MANIKAPPA,BIDAR vs. INCOME TAX OFFICER, WARD-1, BIDAR, BIDAR

PER KESHAV DUBEY, JUDICIAL MEMBER:

These appeals at the instance of the assessee are directed against the order of ld.CIT(A)/NFAC both dated 26/08/2025 vide DIN & Order No: ITBA/NFAC/S/250/2025-26/1080017677(1) for the AY 2015-16 & vide DIN & Order No. ITBA/NFAC/S/250/2025- 26/1080029660(1) for the AY 2016-17 passed u/s. 250 of the Income Tax Act, 1961 (in short “the Act”). Since the legal issues raised in both these appeals is common, these are clubbed together, heard together and disposed of by this common order for the sake of convenience.

ITA Nos.2466 & 2467/Bang/2025 Manikappa, Bidar Page 2 of 13

“Grounds of Appeal No. 1.0 : The learned Commissioner of Income Tax (Appeals) has erred on law and facts by not deciding that the learned Assessing Officer has erred in assumption of jurisdiction and the notices issued u/ s. 148 of the Income Tax Act, 1961 dated 30/03/2021 is time barred, without jurisdiction, based on incorrect assumption of facts and therefore the same are bad in law. Grounds of Appeal No. 02 : The learned Commissioner of Income Tax (Appeals) has erred on law and facts by not deciding that the learned Assessing Officer has erred in invoking provisions of Section 144 of the Income Tax Act, 1961 and therefore the assessment order is illegal and liable to be quashed. Grounds of Appeal No. 3.0 The learned Commissioner of Income Tax (Appeals) has erred on law and facts by not deciding that the learned AssessingOfficer has erred in making additions of Rs.1,09,33,470/- u/s. 69A of the Income Tax Act, 1961 as unexplained money as the same is opposed to the law and facts of the case.

Grounds of Appeal No. 04 : The learned Commissioner of Income Tax (Appeals) has erred in law and facts by not deciding that the assessment order passed is against the principle of natural justice as the learned Assessing Officer has not granted reasonable time to file reply in response to the show cause notice issued on 27/03/2022.”

ITA Nos.2466 & 2467/Bang/2025 Manikappa, Bidar Page 3 of 13 consideration had entered into significant financial transaction as mentioned below:- “At a par cheque issued for cash deposit (Turnover Suppression Rs.1,10,07,463/-)”.

Consequently, a notice u/s. 148 of the Act was issued on 30/03/2021 requiring the assessee to file a return of income within 30 days from the date of receipt thereof. In response to the same, the assessee filed his return of income on 29/09/2021 declaring total income of Rs.4,01,130/-. The assessee had also filed computation of income, capital account, profit and loss account and balance sheet along with the return of income. Subsequently a notice u/s. 143(2) of the Act as well as u/s. 142(1) of the Act was issued wherein the assessee was specifically asked to explain the nature and source of cash deposits. Further, a show cause notice u/s. 144 of the Act dated 09/03/2022 was issued to the assessee directing to show cause as to why the entire cash deposits of Rs.1,10,07,463/- in Kanyaka Parmeshwari Co-operative Credit Society Ltd. should not be brought to tax as the source of said cash deposits remain un-substantiated.

3.1 In response there to, the assessee submitted the ledger account of M/s. Kanyaka Parmeshwari Co-operative Credit Society Ltd. in which the cash amount deposited as per the said ledger account works out to Rs.1,09,33,470/-. Further, the assessee vide reply dated 22/03/2022 had submitted that the source of cash deposits made in M/s. Kanyaka Parmeshwari Co-operative Credit Society Ltd. was nothing but cash sales made during the year out of his business as a wholesaler of pulses, food grain and other like items. It is further stated by the assessee that cash deposits made in the said bank account are out of the sale proceeds realized from his wholesale business. The assessee further in reply dated

ITA Nos.2466 & 2467/Bang/2025 Manikappa, Bidar Page 4 of 13 27/03/2022 again submitted that the assessee is not the member of M/s. Kanyaka Parmeshwari Co-operative Credit Society Ltd. and therefore obtaining loan from the bank does not arise. Further, it is submitted that if the assessee would have obtained the loan, then the bank could not have provided the loan on daily basis that too in part amount. It is also submitted that the bank had also not charged any interest on the said alleged amount. It is also submitted that the bank account was utilized to make purchases of food grain and like items and the cash was generated from realizing the sale proceeds of the same which had been re-deposited and thereby utilized the same for re-purchase of the goods and therefore the overall turnover is Rs.1,09,33,470/-.

