KISHORE MOTORS,GUNDLUPET, CHAMARAJANAGAR vs. INCOME TAX OFFICER, WARD 1, CHAMARAJANAGAR

In this appeal, the assessee has raised the following grounds: -

The learned CIT(A), vide impugned order, dismissed the appeal filed by the assessee on the ground of delay of 58 days. Being aggrieved, the assessee is in appeal before us.

During the hearing, the learned Authorised Representative (“learned AR”) submitted that after receipt of the order passed by the learned CIT(A), the assessee instructed its accounting to submit the papers to the counsel to file the further appeal. However, the Accountant, without taking any necessary steps, left the job, and the assessee was under the belief that the appeal papers had been duly submitted to the counsel. It was further submitted that the assessee became aware only after appointing new counsel that the appeal before the learned CIT(A) had not yet been filed, and thereafter the necessary steps were taken to file the appeal before the learned CIT(A). Thus, the learned AR submitted that due to the aforesaid circumstances, the appeal before the learned CIT(A) was filed after a delay of 58 days. On merits, the learned AR submitted that the assessee is engaged in the business of a sub-dealer of M/s Chakrika Motors Private Limited to sell two-wheelers manufactured by M/s Honda Motorcycles and Scooters India Private Limited. Further, the assessee also provides after- sales services to end-users of two-wheelers from its showroom and workshops. The learned AR submitted that M/s Chakrika Motors Private Limited is the main dealer of M/s Honda Motorcycles and Scooters India Private Limited and has entered into the Sub-Dealership Agreement with the assessee, pursuant to which the assessee is selling two-wheelers on behalf of M/s Chakrika Motors Private Limited, being the main dealer of M/s Honda Motorcycles and Scooters India Private Limited. As regards the cash deposit of Rs. 2,14,02,700/- in the bank account maintained with the Karnataka Bank Limited, the learned AR submitted that the same pertains to cash collected by the assessee from the customers as booking advances for the purchase of vehicles on behalf of the main dealer. It was submitted that the said booking advances were transferred by NEFT to the bank account of the main dealer on the same or the next day, after which the vehicles were delivered to the customers. In this regard, the learned AR referred to the bank statement of the assessee of the account maintained with Karnataka Bank Limited, which forms part of the paper book from pages 98 – 122 by referring to the said bank statement. The learned AR submitted that the cash received by the assessee was transferred through NEFT/RTGS to the main dealer, and apart from the main dealer, the only payment was made in respect of the rent paid for the showrooms/service centre. In order to substantiate its submission that the cash was collected by the assessee from the customers as booking advances on behalf of the main dealer, the learned AR also placed on record a certificate issued by the main dealer certifying the modus operandi/transaction between the assessee and the main dealer. In this regard, consolidated as well as party- wise ledger account of the assessee in the book of the main dealer has also been placed on record by the assessee as additional evidence to substantiate its submission that the cash deposited in its bank account belongs to the main dealer and was also transferred to the main dealer time-to-time. Regarding the commission income, the assessee has placed on record before us the Sub-Dealership Agreement dated 28.10.2015 entered into between the assessee and the main dealer. During the hearing, the learned AR submitted that the assessee was paid commission @8% on the sale of each vehicle by the main dealer, on which TDS was also deducted by the main dealer.

On the other hand, the learned Department Representative (“learned DR”) submitted that the assessee has mostly remained non-compliant to the statutory notices issued during the assessment proceedings and also did not file its return of income in response to the notice issued under section 148 of the Act. The learned DR submitted that during the assessment proceedings, the assessee merely made a general submission 6 that cash collected from customers was deposited in its bank account and transferred to the main dealer, and neither any bank statement was furnished nor any other details were provided by the assessee to substantiate its claim. The learned DR submitted that the documents, now placed reliance upon by the learned AR, have been furnished by the assessee for the first time, and the same require verification/examination.

Having considered the submission of both sides and perused the materials available on record, we find merit in the submissions of the learned DR, as all the documents now placed reliance upon by the learned AR were not furnished by the assessee before the AO despite the grant of ample opportunities. From the perusal of the assessment order, it is evident that the assessee was specifically asked to provide a copy of the cash receipts, confirmation from the main dealer and the agreement, if any, between the assessee and the main dealer. Further copies of the sales ledger, cash flow statement, cash book, and the bank statement for the year under consideration were also sought from the assessee. However, apart from making general submissions, the assessee did not furnish any details.

From the perusal of the bank statement of the account maintained by the assessee with the Karnataka Bank, we find that there are regular cash deposits by the assessee and major transfers of money are to the main dealer, i.e. M/s Chakrika Motors Private Limited. Further, we find that the assessee made multiple similar transactions throughout the year. From the copy of the ledger account of the assessee in the books of the main dealer, we find that there was an opening debit balance of Rs. 47,795/- and a closing credit balance of Rs. 7,88,436/-. Therefore, transactions between the assessee and the main dealer appear to be a running account not restricted to the year under consideration. In response to the query raised during the hearing, the learned AR submitted that in subsequent years, similar transactions were undertaken by the assessee, and the commission income earned was offered to tax.

Thus, in view of the facts and circumstances of the present case, we find that even though the assessee remained non-compliant during the assessment proceedings, it has now placed on record detailed documentation in support of its claim that the cash deposited in the bank account was collected from the customers on behalf of the main dealer and the said cash was transferred to the main dealer. Since all these documents are placed on record by the assessee for the first time and the same have not been verified by any of the lower authorities, we deem it appropriate to restore the matter to the file of the Jurisdictional AO for de novo consideration after examination of the details now placed on record before us by the assessee. We order accordingly. As the matter has been restored to the file of the AO for consideration afresh, the assessee is directed to furnish any other information/document as may be sought by the AO for complete adjudication. Even though the learned CIT(A) dismissed the appeal filed by the assessee on the ground of delay, we are of the considered view that justice shall be served to both parties if the matter is 8 re-examined at the level of AO after considering various documents placed on record by the assessee in support of its case. Thus, with the above directions, the impugned order is set aside, and the grounds raised by the assessee are allowed for statistical purposes.

In the result, the appeal by the assessee is allowed for statistical purposes. Order pronounced in the open court on 31st July, 2026. Sd/- Sd/- (BALAKRISHNAN S) (SANDEEP SINGH KARHAIL) ACCOUNTANT MEMBER JUDICIAL MEMBER Bangalore, Dated, the 31st July, 2026. *VM* Copy to: KISHORE MOTORS, NO. 93/3A, ASSNT. NO.145/3A, PROPERTY NO.09, OOTY-MYSORE 1 ROAD, GUNDLUPET-571111, CHAMARAJANAGARA-571111, KARNATAKA INCOME TAX OFFICER, WARD 1, MPS COMPLEX, CAR STREET, 2 CHAMARAJANAGAR-571313, CHAMARAJANAGARA-571313, KARNATAKA 3 THE PCIT / CIT, 4 THE D.R., ITAT, BANGALORE BENCH BY ORDER ASSISTANT REGISTRAR I.T.A.T., BANGALORE