# Cash Deposit Nightmare Ends in Victory: Delhi Man Wins ITAT Battle Against Tax Dept's Presumptive Income Trap
**October 30, 2025**
In a David-vs-Goliath win for everyday taxpayers, the Income Tax Appellate Tribunal (ITAT) Delhi has struck down a whopping Rs 8.68 lakh addition slapped on a salaried man's bank deposit—ruling it an overzealous power grab by the taxman. Devendra Kumar, a simple earner with no business ties, faced a nightmare notice after parking cash in his account, only for the Assessing Officer (AO) to brand it "presumptive business income" under Section 44AD. The department's leap? Deeming his deposit unexplained profits from phantom trading. But ITAT called foul: Limited scrutiny means *limited*, not a free-for-all probe. This ruling isn't just relief for Kumar—it's a blueprint for battling bureaucratic overreach, reminding the I-T wing that rules aren't rubber bands. As notices rain amid demonetization echoes, here's the full scoop on how one man's stand could shield millions.
## The Deposit That Sparked a Tax Storm: Kumar's Ordeal
It all boiled down to a routine bank deposit in Assessment Year (AY) 2017-18. Devendra Kumar, a non-business individual, filed his income tax return honestly, declaring his salary earnings. But his case pinged the Computer-Assisted Scrutiny Selection (CASS) radar for one red flag: Cash deposits in his savings account. Selected for *limited scrutiny*—expressly to verify the source and nature of those deposits—the AO's lens widened dramatically.
Instead of probing just the cash trail, the officer invoked Section 44AD, the presumptive taxation scheme for small businesses. He estimated Kumar's "unexplained" deposits as business turnover, slapping on a Rs 8,68,799 addition as deemed income—assuming an 8% profit rate on the deposit amount. No evidence of trade? No matter. The assessment order? Finalized with this hefty hike, pushing Kumar's tax bill skyward.
Kumar appealed to the Commissioner of Income Tax (Appeals) [CIT(A)], arguing the AO had strayed beyond the scrutiny's narrow lane. But the first appellate rung upheld the addition, leaving him no choice but to escalate to ITAT Delhi. Little did he know, this would expose a chink in the tax dept's armor.
## Tax Dept's Bold Leap: Presumptive Income or Procedural Foul?
The AO's rationale? Classic post-noteban playbook: High-value cash deposits scream "unaccounted business income" unless proven otherwise. Under Section 44AD, small traders can opt for a flat 8% (or 6% for digital receipts) deemed profit on turnover— but only if they're in the business game. Kumar? A salaried soul with zero trade filings. Yet, the officer flipped the script, treating deposits as "turnover" and taxing phantom profits.
CIT(A) rubber-stamped it, ignoring the limited scrutiny tag. But ITAT? Not so fast. In a scathing September 22, 2025, order (ITA No. 4778/Del/2025), the bench—led by Judicial Member Satbeer Singh Godara—quashed the addition wholesale. Why? Jurisdiction jackpot: The scrutiny was locked to cash verification, per CBDT guidelines. Expanding to business income estimation? That's a no-go without converting to full scrutiny and getting Principal CIT's nod.
## ITAT's Gavel: "AO Exceeded Jurisdiction" – A Landmark Slapdown
The Tribunal's verdict was a procedural masterclass. "The AO acted beyond the scope of the limited scrutiny exercise, which was restricted to examining cash deposits, and therefore lacked jurisdiction to make the addition," the bench declared. Echoing the Calcutta High Court's 2023 ruling in *PCIT v. Weilburger Coatings India Pvt. Ltd.*, ITAT stressed: Additions on off-limits issues are "without jurisdiction and liable to be quashed."
Key zingers from the order:
- "The AO had no jurisdiction to make additions under Section 44AD without first converting the limited scrutiny into a complete scrutiny with the requisite administrative approval."
- Procedural lapses aren't waived just because the assessee showed up—safeguards exist for a reason.
