PRABHU SHANMUKHAPPA NAGATHAN,BIJAPUR vs. ITO, WARD-1 & TPS, BIJAPUR

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ITA 982/BANG/2026Status: DisposedITAT Bangalore13 October 2026AY 2017-188 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal allowed the assessee's appeal. It found that the Karnataka Cooperative Bank Ltd. issued clarifications on 31.01.2025 and 14.07.2026, stating that the assessee's sole bank account had limited transactions (Rs. 46,000/- credited, Rs. 45,500/- debited). The bank confirmed that the account with significant withdrawals (Rs. 3,27,59,951/-) and deposits (Rs. 33,15,750/-) belonged to M/s. Sai Agro Seeds. The bank further clarified that the assessee's PAN was inadvertently and erroneously linked to other customers' accounts due to a data entry error. The Tribunal noted that the CIT(A) had overlooked these crucial bank clarifications and the bank statements of M/s. Sai Agro Seeds, which were filed by the assessee. The Tribunal held that the CIT(A) erred in demanding proof of transactions from the assessee for a third party's account and that the bank's clarification, supported by the assessee's own account statement, should be given weight. Consequently, the additions made under Sections 68 and 69A, and the consequential tax under Section 115BBE, were deleted. The Tribunal also noted that the penalties under Sections 271AAC(1), 271F, and 272A(1)(d) were confirmed without valid reason, implying they would also be deleted as a consequence of the primary additions being deleted. The grounds raised by the assessee were allowed.

What were the facts?

The assessee, Prabhu Shanmukhappa Nagathan, filed an appeal against the order of the CIT(A) for Assessment Year 2017-18. The Assessing Officer (AO) initiated reassessment proceedings under Section 148, alleging cash withdrawals of Rs. 3,27,59,951/- and cash deposits of Rs. 33,15,740/- in bank accounts linked to the assessee's PAN. The assessee did not respond to notices during assessment. The AO treated the withdrawals as unexplained cash credits under Section 68 and deposits as unexplained money under Section 69A, applying tax under Section 115BBE. The CIT(A) upheld these additions. The assessee contended that the bank accounts belonged to Mr. Parappa Ayyappa Sajjan or M/s. Sai Agro Seeds, not him, and provided bank clarifications stating the PAN was erroneously linked to another customer's accounts due to data entry errors.

What were the issues?

1. Whether the reassessment proceedings initiated under Section 148 of the Income Tax Act, 1961, were without jurisdiction, invalid, and bad in law? (Mixed law and fact) 2. Whether the CIT(A) erred in not considering the bank confirmation and supporting documents provided by the assessee? 3. Whether the CIT(A) erred in treating transactions in specific bank accounts as the income of the assessee, despite evidence that these accounts belonged to Mr. Parappa Ayyappa Sajjan or M/s. Sai Agro Seeds? 4. Whether the CIT(A) erred in confirming the additions of Rs. 3,27,59,951/- as unexplained cash credits under Section 68 and Rs. 33,15,740/- as unexplained money under Section 69A, with tax applied under Section 115BBE? 5. Whether the CIT(A) erred in confirming penalties under Sections 271AAC(1), 271F, and 272A(1)(d)? Assessee's Contentions: The assessee argued that the bank accounts in question did not belong to him, but to another individual or M/s. Sai Agro Seeds. He submitted bank clarifications stating his PAN was erroneously linked to these accounts due to data entry errors by the bank. The assessee also argued that the CIT(A) failed to consider this documentary evidence and the principles of natural justice. The assessee relied on the bank's clarification letter. Revenue's Contentions: The revenue, relying on the lower authorities' orders, argued that the assessee did not respond to statutory notices. The revenue also contended that the bank's confirmation had not been verified by any revenue authority and suggested restoring the matter to the AO.

Which sections of the Income-tax Act were involved?

