ITAT Ranchi on Reopening Based on Wrong Bank Details: Pradeep Narsaria Case

ITAT Ranchi on Reopening Based on Wrong Bank Details – Lessons from the Pradeep Kumar Narsaria Case

When Wrong Bank Data Triggers a Reassessment

The Income Tax Department’s increasing reliance on data—be it from AIR, SFT, or direct bank feeds—has made reassessment proceedings more frequent and, at times, more error-prone. In this new landscape, the accuracy of the information that triggers a reopening is not just a technicality; it is the very foundation of the Assessing Officer’s (AO) jurisdiction. The recent decision of the ITAT Ranchi in Pradeep Kumar Narsaria vs ITO is a textbook example of what can go wrong when the facts at the threshold are muddled.

This article unpacks the Narsaria case to answer three pressing questions:

• Can a reassessment stand if it is based on the wrong bank account or incorrect cash deposit figures?
• Why did the Tribunal choose to remand the matter instead of quashing the assessment outright?
• What practical lessons should taxpayers and professionals draw when faced with reassessment notices based on dubious bank data?

Factual Matrix: What Exactly Went Wrong in the Narsaria Reopening?

Let’s start with the facts. Shri Pradeep Kumar Narsaria, a small Dish-TV recharge shop owner, filed his return for AY 2015-16, declaring an income of about Rs. 3.04 lakh. The AO, acting on information about alleged cash deposits of Rs. 2.05 crore, reopened the assessment. But here’s where the wheels came off:

• The bank account number cited in the reopening reasons was for an SBI savings account (No. 62282357559).
• The actual transactions the AO relied on were in a Corporation Bank current account (No. CBCA/01/000152).
• The claimed cash deposit figure of Rs. 2.05 crore did not match the records of either account.
• On scrutiny, the real cash deposits were about Rs. 1.26 crore in the Corporation Bank account, and no cash deposits at all in the SBI account.

To make matters worse, both the assessment and the first appellate order were passed ex-parte, with the assessee’s side of the story barely considered. When the matter reached the ITAT, the assessee produced bank statements for both accounts, clearly exposing the mismatch in both account identity and deposit figures.

Legal Foundation: How “Reasons to Believe” Depend on Correct Facts

The power to reopen an assessment under sections 147/148 of the Income Tax Act is not a casual one. The AO must have a “reason to believe” that income has escaped assessment, and this belief must be anchored in tangible, verified material. There’s a world of difference between a “reason to believe” and a mere “reason to suspect.” The law insists on a live link between the material in the AO’s possession and the belief that income has escaped assessment.

If the very facts that form the basis of the AO’s belief are incorrect—say, the wrong bank account or a phantom cash deposit—then the jurisdiction to reopen is on shaky ground. This is not a minor procedural slip; it goes to the root of the AO’s authority to act. In the Narsaria case, the AO’s belief was about a non-existent pattern of deposits in a wrongly identified account. If the foundation is faulty, the entire edifice of reassessment is at risk.

Courts and tribunals have consistently held that reopening based on incorrect facts is not a curable irregularity. It is a jurisdictional defect that can, in the right circumstances, vitiate the entire proceeding. (See our detailed post on Decoding Section 148A: Strategic Responses and Procedural Insights for Notice u/s 148A(b) for deeper procedural insights.)

Does Mismatched Bank Data Undermine AO’s Jurisdiction to Reopen?

This brings us to the heart of the matter: Can there be a valid “reason to believe” if the bank account is misidentified and the alleged cash deposit figure is a mirage?

• Identity of the account: If the account number in the reasons does not belong to the assessee, or if the AO has mixed up accounts, the very basis of reopening is suspect.
• Quantum of escapement: If the Rs. 2.05 crore figure is not reflected in any account, the AO’s belief is not just mistaken—it is unfounded.

In Narsaria’s case, the AO’s reasons mixed up the SBI savings account with the Corporation Bank current account, and the Rs. 2.05 crore figure had no factual correlation with either. Such defects are not mere technicalities; they strike at the jurisdiction of the AO. Yet, as we’ll see, the Tribunal did not quash the reassessment outright.

ITAT’s Choice: Why Remand Instead of Quashing the Reassessment?

The assessee argued that the reopening was invalid and should be quashed. The Revenue, on the other hand, pointed to the assessee’s non-cooperation and requested a remand for proper verification. The ITAT acknowledged the factual mismatch—wrong account number, different account for transactions, and a non-existent Rs. 2.05 crore deposit. It also noted the ex-parte nature of the proceedings at both the assessment and appellate stages.

In the “interest of justice,” the Tribunal decided that both sides deserved a proper factual hearing. Importantly, there were still substantial cash deposits (about Rs. 1.26 crore) in the Corporation Bank account, which merited examination. The ITAT avoided deciding the complex jurisdictional question at this stage, preferring to restore the matter to the AO for a fresh, fact-based assessment. The appeal was thus “partly allowed for statistical purposes,” with all legal issues left open.

