Quick Summary
A routine cash deposit of Rs 8.68 lakh turned into a long legal battle for a taxpayer, Mr. Kumar, after the Income Tax Department classified the money as "presumptive business income." What began as a limited scrutiny case soon spiraled into a full-fledged assessment without the required authorization. On September 22, 2025, the Income Tax Appellate Tribunal (ITAT), Delhi, delivered a landmark ruling in Kumar's favour, quashing the additions made by the Assessing Officer (AO) and restoring the
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FAQ :
Mr. Kumar made a cash deposit of Rs 8.68 lakh, which the Income Tax Department initially selected for limited scrutiny to verify its source.
The Assessing Officer went beyond the limited scope and added the entire Rs 8.68 lakh to Mr. Kumar's income as presumptive business income, treating it as unreported business profits.
Mr. Kumar argued that the Assessing Officer lacked the legal authority to convert a limited scrutiny into a full assessment without prior approval from the Principal Commissioner, as required by CBDT Instruction No. 5/2016.
The ITAT Delhi ruled that both the Assessing Officer and the Commissioner (Appeals) exceeded their jurisdiction by expanding the scope of the assessment beyond the limited scrutiny issue.
This ruling is significant as it sets a precedent, reinforcing that limited scrutiny cases cannot be arbitrarily expanded and strengthening procedural safeguards for taxpayers.
Taxpayers should be aware that unless the Assessing Officer obtains prior approval from higher authorities, the inquiry must remain confined to the specific issue originally flagged, such as a cash deposit.
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