JAGANNATH ANVEERAPPA DUKANDAR,KALABURAGI vs. INCOME TAX OFFICER, WARD-1 & TPS, GULBARGA

आयकर अपीलीय अधिकरण, बेंगलुरू पीठें, बेंगलुरू INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCHES, BANGALORE BENCH: A BEFORE SHRI PRASHANT MAHARISHI, VICE PRESIDENT AND SHRI SOUNDARARAJAN K., JUDICIAL MEMBER ITA 1922 & 1923/Bang/2024 (निर्धारण वर्ा/Assessment Year : 2016-17 & 2017-18) JAGANNATH ANVEERAPPA INCOME TAX OFFICER, DUKANDAR WARD-1 & TPS, H NO. 7-1101/30A GULBARGA-585105, NEAR ISHWAR TEMPLE, KARNATAKA Vs. GUNJ BANK COLONY, KALABURGI-585104, KARNATAKA अपीलधर्थी Appellant प्रत्यर्थी Respondent

Permanent Account Number of Assessee: AJFPD2563D

अपीलधर्थी द्वारा/Appellant represented by: Shri Sheehari Kutsa Advocate प्रत्यर्थी द्वारा/Respondent represented by: Sri Venkatesh V, Addl CIT DR सुनवाई की तारीख / Date of conclusion of hearing: 05-Aug-2026 घोषणा की तारीख / Date of pronouncement: 21-Oct-2026 आदेश / ORDER PER SHRI PRASHANT MAHARISHI, VICE PRESIDENT

1) These two appeals have been filed by Mr. Jagannath Anveerappa Dukandar (the “assessee/appellant”) for Assessment Years 2016–17 and 2017–18. As they involve common issues and were heard together, they are disposed of by this consolidated order.

2) ITA No. 1922/Bang/2024, relating to Assessment Year 2016–17, is directed against the appellate order dated 4 September 2024 passed by the National Faceless Appeal Centre (NFAC), Delhi [the learned CIT(A)]. By that order, the learned CIT(A) dismissed the assessee’s appeal against the assessment order dated 29 March 2022 passed by the Income Tax Officer, National Faceless Assessment Centre, under section 147 read with section 144B of the Income-tax Act, 1961.

3) ITA No. 1923/Bang/2024, relating to Assessment Year 2017–18, is directed against the appellate order dated 4 September 2024 passed by the learned CIT(A), dismissing the assessee’s appeal against the reassessment order dated 29 March 2022 passed under section 147 read with section 144B of the Income-tax Act, 1961.