Key Takeaways So Far

• Factual errors in bank account details and cash deposit figures can seriously undermine the legal validity of reassessment.
• The AO’s “reason to believe” must be based on verified, correct facts—not assumptions or data mismatches.
• Where the facts are muddled and the proceedings have been ex-parte, the Tribunal may remand the matter for a fresh start, keeping all legal issues open for future challenge.

(For more on the consequences of ex-parte assessments, see our article on Calcutta HC Quashes IT Order under Sec 148A(d): No Personal Hearing Violates Natural Justice.)

Keeping Jurisdictional Issues Open: What It Really Means for the Assessee

One of the most significant aspects of the ITAT Ranchi’s order is its explicit direction that all legal issues are left open for the remanded proceedings. This is not just a procedural nicety—it’s a powerful safeguard for the taxpayer. By refusing to pre-judge the validity of the reopening, the Tribunal ensures that the assessee retains the right to challenge every aspect of the reassessment afresh. The AO cannot claim that jurisdictional objections (like the validity of “reasons to believe,” sanction, or limitation) have already been settled. This “open issues” approach gives the assessee a second chance to build a complete record, file detailed objections (as per the GKN Driveshafts protocol), and present all relevant evidence. If the AO persists with defective or partially corrected reasons, the taxpayer’s case for relief at higher appellate forums becomes even stronger.

(For guidance on income tax return filing to avoid such complications, you can refer to our Income Tax Return Filing Services.)

AO’s Duty of Verification: Why Proper Fact-Checking Is Legally Critical

The Narsaria case starkly illustrates the risks when the AO skips proper verification. The law expects the AO to form a rational belief based on verified material—not just raw, unchecked data. Before issuing a notice under section 148 or 148A, the AO should:

• Confirm the correct account number and ownership, ideally with PAN linkage.
• Cross-check the alleged deposit figures with actual bank statements.
• Distinguish the assessee’s transactions from those of similarly named persons.

Failure to do so can result in jurisdictional challenges, wasted departmental resources, and adverse judicial observations. The Narsaria order is a reminder to the department to adopt standard operating procedures for data-driven reopenings and to invest in proper training for officers.

(Explore our Income Tax Litigation services for professional assistance in such disputes.)

Building a Defence: Documenting and Presenting Evidence Against Erroneous Cash Deposit Allegations

When faced with allegations of undisclosed cash deposits, a robust evidentiary strategy is crucial:

• Gather certified bank statements for the relevant period.
• Produce your cash book, ledger, and financials to explain the source of deposits.
• Reconcile each alleged deposit with your books, and prepare a summary chart comparing the AO’s figures with actual transactions.
• Highlight errors such as double-counting or misclassification by the AO.
• Map each bank account (number, bank, branch, usage) to show if the AO has mixed up accounts or persons.
• Submit all evidence in writing and obtain acknowledgments for your filings.
• If the AO ignores your evidence, use appellate forums to press your case.

For tips on dealing with cash deposit issues, see our blog post on Consequences of Cash Transaction : Know This Before Using Cash.

Broader Lessons: Handling Factual Mismatches in Future Reopenings

The Narsaria case is not an isolated incident. Data-driven reopenings often suffer from:

• Wrong account holder or year
• Misclassification of deposits (cash vs non-cash)
• Reliance on unverified or misread figures

The best defence is a “verify-then-respond” discipline. Use Narsaria as a precedent to argue that unverified, incorrect bank facts can vitiate or at least seriously weaken a reopening. Where ex-parte assessments are passed without proper fact-finding, seek a remand. Strategically, balance the push for quashing with the practical benefits of a remand, and always frame your grounds of appeal to keep both factual and jurisdictional pleas alive.

Re-Drawing the Boundaries of Valid Reassessment: What Narsaria Adds to the Law

The Narsaria decision reaffirms a threshold principle: reassessment cannot rest on incorrect bank details or phantom figures. Factual errors at the threshold can, in principle, vitiate jurisdiction. Yet, where there are objectively substantial transactions needing explanation and prior proceedings were ex-parte, courts may prefer remand over outright quashing. The “open issues” approach protects taxpayer rights without pre-emptively nullifying the revenue’s case.

Going forward, AOs are on notice: sloppy reliance on bank data will not pass judicial scrutiny. Taxpayers, for their part, must contest both facts and law from the earliest stage. The Narsaria case is a blueprint for challenging flawed reopenings and ensuring that assessments are grounded in fact, not fiction.

Key Takeaways

• Always verify the factual basis of any reassessment notice—especially bank account details and deposit figures.
• Respond promptly and comprehensively, documenting every step.
• Use the remand process to build a full factual and legal record.
• Insist on your right to a fair hearing and reasoned orders.
• Remember: a defective foundation can topple the entire reassessment, but only if you raise and preserve the right objections at every stage.

If you’re facing a reassessment based on questionable bank data, don’t panic—respond with facts, law, and a clear paper trail. And if you need help navigating the process, reach out for professional guidance. Our Delhi office is always ready to assist clients nationwide with all their income tax controversies and compliance needs.