KURLAPPA,BANGALORE vs. INCOME TAX OFFICER, WARD 6(2)(1), BANGALORE, BANGALORE

ITA 557/BANG/2026Status: DisposedITAT Bangalore29 September 2026AY 2019-206 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal allowed the assessee's appeal on a legal ground. The Tribunal noted that the AO initially proposed to add Rs. 33,60,000/- based on cash deposits and issued a notice under Section 148A(b) with proper approval. However, while completing the assessment, the AO made a new addition of Rs. 33,95,000/- representing loan repayments. This amount was neither mentioned in the Section 148A(b) notice nor in the order passed under Section 148A(d). Crucially, the AO did not obtain the necessary approval from the specified authority for treating this new amount as escaped income. The Tribunal emphasized that post-April 1, 2021, the procedure under Section 148A, including obtaining prior approval for enquiries and passing an order under Section 148A(d), is mandatory before issuing a notice under Section 148. Since the AO failed to follow this procedure for the Rs. 33,95,000/- addition, it was deemed unsustainable. Consequently, the addition of Rs. 33,95,000/- was set aside. The Tribunal did not adjudicate on the other grounds raised on merits.

What were the facts?

The assessee, Shri Kurlappa, an individual, did not file his return of income for Assessment Year 2019-20. The Assessing Officer (AO) initiated reassessment proceedings under Section 147 based on information about high-value transactions. A notice under Section 148A(b) was issued, relying on bank transactions and TCS/TDS statements. The assessee explained cash deposits as arising from retail textile and garment trading, opting for presumptive taxation under Section 44AD. The AO initially proposed an addition of Rs. 33,60,000/- for cash deposits and TCS/TDS deductions, but accepted the assessee's explanation and dropped the proceedings. However, during assessment completion, the AO added Rs. 33,95,000/- representing loan repayments deposited into the assessee's bank account, which the assessee explained as genuine. The AO disallowed this, citing lack of proof of identity, creditworthiness, and genuineness of depositors. The CIT(A) confirmed the AO's order. The assessee appealed to the ITAT.

What were the issues?

1. Whether the addition of Rs. 33,95,000/- made by the AO during assessment is bad in law, as it was not included in the notice issued under Section 148A(b) of the Income Tax Act, 1961? The assessee's primary argument is that the AO lacked jurisdiction to make the addition of Rs. 33,95,000/- because this specific amount and its nature (loan repayments) were not mentioned in the Section 148A(b) notice. The assessee contends that the AO must follow the procedure under Section 148A, including obtaining prior approval for enquiries and passing an order under Section 148A(d) before issuing a notice under Section 148. The assessee relies on Sections 147, 148, and 148A. Alternatively, the assessee argued that if the income is added, it should be treated as 8% profit under Section 44AD, not the entire cash deposit, and that the entire cash deposit cannot be added as income since the assessee is in business. The revenue's argument is that the assessee, being a non-filer, failed to prove the lending of money and subsequent repayment, and did not establish the creditworthiness of the depositors or the genuineness of the transactions. Therefore, the additions are sustainable.

Which sections of the Income-tax Act were involved?

Section 147,Section 148,Section 148A,Section 44AD

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, BANGALORE BENCHES, BANGALORE

Before: SHRI BALAKRISHNAN S. & SHRI SOUNDARARAJAN K.

For Respondent: Shri Pradeep S., Addl. CIT – DR

PER SHRI SOUNDARARAJAN K., JUDICIAL MEMBER:

This is an appeal filed by the assessee challenging the order of the NFAC, Delhi dated 16/12/2025 in respect of the A.Y. 2019-20. 2. The brief facts of the case are that the assessee is an individual and not filed his return of income. The AO based on the information that the assessee had entered into high value transaction had initiated proceedings 1 Shri Kurlappa u/s. 147 of the Act.

The order continues below.

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