ARUN RAMU SHIKHARE,MUMBAI vs. ASSISTANT COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 4(3), MUMBAI

PER PAWAN SINGH, JUDICIAL MEMBER:

of Income Tax (Appeals) – 52, Mumbai [for short “CIT(A)”] dated

06.03.2025, for the assessment year 2018-19. The assessee has raised the

following grounds ofappeal:- “1.In the facts and circumstances of the case and in law, the Learned, CIT (Appeals)- 52, Mumbai has erred in confirming the addition under section 69A of Rs.20,00,000/- in respect of unexplained money, even after providing all requisite explanations and evidences to substantiate the genuineness of the cash.

was received from Nippani Rural Police Station, District–Belagavi,

Karnataka, that during the Legislative Assembly Election in the state of

Karnataka, Model Code of Conduct was enforced. Static Surveillance Team

(‘SST’) was set up for enforcing Model Code of Conduct. SST Team

intercepted one Hyundai Creta Car, bearing registration No. MH-46-AU8965,

travelling from Kharghar, District Raigad, Maharashtra to Gadhinglaj

Kolhapur, carrying a cash of Rs. 20.00 Lakhs. Nippani Rural Police has

registered a First Information Report (FIR) against the assessee (Arun

Ramu Shikhare) for violation of the Model Code of Conduct. The

information was passed over to ADIT(Inv) Unit 1, Belagavi for enquiries

with the assessee to ascertain the source of cash found in his

possession.During interception the assessee accepted that cash found and

seized by the police belongs to him but he failed to explain the source of

such seized cash amount with documentary evidence. Though, he stated

that the cash was withdrawn by him from his bank account in last six

months. The statement of the assessee was recorded under Section 131 of

the Income Tax Act on 31. 03.2018 by investigation team of Income Tax

Department at Nippani Rural Police Station.

the assessee in the Assessment Order. At the time of recording the statement, the assessee explained that, he is engaged in Civil construction

work and was carrying said amount to make the payment of labours, sub-

contractors and for the purpose of building material from unregistered

dealers (URD) from Gadhinglaj. The AO recorded that he could not provide

the exact details of persons to whom he was going to make the payment.

made requisition under Section 132A to Nippani Rural Police Station on

29.06.2018 for taking possession of cash of Rs. 20 Lakhs seized on

31.03.2018.Consequent on requisition under Section 132A, notice under

Section 153A for block assessment years (AYs) 2013-14 to 2019-20 was

issued to the assessee on 25.09.2019. In response to the notice under

Section 153A, the assessee filed his return of income on 23.10.2019

declaring total income of Rs. 56,22,560/-. The AO after serving the

statutory notices proceeded for the assessment. The AO issued detailed

show cause notice dated 21.04.2021 to furnish the various details as

recorded in Paragraph 3.2 of the assessment order. The assessee was

asked to furnish Bank account for relevant assessment year in the name of

the assessee or in the name of his proprietary firm. Name and address,

PAN, VAT No., GST No. and details of the amount of all purchases along

with their ledger, corresponding purchases, invoices, delivery challan to

substantiate the genuineness of such transaction and also details of the

various other business related activities. The assessee was also asked to

furnish supporting evidence to justify allowability of such expenses under Section 37. In response to such show cause notice, the assessee filed his

reply dated 11.05.2021. The assessee submitted that he is engaged in civil

construction work in the name of Abhiyanta Corporation. The cash was

withdrawn from the Ajara Urban Bank which is in the name of Abhiyanta

Corporation. The assessee furnished a certificate from his Banker and the

details of currency notes seized. He stated that he was carrying a cash of

Rs. 20.00 Lakhs on 31.03.2018 which is the part of his audited bank

account, which is reflected in his ITR, which is uploaded in the system. The

assessee submitted that the total cash in hand as on 31.03.2018 was of Rs.

