FD Non-Filer, Hyderabad - Section 148 Closed, 270AA Immunity Granted

The department flagged large FD investments with no ITR on record. Here is how we closed the assessment with nil additions and eliminated the penalty.

The Problem

A resident individual in Hyderabad held fixed deposits worth over ₹51L across two financial institutions, earning interest income of around ₹3.5L during FY 2019-20. No Income Tax Return had been filed for that year.

CBDT's Insight Portal picked up the FD investments through third-party reporting and flagged the case for non-filing. A Section 148 notice was issued to reopen the assessment.

The underlying facts were straightforward - the funds had been gifted by the taxpayer's husband from his salaried income, which had already been taxed. But without a filed return and documentation, the department had no way to verify this. The risk of additions to income was real.

What We Did

Filing the Return and Declaring the Income A return was filed in response to the Section 148 notice declaring interest income from the fixed deposits. All income visible in Form 26AS was offered for taxation. No unexplained credits, no business income - solely FD interest.

Representing Before the Department and Establishing the Source of Funds Detailed submissions were filed on the taxpayer's behalf in response to departmental notices. The key argument was establishing a complete money trail - from the husband's salary account to a joint account to the taxpayer's individual account and finally into the fixed deposits. Bank statements supporting each step were submitted. This left no room for the department to treat the FD principal as unexplained income.

Coordinating Third-Party Verification The department issued Section 133(6) notices to the financial institutions to independently verify the FD balances and interest credited. The responses confirmed the figures, which matched the return filed. The case was self-corroborating.

Applying for Penalty Immunity Under Section 270AA The assessment order initiated penalty proceedings under Section 270A for non-filing of the original ITR. We immediately filed Form 68 under Section 270AA seeking immunity. Since the assessed income had been accepted as declared and applicable taxes were paid, all conditions for immunity were met.

The Result

The assessment was completed under Section 147 read with Section 144B with no variation - income accepted exactly as declared. The Section 270AA immunity application was allowed, granting full protection from the Section 270A penalty.

Both issues resolved in the taxpayer's favour - clean assessment closure and penalty eliminated.

Key Takeaway: When a non-filer is flagged for large FD investments, the department's primary concern is the source of funds, not just the interest income. A clear, document-backed money trail showing the source is a spouse's taxed salary income resolves the core issue. Once the assessment closes with income accepted as declared, filing Form 68 under Section 270AA is a time-bound but highly effective way to eliminate the non-filing penalty entirely.