Cash deposits previously taxed or covered by amnesty schemes

Cash deposits previously taxed or covered by amnesty schemes cannot be subjected to double taxation.

Issue

Whether cash deposits can be taxed as unexplained money under Section 69A in a subsequent year if a portion of the amount has already been taxed in a preceding assessment year or declared under an amnesty scheme.
Whether the enhanced tax rate introduced by the Taxation Laws (Second Amendment) Act, 2016, under Section 115BBE applies retrospectively to the entire Assessment Year 2017-18.

Facts

The assessee, an individual and a senior citizen, filed a return of income declaring Rs. 1.26 lakhs for the Assessment Year 2017-18.
The case was selected for limited scrutiny to verify total cash deposits of Rs. 67.55 lakhs made during the year, which included Rs. 65.93 lakhs deposited during the demonetization period.
The assessee had declared Rs. 50 lakhs under the Pradhan Mantri Garib Kalyan Yojana (PMGKY) Scheme, which the Assessing Officer (AO) accepted.
For the remaining balance of Rs. 17 lakhs, the AO made an addition under Section 69A as unexplained money and taxed it at the higher, amended rate under Section 115BBE.
The assessee contended that out of the Rs. 17 lakhs addition, a sum of Rs. 10 lakhs had already been examined and taxed as unexplained cash in a scrutiny assessment during the preceding Assessment Year 2016-17.

Decision

Held, yes: The double taxation of the Rs. 10 lakhs was deleted since the Revenue cannot tax the same cash source twice without demonstrating the existence of a separate, independent unexplained source.
Held, yes: An additional ad-hoc relief of Rs. 5 lakhs was granted by the court, taking into account the assessee’s status as a senior citizen and following the lenient precedents set by Coordinate Benches.
Held, yes: The addition under Section 69A was sustained only to the extent of the remaining balance of Rs. 2 lakhs, while the remaining addition of Rs. 15 lakhs was ordered to be deleted.
Held, yes: The retrospective application of the enhanced tax rate under Section 115BBE (via the Taxation Laws Amendment of 2016) was rejected, and the issue was decided in favor of the assessee.

Key Takeaways

Bar on Double Taxation: Once a cash pool or source is targeted, caught, and taxed by the department in year A, the same funds cannot be added back as unexplained cash when deposited into a bank account in year B.
Senior Citizen Relief: Special leniency and relief may be granted by tribunals regarding minor unexplained cash variations during the demonetization period based on small domestic savings patterns of senior citizens.
Prospective Amendment Rule: Drastic fiscal amendments increasing tax liabilities or penalties—such as the enhanced rates under Section 115BBE introduced mid-year in 2016—cannot be applied retroactively to target income earned before the amendment’s enactment date.

IN THE ITAT CHENNAI BENCH ‘A’

Sengodan Govindarajan

Income-tax Officer

Manu Kumar Giri, Judicial Member
and S. R. RAGHUNATHA, Accountant Member

IT APPEAL No. 56 (Chny) OF 2026
[Assessment year 2017-18]

JUNE 15, 2026

S. Sridhar Erode, Adv. for the Appellant. R. Raghupathy, Addl. CIT for the Respondent.

ORDER

S.r. Raghunatha, Accountant Member.- The present appeal has been preferred by the Assessee against the order dated 31.10.2025 passed by the Learned Commissioner of Income Tax (Appeals) – 7, Kolkata [hereinafter referred to as “the Ld. CIT(A)”], arising from the assessment order dated 30.12.2019 passed by the Income Tax Officer, Ward-1, Erode [hereinafter referred to as “the AO”], u/s.143(3) of the Incometax Act, 1961 (hereinafter referred to as “the Act”) for the Assessment Year 2017-18.

2. The brief facts of the case emanating from the records are that the assessee, an individual, filed his return of income for the AY 2017-18 on 29.03.2018 declaring an income of Rs.1,26,000/-. The case has been selected for limited scrutiny for verification of cash deposits made during the year as well as the demonetization period. Accordingly, the AO issued statutory notices to the assessee. During the assessment proceedings, the assessee submitted that the assessee has already declared Rs.50 lakhs under PMGKY Scheme and during the assessment for the AY 2016-17, the explanation given by the assessee for the source of cash deposits of Rs.10 lakhs was not accepted by the AO and brought to tax Rs.10 lakhs by passing an order u/s.143(3) of the Act for the AY 2016-17.