20,54,802/-, out of which he was carrying Rs. 20.00 Lakhs, while he was

travelling to Gadhinglaj through Kognoli Village near Toll Plaza Check

Post.During the course of recording his statement before Director of

Income Tax (Inv.), Unit-1, Belagavi, he stated that cash of Rs. 20.00 Lakhs

is from his business. The cash was withdrawn from his Bank account in the

name of Abhiyanta Corporation. The assessee also furnished the details of

bank withdrawalfrom 01.04.2017 to 31.03.2018 certified by the assessee’s

banker that is Ajara Urban Cooperative Bank Limited, Kolhapur.

assessee had failed to address the moot question as to why the cash

withdrawn from the bank during the year was kept for whole of the year

and was used on the last day when it was detected and seized. The

assessee is in the business of civil construction work, where the labour

payment and payment to sub-contractor and purchases of consumable material are generally made in cash, which justifies the regular and periodic

withdrawal over the year. But keeping the cash ideal for so long is neither

usual nor prudent as evident from the monthly cash withdrawal. The AO

also prepared monthly withdrawal statement of cash from April 2017 to 31

March 2018, wherein, he has accepted the fact that the cash withdrawal

during the year was at Rs. 88.77 Lakhs. In the business of the assessee,

regular payments are required. Thus, regular cash withdrawal was

necessary to meet the obligations. The AO thus concluded that, the cash

seized is unsubstantiated. The AO also referred the decision in the case of

Sumati Dayal Vs CIT (214 ITR 801),whereinit was held that, whether the

apparent is real is to be decided on the basis of surrounding circumstances.

The AO treated such cash seized as unexplained and added under Section

69A and taxed the same under section 115BBE, while passing the

Assessment Order under Section 153A on 25.05.2021.

appeal before the ld CIT(A).Before ld CIT(A), the assessee filed similar

submissions as contended before the AO. The assessee submitted that the

cash seized was withdrawn from his Bank A/c for business purpose. The

assessee also furnished the name and address of the persons to whom he

was likely to make the payment. The Ld.CIT(A) held that the claim of the

assessee about the payment in cash is in violation of the Section 40A(3).

However, Form 3CD shows that, no payment had been made in violation of

Section 40A(3). Thus, the claim of the assessee cannot be believed, that the entire cash was being carried to make cash payment. Had it been a

regular feature, the auditor would have reported in Form 3CD. Thus, the

claim of the assessee is nothing more than after thought and the Ld.CIT(A)

confirmed the action of the AO. Further aggrieved, the assessee has filed

the present appeal before the Tribunal.

(‘Ld. AR’) for the assessee and the Learned Senior Departmental

Representative (‘Ld. Sr. DR’) for the revenue. We find that on filling

additional grounds of the appeal,for questioning the validity of the

proceedings initiated under Section 153A, our predecessor vide order sheet

dated 19.11.2025 directed the Ld. Sr. DR for the revenue to obtain factual

report from the AO, clarifying the facts, whether the condition of Rule 112F

r.w.s Central Board of Direct Tax (‘CBDT’) Circular No. 10 dated

31.12.2012have been complied. The Ld. Sr. DR for the revenue was

directed to file report on or before 10.12.2025. We find that the report of

the AO is available on record. Thus, with the aforesaid factual background,

we have heard the submissions of the Ld. AR of the assessee on the

additional grounds of appeal as well as on merit.

appeal that AO erred in issuing notice under section 153A in gross violation

of third proviso to section 153A read with Rule 112F.The ld AR of the

assessee submits that during the Assembly election in State of Karnataka in

the year 2018, Static Surveillance Team (STT) on duty intercepted the car of assessee wherein a cash of Rs. 20.00 lacs were found and seizes on

31.03.04.2018 by Police of Police Station Nippani District Belagavi,

Karnataka. Thereafter, the official of department was called who recorded

the statement of the assessee. While making statement to SST team, Police

Officer as well as to Investigation team of the Income Tax Department, the

assessee categorically stated that cash he was carrying is from withdrawal

from his bank account of his business concern. The AO made requisition

under section 132A on 29.06.2018 and cash was taken into possessing by

department. On the basis of requisition under section 132A, the AO notices

issued under section 153A dated 25.09.2019 for block assessment years

2013-14 to 2019-20, such facts are recorded in para-2 of assessment order.