4) The Assessee has raised the following grounds of appeal: ITA No. 1922/Bang/2024 For assessment year 2016 - 17 1. The order of the learned Commissioner passed under section 250 of the Act is opposed to law, equity, weight of evidence, probabilities and the facts and circumstances in the Appellant’s case. 2. The Appellant denies to be assessed to tax on total income as determined by the learned AO of Rs. 1,88,66,840/- as against the total income reported by the Appellant of Rs. 6,36,790/- in the original return of income on the facts and circumstances of the case. 3. The learned Commissioner of Income-tax (Appeals) failed to appreciate that the notice under section 153C ought to have been issued in the facts of the case and the notice under section 148 is bad in the facts and circumstances of the case. 4. Without prejudice, the learned Commissioner of Income-tax (Appeals) failed to appreciate that there exists no valid jurisdiction with the Assessing Officer in the matter in the facts and circumstances of the case. 5. The learned Commissioner of Income-tax (Appeals) failed to consider the remand report obtained from the AO and passed a perverse order in the facts and circumstances of the case. 6. The notice under section 148 of the Act dated 29.03.2021 is bad at law as section 148 as it had no force of law pursuant to amendment by the Finance Act 2021 by way of substitution without any savings clause for the notice issued earlier and consequently the entre proceeding the notice issued u/s 148 of the Act is unenforceable in the eyes of law on the facts and circumstances of the case. 7. The learned Commissioner of Income-tax (Appeals) erred in law that section 44AB of the Act is applicable despite the fact that the Appellant has only earned commission income from sale of cotton which does not constitute his turnover in the facts and circumstances of the case. 8. The learned Commissioner of Income-tax (Appeals) erred in law by invoking the provisions of section 69A of the Act where the source of income is business income rendering section 69A inapplicable in the facts and circumstances of the case. 9. The learned Commissioner of Income-tax (Appeals) erred in upholding the addition of Rs. 1,82,30,050/- as unexplained moneys u/s 69A of the Act despite the source is realization from debtors towards the supply of Cotton on Commission Basis/supply of Shahbad Stones and other receipt in the facts and circumstances of the case. 10. The learned Commissioner of Income-tax (Appeals) erred in upholding the applicability of section 115BBE in the facts and circumstances of the case. 11. The learned Commissioner of Income-tax (Appeals) erred in upholding interest u/s 234A and 234B of the Act in the facts and circumstances of the case. 12. The Appellant craves leave to add, alter, delete or substitute any of the grounds urged above. 13. In the view of the above and other grounds that may be urged at the time of hearing of the appeal, the Appellant prays that the appeal may be allowed in the interest of justice and equity. ITA No. 1923/Bang/2024: for assessment year 2017 -18 1. The Order of the learned Commissioner passed under section 250 of the Act is opposed to law, equity, weight of evidence, probabilities and the facts and circumstances in the Appellant's case. 2. The Appellant denies to be assessed to tax on total income as determined by the learned AO of Rs. 1,71,79,435/- as against the total income reported by the Appellant of Rs. 6,89,890/- on the facts and circumstances of the case. 3. The learned Commissioner of Income-tax (Appeals) erred in law that non-obstante clause in section 153C of the Act does not disentitle section 148 from its applicability, hence the proceedings conducted are as per provisions of the Act. 4. Without prejudice, the learned Commissioner of Income-tax (Appeals) failed to appreciate that there exists no valid jurisdiction with the Assessing Officer in the matter in the facts and circumstances of the case. 5. The learned Commissioner of Income-tax (Appeals) failed to consider the remand report obtained from the AO and passed a perverse order in the facts and circumstances of the case. 6. The notice under section 148 of the Act dated 30.03.2021 is bad at law as section 148 as it had no force of law pursuant to amendment by the Finance Act 2021 by way of substitution without any savings clause for the notice issued earlier and consequently the entre proceeding the notice issued u/s 148 of the Act is unenforceable in the eyes of law on the facts and circumstances of the case. 7. The learned Commissioner of Income-tax (Appeals) erred in law that section 44AB of the Act is applicable despite the fact that the Appellant has only earned commission income from sale of cotton which does not constitute his turnover in the facts and circumstances of the case. 8. The learned Commissioner of Income-tax (Appeals) erred in law by Invoking the provisions of section 69A of the Act where the source of income is business Income rendering section 69A inapplicable in the facts and circumstances of the case. 9. The learned Commissioner of Income-tax (Appeals) erred in upholding the addition of Rs. 1,65,99,815/- as unexplained moneys u/s 69A of the Act despite the source is realisation from debtors towards the supply of Cotton on Commission Basis / supply of Shahbad Stones and other receipt in the facts and circumstances of the case. 10. The learned Commissioner of Income-tax (Appeals) erred in upholding the applicability of section 115BBE in the facts and circumstances of the case. 11. The learned Commissioner of Income-tax (Appeals) erred in upholding interest u/s 234B and 234C the Act in the facts and circumstances of the case. 12. The Appellant craves leave to add, alter, delete or substitute any of the grounds urged above. 13. In the view of the above and other grounds that may be urged at the time of the hearing of the appeal, the Appellant prays that the appeal may be allowed in the interest of justice and equity. 5) We first set out the facts for Assessment Year 2016–17. The assessee filed his original return of income on 30 September 2016, declaring a total income of ₹6,36,790. Subsequently, based on information available with the Income Tax Department, the Department initiated proceedings under section 147 of the Act and issued a notice under section 148 dated 29 March 2021 requiring the assessee to file a return. In response, the assessee filed a return on 24 February 2022 declaring the same income. A notice under section 143(2) of the Act was thereafter issued on 3 March 2022.

6) Information available with the Income Tax Department showed that the assessee had deposited ₹1,82,30,050 with Renuka Mata Multi-State Urban Co- operative Credit Society Ltd. During the assessment proceedings, he was asked to explain the source of these deposits. The assessee stated that he traded in cotton on a commission basis, procuring cotton locally from farmers and supplying it to buyers in Maharashtra. He stated that he received collections mainly in cash and deposited them into his account with the Society, from which he withdrew funds at the Gulbarga branch to pay the farmers. As the Assessing Officer was not satisfied, a final show-cause notice was issued on 23 March 2022. In response, the assessee uploaded a cash-flow statement, computation of income, bank statements, and trading and profit-and-loss accounts. He stated that he had earned gross commission income of ₹5,42,552 and disclosed net commission income of ₹2,39,417 after claiming indirect expenses of ₹3,03,135. He also disclosed presumptive income of ₹1,12,635 under section 44AD and profit of ₹3,32,000 from the transportation business, resulting in total income of ₹6,84,052. Relying on judicial precedents, he contended that the bank deposits represented regular business receipts and not unexplained investments. He further submitted that he duly recorded the deposits and withdrawals in his regularly maintained books. Across six bank accounts, deposits of ₹2,00,13,050 and withdrawals of ₹2,13,60,000 were stated to have been made; in the account concerned, deposits of ₹1,78,20,050 and withdrawals of ₹1,82,00,800 were reported. A detailed cash-flow statement was also furnished. However, on examining the material, the Assessing Officer found the explanation contradictory. The purchase vouchers were not in English and, in his view, were unsupported by evidence identifying the persons from whom cash was collected, the dates of collection and deposit, and the dates on which payments were made to the cotton suppliers. The explanation was therefore rejected.