3. During the assessment year, the AO found that the assessee has made a cash deposit of Rs.65,93,500/- both in SBI and KVB savings bank account during the demonetization period and Rs.67,55,000/- cash deposit during the whole year. The explanation submitted by the assessee has been accepted only to the tune of Rs.50 lakhs income offered under PMGKY Scheme and hence the balance cash deposit of Rs.17 lakhs has been brough tot tax u/s.69A r.w.s. 115BBE of the Act by passing an order u/s.143(3) of the Act dated 30.12.2019.

4. Aggrieved by the order of the AO, the assessee preferred an appeal before the ld.CIT(A). Before the ld.CIT(A), the assessee raised many grounds both on merits as well as on legal issue of non-issue of notice u/s.143(2) of the Act in relation to the revised return filed by the assessee, which has been processed u/s.143(1) of the Act is invalid in law the assessment concluded is liable to be quashed. However, the ld.CIT(A) dismissed the appeal of the assessee by confirming the additions made by the AO both under legal as well as on merits by passing an order dated 31.10.2025 by holding as under:-

“5.4 It is found that the appellant filed original return of income on 29.03.2018 disclosing income from house property at Rs.1,26,000/- and information about cash deposit of Rs.60 lakhs in two bank accounts. On the other hand, revised return of income was filed on 15.06.2018 again disclosing therein income from house property at Rs.1,26,000/-, information about cash deposit of Rs.60 lakhs in two bank accounts and claim of TDS of Rs.4,685/-. It is therefore clear that except for claim of credit of TDS of Rs.4,685/-, no new disclosure about any additional income or source of income or any additional exemption or deduction was reported in the revised return. It is also significant to point out that although the credit of TDS was claimed but the corresponding interest income of Rs.46,849/- received from STATE BANK OF INDIA SATHYAMANGALAM ADB was not disclosed in the revised return.

In this regard, the decision of ITAT, Guwahati-Kolkata bench in the case of Tripura State Electricity Corporation v. ITO [M.A. No. 04/GAU/2023 (A.Y. 2013-2014) (in ITA No. 297/GAU/2018), ITAT, Kolkata-Guwahati e-court, DOJ-10.10.2023] may be highlighted as under:-

“9. The short controversy before us is whether non- issuance of a notice under section 143(2) on the revised return would be illegality which can render the assessment order beyond the jurisdiction of the Id. Assessing Officer in this situation or it was a mere irregularity. The judgments, which are being referred by the Id. Counsel for the assessee are concerned, they propound that when revised return is being filed, then original return would obliterate. In other words, the original return would become redundant and the determination of taxable income is to be made on the basis of revised return. In none of the cases, it has been propounded that 143(2) notice was must on the revised return, otherwise whole assessment proceeding would vitiate. Let us explain the situation in a different manner also. Section 139(5) authorizes the assessee to file the return before completion of the assessment order. In the present case. assessment order has been passed on 18.03.2016. Hearing must have been concluded 2-3 days prior to this date because Id. Assessing Officer has to draft the assessment order. On 17th March, assessee filed a revised return without the the Id. Assessing Off icer to take cognizance of such a fact in such a short period of time. This type of step can be taken at the end of an assessee for frustrating the whole assessment machinery. Yes, once a revised return is being filed, certainly its figure can be taken into consideration as propounded in the various decisions cited by the Id. Counsel for the assessee. Therefore, in our opinion, it was only an irregularity and not an illegality. It could have been cured by the Id. 1st Appellate Authority by calling a remand report from the Id. Assessing Off icer after re-determination of the income on the basis of revised return, but to declare the assessment order as a null and void is not in accordance with law.

10. On due consideration of all these facts and circumstances, we set aside the impugned order of the Id. CIT(Appeals) and restore this issue to the file of the Id. Assessing Officer The Id. Assessing Officer is directed to re-determine the taxable income of the assessee after taking the details from the revised return of income.

The above judgement of ITAT was however overruled by Guwahati High Court in the case of Tripura State Electricity Corporation v. Principal Commissioner Of Income Tax [Citation: 2025 Latest Caselaw 486 Tri, Judgement Date: 14 August, 2025] as under:-

“Tribunal got misled by noting the date of filing of the revised return incorrectly, and came to the perverse conclusion that it would only be an irregularity, and not an illegality.