The Ld. AR of the assessee submits that the case of the assessee falls

within the third provisoto Section 153A and the AO was required to follow

Rule 112F of the Income Tax Rules wherein the legislature had categorically

stated that AO is not required to issue notices for assessing or re-assessing

the total income for six assessment years in cases where search was

conducted under section 132 or requisition made under section 132A and

cash for the assets were seized during the election period generally on a

single warrant. Admittedly, in case of assessee the cash was seized during

the election period; therefore, AO could not have issued a notice under

section 153A for all the six assessment years and was to issue notice only

for the year in which the requisition under section 132A was made. In case

of assessee the cash was seized in FY 2017-18 relevant to AY 2018-19.

However, requisition was made in FY 2018-19 relevant to AY 2019-20 that

is on 26.08.2018. To support his submissions, the ld AR of the assessee

referred and relied upon the CBDT Circular No. 10 of 2012 dated

31/12/2012 and would submits that there is no certificate issued by the AO

and none of the procedure laid down in the CBDT Circular has been

followed by AO. Accordingly, the entire assessment proceedings under

section 153A is bad in law.To support his view, the ld AR of the assessee

relied on the decision of Mumbai Tribunal in Vijay Madan Varma Vs ACIT in

ITA No. 2333 & 2334/Mum/2023 dated 23/05/2025.ss

not only before SST party but to investigation team of Income tax

department and again before AO and CIT(A) has categorically said that the

cash seized was from the past withdrawal from the bank account in Ajara

Urban Cooperative Bank Limited, Kolhapurand was being carried for

payment to labour and material for the purpose of bossiness. The assessee

has shown the cash in hand was shown in the cash books. The total

withdrawal in the financial year was more than Rs. 88.76 lacs, such fact is

duly recorded by ld CIT(A).

case, the cash was seized on 31.03.2018 and requisition was made on

26.08.2018, thus sequence falls in two different assessment years. The AO

has furnished his report on the additional ground of appeal raised by the

assessee. The AO has followed due procedure for issuing notice under section 153A. No material is brought on record to invalidate the facts that

the search and seizure action was not valid. On the alleged non-compliance

of Rule 112F, the ld Sr DR for the revenue submits that the objection of

assessee is misconceived. No such objection was raised by the assessee

during assessment. The assessment cannot be invalidated on hyper

technical issues. On merit, the ld Sr DR for the revenue submits that the

assesse failed to substantiate the source of cash seized from the assessee.

The AO as well as ld CIT(A) has given categorical findings while making

and sustaining the addition.

gone through the orders of lower authorities carefully. We have also

deliberated on the various documentary evidences and the case laws relied

by the ld AR of the assessee. There is no dispute on the facts that the AO

made requisition under section 132A on 29.06.2018 and cash was taken

into possessing by department. On the basis such requisition under section

132A, the AO notices issued under section 153A dated 25.09.2019 for block

assessment years 2013-14 to 2019-20; such facts are recorded in para-2 of

assessment order. The AO issued separate notice under section 153A dated

25.09.2029 for AY2018-19. The Ld. AR of the assessee submits that the

case of assessee fall under third provision of section 153A. Thus, the AO

was required to follow the mandate of third proviso to Section 153A and

Rule 112F of the Income Tax Rules. We find that in response to additional

ground of appeal, this bench required the report of AO. The report of AO filed through Sr DR for revenue is available on record. In the report the AO

submitted “that the assessee cannot challenged the jurisdictional merely on

basis of speculative or hyper technical objection or procedural conjectures,

unless demonstrate prejudice, which is absent in the present case”.

below;