Section 148,Section 147,Section 144,Section 144B,Section 68,Section 69A,Section 115BBE,Section 271AAC(1),Section 271F,Section 272A(1)(d),Section 250,Section 133(6)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, BANGALORE BENCHES, BANGALORE

Before: SHRI WASEEM AHMED & SHRI SANDEEP SINGH KARHAIL

PER SANDEEP SINGH KARHAIL, JUDICIAL MEMBER:

The assessee has filed the present appeal against the impugned order dated 13.02.2026, passed under section 250 of the Income Tax Act, 1961 (“the Act”) by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [“learned CIT(A)”] for the assessment year 2017-18.

2.

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

1.

The learned Commissioner of Income Tax (Appeals) ["CIT(A)"] erred in rejecting the grounds of appeal and upholding the impugned assessment order. The order is bad in law and liable to be quashed on the following grounds: a) Lack of Jurisdiction. b) Erroneous assumption of jurisdiction. c) Failure to comply with the principles of natural justice 2. The CIT(A) order in so far as it is against the appellant, is opposed to law, equity, weight of evidence, probabilities, facts and circumstances of the case. 3. The learned CIT(A) erred in not appreciating that the reopening of assessment by issuance of notice under Section 148 of the Income Tax Act, 1961 by the Jurisdictional Assessing Officer (JAO) is without jurisdiction, invalid and bad in law. 4. The CIT(A) erred in Non-Considering the Bank confirmation and supporting documents. 5. The learned CIT(A) erred in treating the transactions appearing in the following bank accounts as the income of the Appellant, despite clear documentary evidence establishing that the said accounts belong to Mr. Parappa Ayyappa Sajjan and not to the Appellant: • Saving Account No. 017001101015626 • Current Account No. 017003101000558 • Overdraft Loan Account No. 017005501001784 • Overdraft Loan Account No. 017005501001610 • Godown Loan Account No. 017005201000655 • Godown Loan Account No. 017005201000651 The action of the Assessing Officer, as confirmed by the learned CIT(A), in treating the transactions in the above accounts as the Appellant’s income is arbitrary, unjustified and liable to be deleted. 6. The Learned CIT(A) erred in confirming the alleged deposits of Rs.3,27,59,951/- as unexplained cash credits u/s 68 of the Income Tax Act, 1961 & alleged withdrawals of Rs. 33,15,740/- as Unexplained money u/s 69A of the Income Tax Act,1961 and applied tax under Section 115BBE (60% tax rate with surcharge & cess). 7. The CIT(A) erred in confirming penalties under Sections 271A AC(1), 271F & 272A(1)(d) without any valid reason. 3. During the hearing, the learned Authorised Representative (“learned AR”) submitted that the assessee is a physical education teacher in a school. It was submitted that the impugned addition was made on the basis of cash withdrawals and cash deposits in a bank account that does not belong to the assessee. The learned AR submitted that the assessee could not respond to the statutory notices issued during the assessment proceedings. However, the assessee furnished all details supporting his submission that the bank account does not belong to him along with the appeal filed before the learned CIT(A). However, without considering the documentary evidence filed by the assessee, the learned CIT(A) upheld the impugned additions. During the hearing, the learned AR submitted that, pursuant to the assessee's request, the bank also issued a clarification that, due to incorrect mapping of PAN, the assessee’s PAN was linked to another customer's bank account. The learned AR submitted that the bank also provided the bank statement of the other customer, in whose account there were cash withdrawals and cash deposits. Thus, the learned AR submitted that, as the assessee’s PAN was inadvertently linked/tagged to the account of another customer of the bank, the transactions in that bank account cannot form the basis for making the impugned addition in the hands of the assessee.

4.

On the other hand, the learned Departmental Representative (“learned DR”), by vehemently relying upon the orders passed by the lower authorities, submitted that the assessee did not respond to any of the statutory notices issued during the assessment proceedings, despite service of those notices on the assessee. It was further submitted that the confirmation from the bank has not been verified by any Revenue Authority, and therefore, the matter should be restored to the file of the AO.