7) The Assessing Officer further observed that, during a search under section 132 in the case of Renuka Mata Multi-State Urban Co-operative Credit Society Ltd., the Society was found to have accepted large cash deposits purportedly made by various suspicious entities and individuals through its branches across India. After being deposited into such entities' accounts, the funds were transferred through multiple banking channels and layers to beneficiaries' accounts, ultimately benefiting numerous unidentified persons.

8) The Assessing Officer noted that the assessee had neither separately disclosed income from the commission-agency business nor furnished documentary evidence of the transactions conducted through Renuka Mata Multi-State Urban Co-operative Credit Society Ltd. on which such commission was allegedly earned. Accordingly, it could not be verified whether the deposits in that account formed part of the receipts on which commission income had been declared. Accordingly, the Assessing Officer treated the deposit of ₹1,82,30,050 in the assessee’s account with the Society as unexplained money under section 69A of the Act and added it to the assessee’s income. By an assessment order dated 29 March 2022 passed under section 147 read with section 144B of the Income-tax Act, the total income was determined at ₹1,88,66,840.

9) Aggrieved, the assessee appealed to the Commissioner of Income-tax (Appeals), who upheld the Assessing Officer’s action. During the appellate proceedings, the assessee contended that he had disclosed income from the commission-agency business and furnished supporting documents, including purchase vouchers, relating to transactions with the Society. The learned CIT(A) called for a remand report. In that report, the Assessing Officer initially stated that the assessee had not furnished all purchase vouchers, sales invoices, cash receipts, cash-payment vouchers, books of account, ledgers, cash book, bank book, bank statements, or trading account in English. The only exception noted was the commission purchase invoice of the Agricultural Produce Market Committee, Gulbarga, known as a “Thakapati,” which was pre-printed in Kannada but contained names, amounts, and other particulars in English. The Assessing Officer nevertheless further recorded during the remand proceedings that the assessee had furnished supporting documents, including purchase and sales invoices and cash receipt and payment vouchers, relating to the commission business, and that the deposits in the account with Renuka Mata Multi-State Urban Co-operative Credit Society Ltd. arose from the assessee’s commission business and turnover. Despite this finding, the learned CIT(A) confirmed the addition. In paragraph 9.4 of the appellate order, the learned CIT(A) observed that the assessee claimed the cash deposits formed part of the commission turnover recorded in the books for the relevant assessment year, but he failed to have his accounts audited despite exceeding the threshold under section 44AB of the Act. The assessee had declared commission income in the return under the category “commission business without books,” although he allegedly carried on substantial business in several lines and maintained regular books of account. The learned CIT(A) also found that large sums were shown as realised from debtors on a single day against single invoices, with amounts exactly matching those invoices, raising doubts about the genuineness of the transactions. The failure to produce third- party evidence supporting the ledger entries further led the learned CIT(A) to conclude that the books had been prepared to justify the cash deposits after initiation of proceedings under section 147. The learned CIT (A) therefore rejected the assessee's explanation, confirmed the addition, and dismissed the appeal.

10) Aggrieved by the appellate order, the learned authorised representative, Shri Srihari Kutja, Advocate, filed a 389-page paper book. It contained the assessee’s returns of income with computation statements, balance sheets, trading accounts, correspondence exchanged during the assessment proceedings, and bank statements for the relevant assessment year relating to the assessee’s accounts with various banks and Renuka Mata Multi-State Urban Co-operative Credit Society Ltd. He also filed the assessee’s Agricultural Produce Market Committee license dated 1 April 2008. To establish that the cash deposited in the bank account arose from the assessee’s business, he produced the cash book for the period from 1 April 2015 to 31 March 2016, copies of purchase and sales invoices, cash receipts, and the remand report submitted by the Assessing Officer during the assessment and appellate proceedings. He also referred to the various submissions made before the learned CIT(A).