36. Therefore the Tribunal ought to have modified the order of the CIT (Appeals) by setting aside the order of the Assessing Authority and remitted the matter back to the Assessing Officer for re-determining the taxable income of the appellant after taking the details from the revised return of income. Instead, it set aside the order of the CIT (Appeals) but restored the matter to the file of the Assessing Officer without setting aside the Assessment Order passed on 18.03.2016. This is a clear error of law.

37. Therefore, the second substantial question of law framed by us is held in favour of the appellant, and so we modify the decision of the ITAT in the following manner:

(a) The Assessment Order dt. 18.03.2016 is set aside;

(b) The order of the CIT (Appeals) is modified, and the matter is remitted to the Assessing Officer to re-determine the taxable income of the assessee after taking the details from the revised return of income, and this exercise should be carried out after providing due opportunity of hearing to the assessee.”

From the judgement of High Court, it is clear that while overruling the decision of ITAT, High Court has held that since the facts and figures reported in revised return have not been considered, the assessment is required to be passed afresh and therefore restored the assessment back to the assessing officer. However, in the present case of the appellant, the facts are completely different. The appellant has not disclosed any new fact or figure in respect of income earned or deduction/exemption claimed in the revised return. The only new fact reported is claim of credit of TDS though not offering to tax the corresponding receipt. These facts were intimated to appellant by notice dated 20.10.2025 and asked to offer his comments. However, by his reply dated 30.10.2025, the appellant informed that his appeal may be decided based on the grounds of appeal and the written submissions hitherto filed.

In view of above discussion, it is therefore held that since the appellant has not disclosed any new income or source of income or claim of deduction or exemption in the revised return of income, the notice issued u/s 143(2) against the original return was valid one and there was no requirement for again issuing fresh notice u/s 143(2) upon filing of revised return. Appellant’s ground of appeal on this issue is dismissed. As regard, the issue of addition of Rs. 17,00,000/- on merit, since the appellant has not filed any submission or placed any argument during the appellate proceedings which could contradict the findings of assessing officer, the observation of assessing officer and addition of Rs. 17,00,000/- is upheld and confirmed. This ground of appeal is also dismissed. It is also to be stated that credit of TDS of Rs.4,685/- is not to be allowed as the appellant did not offer to tax the corresponding interest income of Rs.46,849/-.”

5. Aggrieved by the order of the ld.CIT(A), the assessee preferred an appeal before us by raising following grounds of appeal:-

“1) The Impugned Order is unjust, unreasonable and bad in law.

2) The Learned Addl/Joint Commissioner (Appeals) erred in not considering the facts, grounds originally and additionally raised and the written submissions filed.

3) Without prejudice, the Learned Addl/Joint Commissioner (Appeals) and the Assessing Officer erred in not considering that the Assessment Order is null and void due to non- issue of mandatory notice u/s.143(2) in respect of Revised ITR filed on 15/06/2018, specifically when such revised return was processed by the CPC and when TDS credit claimed therein was included while framing the Assessment Order.

4) Without prejudice, the Learned Addl/Joint Commissioner (Appeals) erred in observing that the ITR filed on 15/06/2018 cannot be considered as a Revised Return u/s.139(5), as nothing except TDS credit was claimed afresh therein, when the plain reading of sec. 139(5) supports the case of the appellant.

5) Without prejudice, the Learned Addl/Joint Commissioner (Appeals) and the Assessing Officer also erred in not considering that the Appellant had sufficient cash in hand for deposit during the demonetization period and also other surrounding factors like past history, age and possible savings of the Appellant etc.

6) Without prejudice, in any case, the Learned Addl/Joint Commissioner (Appeals) and the Assessing Officer erred in applying the increased rate of 60 percent and additional surcharge of 25 percent under Section 115BBE, without considering that such rate was not applicable for Assessment Year 2017-18, specifically in light of the Hon’ble Madras High Court Order in “SMILE Micro Finance Ltd Case”.

And, for other grounds and reasons that may be adduced later, the Appellant humbly prays that the present appeal may be admitted, duly considered and justice be rendered.”

