ITAT Bangalore Rules AO Exceeded Jurisdiction; Exempts Non-Business Individuals from Cash Deposit Verification.

The ITAT Bangalore allowed the appeal, ruling in favor of the assessee. The Tribunal determined that the AO exceeded jurisdiction by not adhering to CBDT Instruction No.3 of 2017, which exempts individuals without business income from further verification for cash deposits up to Rs. 2.5 lakhs. The Tribunal emphasized the binding nature of CBDT guidelines and concluded that no addition could be made under these circumstances.

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Issues:
Jurisdiction of Assessing Officer over cash deposits below a certain threshold as per CBDT guidelines.

Analysis:
The appeal before the Appellate Tribunal ITAT Bangalore arose from an order by the Addl/JCIT (A), Gwalior concerning the assessment year 2017-18. The assessee, a lady, failed to file her income tax return but deposited Rs. 1,73,985 in her bank accounts. The Assessing Officer (AO) added this amount as unexplained cash during an ex-parte assessment. The assessee, aggrieved by the AO's order, appealed before the NFAC. The NFAC dismissed the appeal ex-parte without addressing the merits. Subsequently, the assessee appealed to the Tribunal with a slight delay of 27 days, which was condoned due to valid reasons.

The crux of the matter revolved around the CBDT Instruction No.3 of 2017, which restricted revenue officers from conducting inquiries where cash deposits were up to Rs. 2.5 lakhs. The assessee's counsel argued that the AO wrongly assumed jurisdiction over the case, contrary to the CBDT guidelines. The Tribunal examined the CBDT instruction, emphasizing that it was issued post-demonetization and binding on the department. Notably, the instruction exempted individuals without business income from further verification for cash deposits up to Rs. 2.5 lakhs. Referring to precedent, the Tribunal held that the AO erred by disregarding the CBDT guidelines, exceeding his jurisdiction. Citing a relevant case, the Tribunal allowed the appeal, concluding that no addition could be made in cases covered by the CBDT exemption.

Ultimately, the Tribunal allowed the appeal, finding in favor of the assessee based on the AO's failure to adhere to the CBDT guidelines. The judgment highlighted the importance of following specific verification guidelines, especially in cases involving cash transactions post-demonetization. The decision underscored the binding nature of CBDT instructions on revenue officers and the necessity to comply with such directives to avoid exceeding jurisdiction.

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