Kumar's win? Full deletion of the Rs 8.68 lakh addition, plus a clean slate. Counsel Pankaj Goel hailed it as "vindication for honest taxpayers," while the Revenue's Manoj Kumar got a reality check on CASS boundaries.
| Key Case Milestones | Details |
|---------------------|---------|
| **AY & Selection** | 2017-18; Limited scrutiny via CASS for cash deposits only. |
| **AO's Addition** | Rs 8,68,799 u/s 44AD as presumptive business income. |
| **CIT(A) Ruling** | Upheld AO's order. |
| **ITAT Date** | September 22, 2025 (2025 TAXSCAN (ITAT) 1938). |
| **Outcome** | Addition deleted; AO's jurisdiction exceeded. |
| **Precedent** | *PCIT v. Weilburger Coatings* (Cal HC, 2023). |
## Takeaways: A Shield for Salaried Souls in Scrutiny Hell
This isn't niche legalese—it's a taxpayer's toolkit. Limited scrutiny (now evolved but still gated) bars AOs from fishing expeditions. For the 1.5 crore+ annual filers facing CASS pings:
- **Know Your Bounds**: If selected for one issue (e.g., deposits), demand proof of conversion for broader probes.
- **Section 44AD Trap**: It's for businesses, not accidental "traders." Salaried deposits from savings? Not taxable windfalls.
- **Appeal Power**: ITAT's taxpayer-friendly tilt shines here—uphold returns unless evidence screams foul.
Broader ripple? With I-T raids up 20% post-2024 budget, this curbs arbitrary additions, potentially saving billions in wrongful taxes. CBDT might tweak guidelines, but for now, it's a win for due process.
## Social Media Stir: From ET Alerts to Tax Twitter Cheers
The story broke via Economic Times' viral video explainer, racking up views and shares. ET Wealth's X post—"Man gets #tax notice for depositing Rs 8 lakh... he wins case in ITAT Delhi"—sparked 500+ likes and retweets, with users venting: "Finally, some sense! Salaried folks aren't secret shopkeepers."
Reddit's r/IndiaTax lit up with a thread: "ITAT Delhi Ruled in Favour of assessee in Rs 8.68 Lakh Cash Deposit Case," drawing 200+ upvotes and tips like "Document everything—receipts over presumptions." Tax pros on LinkedIn called it "a procedural nuke," warning AOs: "Stick to the script or face quash."
## Final Word: Deposit Without Dread – But Keep Receipts Handy
Devendra Kumar's saga? A reminder that India's tax net is tightening, but justice bends toward the rulebook. In an era of AI audits and faceless assessments, this ITAT triumph underscores: Presumptions cut both ways—don't let them presume you guilty. Got a scrutiny horror? Or tips for dodging the deposit dread? Spill in the comments.
*Sources: Taxscan, Economic Times, TaxGuru, and social feeds. For the full order, check ITAT archives.*
When Mr. Kumar deposited Rs 8 lakh (8,68,799) cash in his bank account, it raised a red flag for the income tax authorities. Initially, he received a tax notice, followed by an assessment where this cash was added to his income as presumptive business income under Section 44AD. He appealed this order to the Commissioner of Appeals CIT (A), but lost the case. However, then he took his case to the Income Tax Appellate Tribunal (ITAT) Delhi and here he won the case.
His main issue is disputing the validity of the lower tax authority’s decision to classify Rs 8,68,799 as presumptive business income under Section 44AD , during the assessment carried out in December 25, 2019, which was upheld by the lower appellate proceedings (CIT(A)). Kumar argued that it appeared to be a case of “limited” scrutiny focused solely on his cash deposits, which led to an estimation of his profits (presumptive business income) in question.
On September 22, 2025 Kumar won the case in ITAT Delhi.
Chartered Accountant (Dr.) Suresh Surana, said to ET Wealth Online that in the given case (ITA No. 4778/Del/2025), the taxpayer, Mr. Kumar, was subjected to a limited scrutiny assessment for Assessment Year 2017-18.
The scope of scrutiny, as defined in the notice under section 143(2), was restricted solely to examining cash deposits in his bank account. However, during the assessment, the Assessing Officer (AO) went beyond this limited scope and made an addition of Rs 8,68,799 by estimating presumptive business income under section 44AD of the Income-tax Act, 1961. The appellate authority upheld this addition, prompting the assessee to file an appeal before the Income-tax Appellate Tribunal (ITAT).