6. The ld.AR submitted that the impugned order of the ld.CIT(A) is erroneous in rejecting the assessee’s claim to treat the assessment order as null and void ab initio due to non-issue of mandatory notice u/s.143(2) of the Act in respect of revised ITR filed on 15.06.2018. In support of the same, the ld.AR relied on various judicial precedents like Asstt. CIT v. Hotel Blue Moon 321 ITR 362 (SC) of the Hon’ble Supreme Court and the Co-ordinate Bench decision of the Tribunal in the case of Guwahati-Kolkata Bench in the case of Tripura State Electricity Corporation. In respect of the merits, the ld.AR submitted that the assessee had explained the complete source of cash deposits made during the AY 2017-18 in his bank account held at SBI and KVB. Further, the ld.AR also submitted that during the assessment proceedings for the AY 2016-17, the cash balance of Rs.10,66,000/- has been clearly explained by showing the details of earlier years income in support of the cash deposit during the AY 2017-18.

7. Further, without prejudice to the above arguments, the ld.AR submitted that the assessee is a senior citizen and is eligible to get the deduction of Rs.5 lakhs as per the CBDT Instruction No.3/2017 dated 21.02.2017. The deduction of Rs.5 lakhs has to be given to the assessee as held by the Co-ordinate Delhi Bench of the Tribunal in the case of Amar Singh v. ACIT [IT Appeal No. 1716 (Del) of 2020, dated 20-9-2022], which has been followed by the Chennai Tribunal in the case of Gaman Narayanachetty Govindaraju v. ITO [IT Appeal No. 2907 (CHNY) of 2024, dated 1-7-2025], wherein the relief has been granted to the assessee by following the CBDT Circular (supra). Further, the cash balance as shown as on 01.04.2016 of Rs.10,66,000/- needs to be considered as source for cash deposits made during the demonetization period since the assessee had filed return of income for the earlier years by explaining the arrival of cash balance apart from Rs.10,00,000/- has been added as unexplained income in the scrutiny assessment concluded for the AY 2016-17 vide assessment order passed u/s.143(3) dated 31.12.2018. In view of the above, the assessee prayed for deleting the entire additions of Rs.17 lakhs as the source for the same has been explained by the assessee. Without prejudice to the above arguments, the ld.AR submitted that in case any addition is sustained, the rate of tax applicable shall be restricted to 30% as the applicability of higher rate of tax u/s.115BBE of the Act is not applicable to the impugned AY 2017-18 by relying on the decision of SMILE Micro Finance Limited.

8. Per contra, the ld.DR relied on the orders of the authorities and stated that the assessee has not explained the source for the cash deposits made, and hence, prayed for confirming the order of the ld.CIT(A).

9. We have carefully considered the rival submissions perused the material available on record and gone through the orders of the authorities along with the case laws relied upon. The undisputed facts are that the assessee originally filed his return of income on 29.03.2018 declaring income of Rs.1,26,000/-. Subsequently, a revised return was filed on 15.06.2018. The assessment was selected for limited scrutiny and notice u/s.143(2) of the Act was issued only with reference to the original return. No fresh notice u/s.143(2) of the Act was issued after filing of the revised return.

10. The contention of the assessee is that once a revised return is validly filed u/s.139(5) of the Act, the original return stands substituted and, therefore, issuance of notice u/s.143(2) on the revised return is mandatory. In the absence of such notice, the assessment is liable to be quashed. We are unable to accept the aforesaid contention in the peculiar facts of the present case.

11. A revised return undoubtedly substitutes the original return and forms the basis of assessment. However, whether non-issuance of a fresh notice u/s.143(2) would invalidate the assessment has to be examined in the context of the nature and contents of the revised return. From the records, it is evident that the revised return of income filed on 15.06.2018 did not disclose any fresh source of income, additional claim of deduction, exemption, loss, or any variation in the returned income. The only change made was a claim of TDS credit of Rs.4,685/-. Even the returned income remained unchanged at Rs.1,26,000/-. Thus, no substantive alteration was made in the computation of total income which could necessitate a fresh scrutiny process.

12. The reliance placed by the assessee on the decision of the Hon’ble Supreme Court in Hotel Blue Moon (supra) is misplaced. The said decision was rendered in the context of block assessment proceedings and the mandatory nature of notice u/s.143(2) before framing an assessment. In the present case, notice u/s.143(2) had admittedly been issued and served. The dispute is only regarding issuance of a second notice after filing of a revised return which did not alter the returned income or the issues under scrutiny.

We also note that the decision in Tripura State Electricity Corporation relied upon by the assessee arose in entirely different factual circumstances where the revised return contained material particulars which required consideration by the AO. The Hon’ble High Court set aside the assessment because the revised return itself had not been considered while framing the assessment. In the present case, no such prejudice is demonstrated. The revised return did not introduce any fresh claim affecting determination of taxable income and the assessment was completed after considering the materials furnished by the assessee during scrutiny.

