ITR filing Mandatory for High-Value Withdrawals, Even for POA Holders: Madras HC Upholds Income Tax Notice Against Advocate [Read Order]

In an important ruling, the Madras High Court has ruled that income tax returns ( ITR ) must be filed when you’re withdrawing a high value even while acting as a power of attorney ( POA ) holder. It upheld the income tax demand notice issued against the practising Advocate who acted as a POA and withdrew a high value amount.

Justice Krishnan Ramasamy stated that even a POA holder is obligated to file income tax returns when substantial financial transactions are involved.

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The petitioner, an advocate, challenged the income tax notice dated 19.02.2025 issued for the assessment year 2017-2018. He submitted that he had executed a sale deed on behalf of his principal and, as instructed, withdrew ₹55.8 lakhs from a bank account, which was handed over in cash to the principal on two dates.

However, the Income Tax Department treated the entire withdrawn amount as the petitioner’s income due to non-filing of returns and issued multiple show cause notices.

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The petitioner argued that he was not the owner of the property and merely acted as a POA. Therefore, any notice regarding the transaction should have been issued to the principal.

The Department, however, maintained that the petitioner, having withdrawn a huge amount, was legally bound to file a return of income and justify the transaction.

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The court, agreeing with the Department’s stance, noted that in cases involving huge withdrawals, especially by professionals, filing of income tax returns is mandatory. In the absence of such a return, the assessing authority is justified in treating the withdrawn amount as income and initiating proceedings.

The bench observed that “since the transaction involved in this case is a sum of Rs.55,80,000/-, the petitioner, being a practising advocate, is supposed to have filed his returns for withdrawal of such huge amount. When no returns were filed for withdrawal of any amount, certainly the respondent will consider the said amount as income of the petitioner. Accordingly, the proceedings were initiated.”

The Court stated that the petitioner had been provided ample opportunity to respond to the show cause notice, but failed to submit a reply. It further held that the writ petition was premature, as the petitioner had not yet exhausted the remedy of replying to the notice or approaching the appellate forum post-assessment.

Dismissing the petition, the Court granted liberty to the petitioner to file a reply to the impugned notice dated 19.02.2025 within 30 days.

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To Read the full text of the Order CLICK HERE

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