ITAT Restores Assessment After AO Goes Beyond Scope of Limited Scrutiny in Cash Deposit Case

The Income Tax Appellate Tribunal (ITAT), Chennai, directed the assessing officer to do a fresh assessment, as the AO went beyond the cash deposits issue, which was not flagged by the CASS (Computer Aided Scrutiny Selection).

The assessee, Mohan, was engaged in the business of purchase and sale of garments. He filed his income tax return (ITR) for AY 2017-18, declaring an income of Rs 8,37,250. The case was selected for scrutiny under the CASS to verify the cash deposits made during the year.

However, the assessee argued that the AO went beyond the scope on issues that were not flagged by the CASS and added Rs 41,13,322 under section 69A of the Income Tax Act. This included an addition of Rs 17,28,000 towards the alleged unexplained cash deposits and Rs 23,85,322 towards the credits made in the bank account of the assessee. This was challenged before the ITAT, Chennai.

The assessee argued that the AO was only required to inquire about the nature and source of the cash deposits. The assessee cited CBDT Instruction No. 20/2015 dated 29.12.2015 and CBDT Instruction F. No. 225/402/2018/ITA.II dated 28.11.2018, claiming that the AO went beyond the issue as per the circular. Further, it was also contended that the assessee did not get a proper opportunity during the assessment proceedings.

The Tribunal noted that the AO’s assessment order did not give clarification about the cash deposits made in the accounts of the assessee, and the AO did not properly examine the matter as per the issue flagged by the CASS.

Therefore, to give one more opportunity to the assessee, the tribunal set aside the order and restored the assessment to the AO for fresh consideration. The AO was directed to examine the details of the nature and source of cash deposits in the assessee’s bank account and then pass an assessment order.