13. In our considered opinion, where a revised return merely seeks TDS credit without any modification in returned income or disclosure of fresh facts relevant to assessment, the notice already issued u/s.143(2) on the original return cannot be regarded as invalid. The assessee has also failed to demonstrate any prejudice caused by non-issuance of a fresh notice.

14. Accordingly, we uphold the finding of the ld. CIT(A) on this issue and dismiss Ground Nos.1 to 4 raised by the assessee.

15. The next issue raised by the assessee on merits is that the AO made an addition of Rs.17,00,000/- u/s.69A of the Act being the balance cash deposits which, according to him, remained unexplained after considering the disclosure of Rs.50,00,000/- made by the assessee under the PMGKY Scheme. The assessee has contended that out of the impugned addition of Rs.17,00,000/-, a sum of Rs.10,00,000/- had already been subjected to tax in A.Y.2016-17 pursuant to scrutiny assessment completed u/s.143(3) of the Act. It was submitted that the very same cash balance was considered by the AO in the earlier assessment year and an addition of Rs.10,00,000/- was made and brought to tax. Therefore, the said amount cannot once again be treated as unexplained in the year under consideration.

16. We find considerable force in the above contention. Once a particular source of cash has already been examined and brought to tax in an earlier assessment year, the same amount cannot again be subjected to tax in a subsequent year in the absence of any material showing availability of a separate unexplained source. Taxing the same amount again would result in impermissible double taxation of the same income. The Revenue has not placed any material before us to demonstrate that the amount of Rs.10,00,000/-added in A.Y.2016-17 represented a source different from the cash balance relied upon by the assessee in the present year. Therefore, we hold that the assessee is entitled to relief of Rs.10,00,000/- on this account.

17. The assessee has further claimed that he is a senior citizen and is entitled to the benefit flowing from CBDT Instruction No.3/2017 dated 21.02.2017. Reliance was placed on the decision of the Delhi Bench of the Tribunal in Amar Singh(supra), which was subsequently followed by the Chennai Bench of the Tribunal in the case of Gaman Narayanachetty Govindaraju (supra). In the said decisions, having regard to the peculiar facts of demonetization-related deposits and the status of the assessee as a senior citizen, reasonable relief was granted while examining availability of cash in hand and household savings.

18. Having regard to the age of the assessee, the surrounding circumstances, the nature of deposits, the past history of returned income and keeping in view the ratio laid down in the aforesaid decisions, we are of the considered view that a further relief of Rs.5,00,000/- deserves to be granted to the assessee.

19. Accordingly, out of the addition of Rs.17,00,000/- made by the AO, relief of Rs.10,00,000/- is granted on account of income already subjected to tax in A.Y.2016-17 and further relief of Rs.5,00,000/- is granted considering the assessee’s status as a senior citizen and following the decisions of the Coordinate Benches referred to above.

20. Consequently, the balance addition of Rs.2,00,000/- alone remains unexplained. Considering the facts and circumstances of the case and the failure of the assessee to furnish satisfactory evidence regarding the source thereof, we uphold the addition to the extent of Rs.2,00,000/- u/s.69A of the Act and direct deletion of the balance addition of Rs.15,00,000/-.

21. The assessee has alternatively challenged the application of the enhanced rate of tax u/s.115BBE of the Act. We find merit in the contention of the assessee. The addition in the present case pertains to A.Y.2017-18. The assessee has relied upon judicial precedents, including the decision of the Hon’ble Madras High Court in the case of SMILE Micro Finance Ltd., wherein it has been held that the enhanced provisions introduced by the Taxation Laws (Second Amendment) Act, 2016 cannot be applied retrospectively so as to fasten the higher rate of tax for A.Y.2017-18.

22. Respectfully following the aforesaid decision, we hold that the enhanced rate of tax u/s.115BBE as amended by the Taxation Laws (Second Amendment) Act, 2016 is not applicable to the year under consideration. Accordingly, the surviving addition of Rs.2,00,000/- shall be taxed in accordance with the provisions of section 115BBE as applicable prior to the amendment and not at the enhanced rate introduced subsequently. The AO is directed to recompute the tax liability accordingly.

23. In the result the appeal of the assessee is partly allowed.