Widow Wins Tax Battle Over Rs 2.42 Lakh FD And Cash Deposits After Nine Years

A fixed deposit (FD) made in 2007 came back to trouble an 83-year-old Jaipur woman almost a decade later. Since she had not filed an income tax return (ITR) or responded to the tax notice, the tax officer treated several entries in her bank account as unexplained income.

The Income Tax Appellate Tribunal (ITAT), Jaipur, has now given her relief. It found that her bank records explained where the money had come from and that the additions could not be sustained merely because she had failed to participate in the earlier proceedings.

How The Amount Reached Rs 5.15 Lakh

The woman, an elderly widow dependent on family pension, had placed Rs 2 lakh in a two-year fixed deposit with the Bank of Rajasthan on May 14, 2007. The FD matured on May 29, 2009, and about Rs 2.42 lakh was credited to her account, according to a recent report by The Times of India.

She also deposited Rs 1.06 lakh in cash during the relevant period. Her explanation was that the money had come from savings out of the family pension received by her.

The transactions caught the tax department’s attention because no ITR had been filed. A reassessment notice under Section 148 was issued on March 29, 2017. The woman did not reply.

The Assessing Officer (AO) consequently passed an order under Section 144, which allows an assessment to be completed on the basis of the information available when a taxpayer does not respond.

The officer counted the Rs 2.42 lakh FD maturity amount and the cash deposits of Rs 1.06 lakh as unexplained. Another Rs 1.5 lakh was added as estimated regular income, apart from interest income of Rs 16,940. Her total income was fixed at Rs 5.15 lakh.

Her first appeal also failed after she did not submit replies or written arguments despite receiving hearing notices. Following the long delay in the proceedings, she took the matter to the ITAT.

What The Bank Passbook Revealed

The passbook proved crucial. It showed the original Rs 2 lakh FD investment in 2007 and the maturity credit received in 2009. The tribunal said there was a direct trail between the two transactions. The maturity amount was, therefore, her own money returning to her account, not unexplained income earned during that year.

The passbook also recorded earlier cash withdrawals adding up to Rs 2.45 lakh. This was more than twice the cash deposited later. The tax officer had brought no evidence to show that those withdrawals had already been spent.

In that situation, the tribunal found it reasonable to accept that the Rs 1.06 lakh deposited in cash came from money withdrawn earlier. Once the woman provided a plausible source, the tax department had to produce material disproving it. It failed to do so.

The Rs 1.5 lakh estimated as regular income was deleted for the same reason: no evidence supported the figure.

For taxpayers, particularly senior citizens, the case underlines the value of retaining old passbooks, FD receipts and withdrawal records. Ignoring a tax notice can prolong a dispute, but a bank deposit by itself does not establish undisclosed income.

FAQs

1. Can FD maturity proceeds be treated as unexplained income?

Not if the taxpayer can establish a clear link between the original investment and the maturity amount through bank statements, passbooks, or FD receipts.

2. Can cash deposits made from earlier withdrawals be questioned?

Yes. However, they may be accepted as explained if earlier withdrawals are documented and there is no evidence that the money was spent elsewhere.

3. What happens if a taxpayer ignores an income tax notice?

The tax officer may complete a best-judgment assessment using available information. Responding promptly and submitting supporting documents can prevent an avoidable dispute.