5.

We have considered the submissions of both sides and perused the materials available on record. The brief facts of the case are that the assessee is an individual and for the year under consideration did not file his return of income. On the basis of the information that there has been a cash withdrawal to the tune of Rs. 3,27,59,951/- and cash deposits of Rs. 33,15,740/-, during the year under consideration, in the bank account linked with the assessee’s PAN maintained with the Karnataka Cooperative Bank, notice under section 148 of the Act was issued on 19.01.2024 after completion of the proceedings under section 148A of the Act. However, the assessee did not file any return of income in response to the notice issued under section 148 of the Act. Since the assessee remained non- responsive, notice was also issued through speed post to the registered address of the assessee. However, despite the same, the assessee did not comply with any of the notices issued during the assessment proceedings. Since, as per the information, the transactions of cash deposit and cash withdrawal were made in two bank accounts, namely 017001101000521 and 017003101000558, maintained with the Karnataka Cooperative Bank, notice under section 133(6) was issued to the said bank as part of the third-party enquiry. However, the bank did not respond. In the absence of any details being furnished by the assessee, the Assessing Officer (“AO”) proceeded to complete the assessment on a best judgment basis and, vide order dated 03.12.2024 passed under section 147 r.w.s. 144 r.w.s. 144B of the Act, treated the cash withdrawals to the tune of Rs. 3,27,59,951/- as unexplained cash credit, on the basis that the said cash withdrawal indicates cash deposit, other credits, and other transfers to that extent. Accordingly, the said sum was added to the total income of the assessee under section 68 of the Act. Similarly, the cash deposits of Rs. 33,15,740/- were added to the total income of the assessee under section 69A, as the assessee failed to explain the source of said cash deposit.

6.

The learned CIT(A), vide impugned order, even though took note of the submission of the assessee that the bank account in which there have been transactions of cash withdrawal and cash deposit pertains to M/s. Sai Agro Seeds. However, the said contention was rejected on the basis that the assessee did not adduce any proof that the cash withdrawals and deposits were accounted for in the books of account of such firm, i.e., M/s. Sai Agro Seeds along with the return of income of such firm. Accordingly, the learned CIT(A) upheld the additions made by the AO.

7.

Having considered the submissions of both sides and perused the materials available on record, we find that on 31.01.2025, the Karnataka Cooperative Bank Ltd. issued a clarification that the assessee has only one bank account, bearing No. 017001101000521, in which an amount of Rs. 46,000/- was credited and an amount of Rs. 45,500/- was debited during the relevant financial year. The bank further clarified that the Account No. 017003101000558, in which there was a debit of Rs. 3,27,59,951/-, belongs to M/s. Sai Agro Seeds. Further, from the copy of said clarification, which is placed in the paper book from Pages 4 – 12, we find that the bank also provided the bank statement of M/s. Sai Agro Seeds for the financial year 2016-17. We find that the said clarification letter dated 03.01.2025 was filed by the assessee along with its appeal before the learned CIT(A), and a reference to the same can be sent from Form No. 35 filed before the learned CIT(A). It is pertinent to note that in the statement of facts the assessee specifically referred to the bank’s clarification letter confirming the incorrect PAN linking with some other bank account. The assessee has also placed on record another letter dated 14.07.2026 issued by the Karnataka Cooperative Bank Ltd., again clarifying that the transaction of cash withdrawal to the tune of Rs. 3,27,59,951/- and cash deposits of Rs. 33,15,750/- pertain to the accounts maintained in the bank by M/s. Sai Agro Seeds, and the same has no connection with the assessee. From the perusal of the said letter, which is placed in the paper book on Page 13, we find that the bank has clarified that at the time of uploading the Statement of Financial Transactions with the Income Tax Department, the assessee’s PAN was inadvertently and erroneously linked to the bank accounts of some other customer due to the data entry error on the part of the bank. The bank further submitted that, since the transaction pertains to the financial year 2016-17 and given the constraints of the Income Tax Department's correction utility for such old assessment years, it is unable to electronically rectify or revise the statement filed for this year at this point in time.

