New Delhi: A taxpayer has successfully challenged the addition of nearly ₹8.68 lakh to his income on the basis of presumptive business income, after the tax department treated the deposit as business profits and issued a notice.
The case, filed under ITA No. 4778/Del/2025, examined the taxpayer’s deposit of ₹8,68,799 into his bank account for Assessment Year 2017-18. Initially, the Assessing Officer (AO) issued a notice under Section 143(2) for “limited scrutiny” of the cash deposit, and later invoked Section 44AD (presumptive business income) to make an addition. The Commissioner of Income-Tax (Appeals) upheld the addition.
However, the Income Tax Appellate Tribunal – Delhi Bench (ITAT Delhi) on September 22, 2025 ruled that the AO exceeded his jurisdiction since the issue of presumptive business income was not included in the scope of the limited scrutiny notice, and required conversion to full scrutiny to proceed.
The Tribunal drew on precedent such as the PCIT v. Weilburger Coatings India (P) Ltd. (2023) decision and referenced Central Board of Direct Taxes (CBDT) instructions which state that issues outside the scope of limited scrutiny cannot be addressed without jurisdictional conversion.
Financial-planning commentators say the case serves as a reminder for taxpayers and practitioners to review the scope of notices under Section 143(2), and for departments to maintain compliance with the narrow parameters when issuing limited scrutiny orders.
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