SECTION 132, READ WITH SECTION 132A OF THE INCOME-TAX ACT, 1961 – SEARCH & SEIZURE - ASSESSMENT OF PRECEDING YEARS IN SEARCH CASES DURING ELECTION PERIOD CIRCULAR NO. 10/2012 [F. NO. 282/22/2012-IT (INV. V)], DATED 31-12-2012 As per provisions contained in section 153A and 153C of the Income Tax Act, 1961, the Assessing Officer is required to issue notice for assessing or reassessing the total income for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made. 2. In consequence of the powers conferred by clauses (64) and (66) of the Finance Act, 2012 the Central Government amended the Income Tax Rules, 1962, to insert a new Rule 112F after the existing Rule 112E, specifying the class or classes of cases in which the Assessing Officer shall not be required to issue notice for assessing or reassessing the total income for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made. 3. The aforesaid amendment was introduced with a view to reduce infructuous and unnecessary proceedings under the Income Tax Act, 1961 in cases where a search is conducted u/s 132 or requisition made u/s 132A and cash or other assets are seized during the election period, generally on a single warrant, and no evidence is available, or investigation required, for any assessment year other than the assessment year relevant to the previous year in which search is conducted or requisition is made. 4. In such cases, the officer investigating the case, with the approval of the Director General of Income Tax, shall certify that - (i) the search is conducted under section 132 or the requisition is made under section 132A of the Act in the territorial area of an assembly or parliamentary constituency in respect of which a notification has been issued under section 30, read with section 56 of the Representation of the People Act, 1951; or (ii) the assets seized or requisitioned are connected in any manner to the ongoing election process in an assembly or parliamentary constituency; and (iii) no evidence is available or investigation is required for any assessment year other than the assessment year relevant to the previous year in which search is conducted or requisition is made. 5. The certificate of the investigating officer shall be communicated to the Commissioner of Income Tax and the Assessing Officer having jurisdiction over the case of such person. 14. We find that the AO has not followed the mandate of Rule 112F of Income

Tax Rules-1962. The above said Circular clearly prescribe that Investigation

Officer by the approval of Director General of Income Tax has to certify the

three situations provided therein and then said certificate of the

Investigation Officer is communicated to the CIT and the AO having

jurisdiction over the case of such person. Admittedly the AO in his report,

has not specified that any such certificate has been issued. Rather, he

stated that the assessee cannot challenged the jurisdictional merely on

basis of speculative or hyper technical objection or procedural conjectures,

unless demonstrate prejudice, which is absent in the present case. We find

that coordinate bench of Mumbai Tribunal in Vijay Madan Varma Vs ACIT

(supra) has held that once the procedure prescribed in Rule 112F as

clarified by the CBDT has not been complied with and no certificate has

been issued by the Investigation Officer even when the cash was found

during the election period, AO could not have issued notices under section

153A for the six earlier assessment years and it was a clear violation of

Rule 112F and the procedures laid down by CBDT vide Circular No.10 of

2012 (supra). And the entire proceeding under section 153A was held as bad in law and accordingly, the assessment quashed. Thus, respectfully

following the same the assessment under section 153A in the present case

is held as bad in law.

that cash seized by SST team was from the known sources, which was part

of cash withdrawal from bank account of assessee with Ajara Urban

Cooperative Bank Limited, Kolhapur. The AO or CIT(A) has not rejected the

books of account of the assessee or the cash book of assessee. There is

total cash withdrawal of assessee of more than Rs. 88.00 lakhs in the

financial year. Thus, the assessee is also liable to succeed on merit. In the

result, the grounds of appeal raised by the assessee are allowed.

Order pronounced in open Court on 10.07.2026

S Sd/-

Sd/- Sd/- GIRISH AGRAWAL PAWAN SINGH ACCOUNTANT MEMBER JUDICIAL MEMBER

Mumbai, Dated: 10/07/2026 Aditi Pandare, PS Aditi Pandare, PS Aditi Pandare, PS Aditi Pandare, PS Copy of the order forwarded to: (1) The Assessee; (2) The Revenue; (3) The PCIT / CIT (Judicial); (4) The DR, ITAT; and (5) Guard file. By Order

Assistant Registrar ITAT, Mumbai