8.

It is evident from the perusal of the impugned order that even though the learned CIT(A) took into consideration the statement of the assessee that the said bank account pertains to M/s. Sai Agro Seeds. However, the learned CIT (A) did not consider the clarification letter issued by Karnataka Cooperative Bank Ltd. and the bank statement furnished along with it. Instead, we find that the learned CIT(A) emphasises that the assessee did not adduce the books of account of M/s. Sai Agro Seeds and its return of income to show that said cash withdrawal and cash deposit were duly taken into account by the said firm. We are of the considered view that such findings of the learned CIT(A) are completely misplaced, as the assessee can furnish only the documents in his possession and control and cannot compel any third party, that is totally unrelated to him, to furnish the documents/evidence. It is pertinent to note that M/s. Sai Agro Seeds was another customer of Karnataka Cooperative Bank Ltd., and the bank furnished its account statement along with a clarification that the cash withdrawals and deposits pertain to the bank accounts maintained by M/s. Sai Agro Seeds and the same has no relation with the assessee.

9.

We are of the considered view that after having all the information, if the learned CIT(A) was not convinced with the documentary evidence, then a report could have been called from the AO. However, in the present case, the learned CIT(A), despite having power co-terminus with the AO, did not take any such steps and straightaway rejected the clarification letter issued by the Karnataka Cooperative Bank Ltd., with whom all the bank accounts in dispute were maintained. We are of the considered view that once the bank itself has clarified that the assessee has only one savings bank account and the other account does not belong to the assessee, the said statement and clarification need to be given weightage and should not be rejected without any contrary material on record. The assessee has also placed on record his bank account statement maintained with the Karnataka Cooperative Bank Ltd. for the financial year 2016-17, which confirms the credit of Rs. 46,000/- and debit of Rs. 45,500/- during the year under consideration.

10.

Therefore, having considered the documentary evidence placed on record, we do not find any merits in the findings of the learned CIT(A) in upholding the impugned additions despite having the relevant documentary evidence on its record. Since the assessee is an individual and is working as a physical education teacher, credited only an amount of Rs. 46,000/- in his bank account maintained with Karnataka Cooperative Bank Ltd., as is evident from the bank statement, we do not deem it appropriate to put the assessee again to the hardship and rigours of assessment proceedings for verification and examination of the documents which were placed on record by the assessee, particularly when the Revenue Authorities failed to perform their duty without any just cause. Therefore, in light of the evidence placed on record, we do not find any merit in the impugned additions made on account of cash withdrawal and cash deposit in the bank account which does not belong to the assessee. Accordingly, the said additions are deleted. As a result, the grounds raised by the assessee are allowed.

11.

In the result, the appeal by the assessee is allowed. Order pronounced in the open court on 13-Oct-2026.

Sd/- Sd/- (WASEEM AHMED) (SANDEEP SINGH KARHAIL) ACCOUNTANT MEMBER JUDICIAL MEMBER Bangalore, Dated, the 13-Oct-2026 *VM* Copy to: PRABHU SHANMUKHAPPA NAGATHAN, PRABHU S NAGATHAN VIDHA NAGAR BEHIND V B C HIGH SCHOOL 1 MUDDEBIHAL, VIJAYAPURA-586212, KARNATAKA

ITO, WARD-1 & TPS, 2 ITO, BIJAPUR-, KARNATAKA

3 THE PCIT / CIT, 4 THE D.R., ITAT, BANGALORE BENCH 5 GUARD FILE BY ORDER

ASSISTANT REGISTRAR I.T.A.T., BANGALORE

Digitally signed P G by P G RAJANI Date: RAJANI 2026.10.16 17:37:22 +05'30'

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