3.2 The AO however was of the view that the assessee failed to explain the source of cash deposits in the said co-operative society Ltd. The AO also of the view that in the original return the assessee has disclosed the turnover of Rs.62,30,593/- where as turnover declared in the return filed u/s. 148 of the Act was Rs.1,71,93,069/- for which there is no law and logic but it smacks of an after thought. It is beyond anybody’s comprehension that the assessee had made the entire sale in cash whilst his purchases are routed through banking channel which is irregular and baseless. The AO held that the assessee introduced his unaccounted cash and routed in his business. Further, the assessee had not brought on record any substantiating evidence to prove that the entire sale transaction are routed through cash. Lastly, the ld. AO observed that the assessee had not disclosed the account maintained with M/s. Kanyaka Parmeshwari Co-operative Credit Society Ltd. in his books of accounts and the original return was filed without considering the amount deposited in the said co-operative society and therefore the contention of the assessee is not acceptable. The assessee had not submitted iota of evidence to show that the source

ITA Nos.2466 & 2467/Bang/2025 Manikappa, Bidar Page 5 of 13 of cash deposited in co-operative society are sale proceeds of products and accordingly added the entire cash deposits in M/s. Kanyaka Parmeshwari Co-operative Credit Society Ltd. amounting to Rs.1,09,33,470/- as unexplained money u/s. 69A of the Act. Thus, the AO completed the assessment proceedings u/s. 143(3) r.w.s 147 of the Act on 29/03/2022 on a total assessed income of Rs.1,13,34,600/-.

ITA Nos.2466 & 2467/Bang/2025 Manikappa, Bidar Page 6 of 13 6. Again aggrieved by the order of ld.CIT(A)/NFAC, the assessee has filed the present appeal before this Tribunal.

ITA Nos.2466 & 2467/Bang/2025 Manikappa, Bidar Page 7 of 13 of ledger extracts from these parties during the course of assessment proceedings and accordingly prayed that the addition made u/s. 69A of the Act is liable to be deleted.

ITA Nos.2466 & 2467/Bang/2025 Manikappa, Bidar Page 8 of 13 as held by apex court in the case of Union of India & Ors. Vs. Rajeev Bansal reported in (2024) 469 ITR 46 that the Parliament enacted TOLA to ensure that the interests of the revenue are not defeated because the assessing officer could not comply with the pre-conditions due to the difficulties that arose during the Covid-19 pandemic. Further, the Apex Court held that section 3(1) of the TOLA relaxes the time limit for compliance with actions that fall for completion from 20th March 2020 to 31st March 2021. The TOLA will accordingly extend the time limit for the grant of sanction by the authority u/s. 151 of the Act. In the case of section 151 of the old regime, the test is : If the time limit of 4 years from the end of an assessment year falls between 20th March, 2020 and 31st March, 2021, then the specified authority u/s 151(2) of the Act has time till 31st March, 2021 to grant approval. The time limit for section 151 of the old regime expires on 31st March, 2021 because the new regime comes into effect on 1st April, 2021. Before us, the ld. .A.R of the assessee heavily relied on the decision of Hon’ble Bombay High Court in the case of J.M. Financial & Investment Consultancy Services Pvt. Ltd. Vs. ACIT in WP No.1050 of 2022 dated 4th April, 2022. However, we take a note of the fact that Hon’ble Supreme Court in the case of Union of India & Ors. Vs. Rajeev Bansal cited (supra) vide judgment dated 3.10.2024 has clarified the issue in hand. In view of the above the legal ground as raised by the assessee with regard to validity of approval by the ld. JCIT, Gulbarga Range is hereby dismissed.

9.1 Further, the next contention of the assessee is that the ld. JCIT, Gulbarga Range had accorded an approval u/s. 151 of the Act dated 29/03/2021 without affixing his signature either manually or digitally and therefore the same is an invalid approval. Before us, the ld. D.R. by way of written submission produced the copy of approval u/s. 151 of the Act in which we observed that the ld. JCIT,

ITA Nos.2466 & 2467/Bang/2025 Manikappa, Bidar Page 9 of 13 Gulbarga Range, Gulbarga had signed the approval manually. Further, the ld. D.R. submitted that the approval u/s. 151 was obtained from the competent authority well within the time i.e. 31/03/2021 and the same had been communicated to the AO on the same day via WhatsApp based on which the notice u/s. 148 of the Act dated 31/03/2021 was issued to the assessee. After verifying the copy of approval submitted by the ld.D.R, we are of the opinion that as rightly contended by the ld. D.R., the ld. JCIT, Gulbarga Range had manually signed the approval accorded u/s. 151 of the Act dated 29/03/2021 and also we find that the seal affixed above dated 20/04/2021 on the approval letter in which it is nowhere mentioned the date of dispatch by O/o. JCIT, Gulbarga Range as there was neither dispatch seal nor any indication of acknowledgement of receipt of the same by the AO. Accordingly, we dismiss all these legal grounds as raised by the assessee.

