Reassessment Beyond 3 Years Invalid When Actual Cash Deposits Below ₹50 Lakh: ITAT Quashes Time-Barred Reassessment [Read Order]
Cash deposit converted into a fixed deposit cannot be treated as separate escaped income for invoking the extended reassessment limitation; the tribunal quashed reassessment proceedings
In a recent ruling, the Income Tax Appellate Tribunal (ITAT) Hyderabad held that reopening beyond 3 years was barred by limitation, where the actual cash deposit in the assessee's bank account did not exceed 50 lakh.
The appeal was filed by Vatti Praksh Reddy against the order passed by the Commissioner of Income Tax (Appeals) confirming reassessment proceedings initiated under section 148 ofthe Income Tax Act 1961.
The assessee argued that the reopening was unsustainable, and it was submitted that a cash deposit of ₹20 lakh made on 24 June 2014 was converted into a fixed deposit on the same date, and therefore could not be treated as two separate instances of income. It was further pointed out that several deposits were counted multiple times under overlapping reporting categories, resulting in duplication.
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The respondent argued that at the stage of issuing notice under Section 148, the Assessing Officer is only required to form a prima facie belief based on available information and is not expected to conduct a detailed enquiry. Since the bank transactions, including cash deposits and time deposits, exceeded ₹1 crore, the Assessing Officer was justified in invoking the extended ten-year limitation applicable where escaped income exceeds ₹50 lakh. Accordingly, the notice under Section 148 was valid and within time.
The assessee also submitted that the reopening was invalid as the notices were issued by the JAO in violation of the mandatory faceless assessment procedure.
The tribunal observed that the AO had clubbed the cash deposits and fixed deposits arising out of the same cash. also once such duplicated entries were excluded, the deposits clearly fell below ₹50 lakh, making the reassessment notice issued after three years time-barred.
Tribunal also found that the reopening proceedings were procedurally invalid, as the notices under Sections 148A and 148 were issued by the Jurisdictional Assessing Officer, contrary to the National Faceless Assessment Scheme mandated under Section 144B read with Section 151A of the Act.
Relying on the Telangana High Court ruling in Tecumseh Products India (P.) Ltd. v. DCIT (2025), the bench held that reassessment proceedings initiated in a non-faceless manner are liable to be quashed.
Accordingly, the bench Vjay Pal Rao( Vice President) allowed the appeal in favour of the assessee, with liberty granted to revive the matter depending on the outcome of pending proceedings before the Supreme Court on the faceless reassessment issue.
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