Man faces Rs 17.18 lakh tax penalty over Rs 55.62 lakh unexplained deposits; ITAT gives relief

Unexplained cash can lead to a notice from the Income Tax Department, and sometimes even a penalty. But what happens if the penalty is imposed under the wrong section?In one such case, the Mumbai bench of the Income Tax Appellate Tribunal (ITAT) has ruled that a tax officer cannot impose a penalty under one provision of the Income Tax Act when the assessment order records that proceedings were being initiated under different provisions.What the case is aboutA man had not filed an income tax return for assessment year 2016-17. The tax department subsequently completed a reassessment without his participation and, on February 15, 2024, assessed his total income at Rs 55.62 lakh.The amount was treated as unexplained cash deposits in a bank account that the department attributed to him.