9.2 Undisputedly, in the present case the assessee is engaged in the business of Wholesale trade of pulses and similar food items under his proprietorship concern running under the name and style of M/s. Mahesh Food Grain Merchants at Moti Bazar, Gandhi Gunj in the district of Bidar. It is also an undisputed fact that the case of the assessee was re-opened solely on the basis of “at a per cheque issued for cash deposit (Turnover suppression Rs.1,10,07,463/-)”. The contention of the assessee is that the assessee is not a member of M/s. Kanyaka Parmeshwari Co-operative Credit Society Ltd. and therefore it is not a loan. Further, it is submitted that as alleged by the AO, there is no bank account maintained by the assessee in the said co-operative bank and therefore the question of depositing cash does not arise at all. In this regard the assessee has filed the confirmation letter from the manager of M/s. Kanyaka Parmeshwari Co-operative Credit Society Ltd. The assessee has categorically submitted that the assessee has maintained with only SBI and

ITA Nos.2466 & 2467/Bang/2025 Manikappa, Bidar Page 10 of 13 Canara Bank which had been declared by the assessee. The main contention of the assessee is that assessee has purchased the demand drafts from M/s. Kanyaka Parmeshwari Co-operative Credit Society Ltd. for making payments to his out station suppliers. It is also submitted by the assessee that during the relevant AY, out of the gross purchases the assessee had made purchases to the extent of Rs.1,20,13,834/- from the following parties located/ situated outside Bidar:-

Name of the DD Cash Cheque Total Party/ supplier Purchases Purchases Purchases Purchases R.J. Pulses, 29,18,354 NIL 18,334 30,69,976 PAN:AAIFR9984Q, Udyam Nagar, Indore, Madya Pradesh- 452001

Ugam Pulses, 16,61,300 NIL 1,51,622 30,69,976 PAN:ABRPB4995M , No.159, SAJJAN Nagar, Indore, Madhya Pradesh- 452001

Vishwabharathi 63,47,066 NIL 9,17,158 72,64,224 Foods Pvt Ltd., PAN:AAACV7785, E-21, MIDC, Jagaon, Maharasthra- 425003

TOTAL 1,09,26,720 NIL 10,87,114 1,20,13,834

Thus, as the above mentioned parties were situated outside the Bidar and therefore the advance payments have been made through Demand Drafts to the extent of Rs.1,09,26,720/-. Further, the assessee submitted that due to heavy rush and more commission charges on demand drafts by the SBI and Canara Bank, the

ITA Nos.2466 & 2467/Bang/2025 Manikappa, Bidar Page 11 of 13 assessee has preferred to purchase the demand drafts from M/s. Kanyaka Parmeshwari Co-operative Credit Society Ltd. Hence the demand drafts to the extent of Rs,.1,09,26,720/- were purchased for making payments to the suppliers against the purchases. It is submitted that the assessee had duly accounted the sales and purchases in his books of accounts and also furnished confirmation of ledger extracts from these parties and complete books of accounts during the assessment proceedings. We are of the considered opinion that as rightly contended by the ld. A.R. of the assessee, the question of declaring the bank account in the books of accounts/return of income, does not arise as the assessee did not have any bank account with M/s. Kanyaka Parmeshwari Co- operative Credit Society Ltd. Further, in the absence of any contrary material brought on record by the authority below, we accept the contention of the assessee that the assessee was purchasing the demand drafts from M/s. Kanyaka Parmeshwari Co-operative Credit Society Ltd. as the assessee was not the member of the Co-operative bank. Hence, we accept that the demand drafts to the extent of Rs.1,09,26,720/- were purchased for making payments to the suppliers against the purchases. We make a note of the fact that the assessee had duly accounted the sales and purchases in his books of accounts and also furnished confirmation of ledger extracts from these parties and complete books of accounts during the assessment proceedings. Therefore, we direct the AO to delete the entire addition of Rs.1,09,33,470/- made u/s 69A of the Act.

ITA Nos.2466 & 2467/Bang/2025 Manikappa, Bidar Page 12 of 13

Grounds of Appeal No. 1.0 : The learned Commissioner of Income Tax (Appeals) has erred on law and facts by not deciding that the learned Assessing Officer has erred in assumption ofjurisdiction and the notices issued u/s. 148 of the Income Tax Act, 1961 dated 30/03/2021 is time barred, without jurisdiction, based on incorrect assumption of facts and therefore the same is bad in law.

Grounds of Appeal No. 02 : The learned Commissioner of Income Tax (Appeals) has erred on law and facts by not deciding that the learned Assessing Officer has erred in invoking provisions of Section 144 of the Income Tax Act, 1961 and therefore the assessment order is illegal and liable to be quashed. Grounds of Appeal No. 3.0 : The learned Commissioner of Income Tax (Appeals) has erred on facts and law by not deciding that the learned Assessing Officer has erred in making additions of Rs. 1,09,85,650/- u/s. 69A of the Income Tax Act, 1961 as unexplained money as the same is opposed to the law and facts of the case.

Grounds of Appeal No. 04 : The assessment order passed is against the principle of natural justice as the learned Assessing Officer has not granted reasonable time to file reply in response to the show cause notice dated 26/03/2022.

ITA Nos.2466 & 2467/Bang/2025 Manikappa, Bidar Page 13 of 13

Sd/- Sd/- (Waseem Ahmed) (Keshav Dubey) Accountant Member JudicialMember

Bangalore, Dated 10th July,2026. VG/SPS

Copy to:

Asst. Registrar, ITAT, Bangalore.