBBANNA SADANANDA [the Assessee/Appellant] against the appellate order of Ld. COMMISSIONER OF INCOME TAX (APPEALS), NFAC, DELHI dated 20-Jun-2025 for the Assessment Year 2017-18 wherein the appeal filed by the assessee against the assessment order passed by ITO, WARD 5(2)(3), BENGALURU [ld. AO] dated 23.12.2019 making the addition of Rs.1,21,55,500 u/s. 69A of the Act being cash deposit in the bank account of the assessee was dismissed. Thus, assessee is aggrieved and in appeal before us.
