If a common citizen deposits a huge amount like ₹1.33 crore in his bank account in cash and after that does not even file Income Tax Return (ITR), then it is assumed that the Income Tax Department is sure to tighten its grip. But such a shocking case has come to light from Mysore, Karnataka, which has shocked everyone. A retired teacher neither filed ITR nor could give account of crores of rupees, yet the Income Tax Appellate Tribunal (ITAT) in Bengaluru gave a verdict in his favor and cancelled the entire action of the Income Tax Department. Let us know what happened in this interesting case that completely turned the tables.
What was the whole matter and how did the retired teacher come on the radar?
Marthikyathanahalli, a retired teacher from Mysore, deposited approximately ₹1.33 crore in cash into his bank account during Assessment Year (AY) 2015-16. Significantly, he had not filed an Income Tax Return (ITR) for that financial year. The Central Board of Direct Taxes (CBDT)’s Risk Management System (RMS) detected this suspicious and substantial transaction and alerted the Income Tax Department. The department had records showing his primary income was from farming and bank interest, but the sudden cash transaction of crores of rupees aroused suspicions of undisclosed income (black money). The department subsequently launched an in-depth investigation.
Notice and assessment action by the Income Tax Department
Proceeding with the investigation, the Income Tax Department issued the teacher’s first notice under Section 148A(b) on March 26, 2022. Upon receiving no response from the teacher, the Assessing Officer (AO) issued an order under Section 148A(d) on April 26, 2022, and also sent a Section 148 notice, directing him to file an Income Tax Return (ITR). The teacher subsequently filed an Income Tax Return (ITR), but it was not e-verified, resulting in it being considered invalid. Subsequently, the department assessed his total income as ₹48.85 lakh under the reassessment process, taxing approximately ₹48.73 lakh as undisclosed income. After receiving no relief from the CIT(A), the matter finally reached the ITAT Bengaluru bench.
The 26-day delay changed the course of the entire case.
During the hearing at the ITAT, Bengaluru, the teacher’s lawyers made a significant legal move. They argued that the Income Tax Department had issued the main Section 148 notice 26 days after the expiry of the statutory time limit. According to the old rules, the last date for serving the notice for AY 2015-16 was March 31, 2022. Even after factoring in certain administrative exemptions, the notice could have been served only by April 12, 2022, but the department served it on April 26, 2022. The ITAT fully accepted this argument and clarified that since the notice itself was illegally served after the statutory time limit, all subsequent assessment proceedings would be automatically void. Citing previous Supreme Court and High Court decisions, the tribunal granted significant relief to the taxpayer.