11) The learned authorised representative first referred to the notice issued under section 143(2) of the Act at page 35 of the paper book and the reasons recorded by the Assessing Officer at page 37. He submitted that the assessment was reopened under section 147 solely on the grounds that: (i) the assessee had not filed a return of income; (ii) the assessee did not carry on any business; and (iii) income chargeable to tax had escaped assessment in the account of the beneficiary, Shri Jagannath Dukandar. He argued that the information arose from a search conducted under section 132 of the Act in the case of Renuka Mata Multi-State Urban Co-operative Credit Society Ltd. The search allegedly revealed cash deposits by various entities, followed by transfers through several accounts that could not ultimately be traced. He therefore contended that the Assessing Officer ought to have invoked section 153C, rather than section 148, of the Act. Although the assessee raised this issue before the learned CIT(A), the CIT (A) rejected it. In support, he relied on decisions of the Vishal Kishorilal Jain ITA no.108 & 109/Nag./2025 (Assessment Year : 2016–17 & 2017–18, Sejal Jewellery & Anr. v/s Union of India, W.P. no.3057 of 2019, vide judgment dated 18/02/2025 of the Hon'ble Bombay High Court, and in the case of VLS Mining of the Hon'ble Karnataka High Court were heavily relied upon. He therefore strongly contended that the Assessing Officer erred in passing the assessment order under the reassessment provisions and ought instead to have invoked section 153C of the Act.

12) On the merits, the learned authorised representative referred to paragraphs 5, 6, and 8 of the assessment order, which recorded that the assessee was engaged in cotton trading. He also referred to page 22 of the paper book, containing the assessee’s bank statement with Renuka Mata Multi-State Urban Co-operative Credit Society Ltd., in which the cash deposits were made. Referring further to page 201 onwards, he submitted that the assessee had furnished complete details of the cash received by Shri Jagannath Dukandar as commission agent, including the buyers’ particulars and details of the cotton, such as the number of bales, rate, amount, and serial number. As the assessee was a licensed Agricultural Produce Market Committee dealer, he contended that all cash deposited in the bank arose from the commission business. He further submitted that the Assessing Officer had accepted during the appellate proceedings that the assessee carried on business as a commission agent. Despite this, the learned CIT(A) treated the cash deposits as unexplained. According to him, once the Assessing Officer accepted in the remand proceedings that the deposits in the account with the Society arose from the regular books of account, and the assessee had produced evidence of the cotton commission business together with purchase and sales invoices for the relevant assessment year, the addition could not be sustained on the merits.

13) The learned Departmental Representative strongly supported the orders of the lower authorities and referred to the reasons recorded by the Assessing Officer. He submitted that section 153C is not attracted in every case where information emerges from search proceedings. Referring extensively to section 153C, he argued that where one assessee is searched, that provision applies to another assessee only if material pertaining or relating to the latter is found and the prescribed satisfaction is recorded by both officers. According to him, those conditions were not satisfied because no document or material pertaining or relating to the assessee had been found; therefore, section 148 alone applied in the circumstances. He explained that Renuka Mata Multi- State Urban Co-operative Credit Society Ltd. maintained thousands of accounts and that the search revealed its use by several persons to deposit large amounts of cash, which were thereafter transferred to various beneficiary accounts without a traceable trail. One such account belonged to the assessee. The Assessing Officer thus received information that the assessee had made substantial cash deposits in an account with the Society and reopened the assessment on that basis. He submitted that proceedings under section 153C stand on a different footing from reassessment proceedings and that the Assessing Officer correctly invoked section 148, as upheld by the learned CIT(A). He accordingly contended that the authorised representative’s argument for invoking section 153C lacked merit. He further distinguished the decision of the Hon’ble Karnataka High Court in VLS Mining, relied on by the authorised representative, on the ground that section 153C was properly attracted on the facts of that case and that the decision therefore did not apply here.

14) On the merits, the learned Departmental Representative strongly supported the orders of the lower authorities and relied on the four reasons given by the learned CIT(A) for confirming the addition. He submitted that the findings of the lower authorities were well founded and that the addition therefore deserved to be sustained.

15) We have carefully considered the rival submissions and examined the orders of the lower authorities.

16) The first issue raised by the learned authorised representative is whether the Assessing Officer should have initiated proceedings under section 153C, rather than reopening the assessee’s assessment under section 148 of the Income-tax Act.

17) Briefly, a search was conducted at a co-operative bank where the assessee maintained an account and had made cash deposits. The bank was suspected of facilitating cash deposits and routing funds through multiple layers to unidentified beneficiaries. However, the search yielded no documents belonging to or relating to the assessee.

18) During the hearing, the learned authorised representative was specifically asked whether the search of the co-operative bank had yielded any material belonging to or relating to the assessee. He replied in the negative and relied solely on decisions of Coordinate Benches which, on similar facts, held that section 153C should have been invoked. He contended that those decisions were binding on this Bench.

19) A search under section 132 of the Income-tax Act was conducted in the case of Renuka Mata Multi-State Urban Co-operative Credit Society Ltd., a co- operative bank. The search revealed that several persons had deposited substantial cash into accounts maintained with the Society, which was thereafter used to route funds through multiple layers to unidentified beneficiaries. The ledgers found during the search were part of the Society’s regular books of account and related to its customers and members. One such ledger concerned the assessee’s account, which was regarded as suspicious because substantial cash had been deposited in it. However, no document belonging to or pertaining to the assessee was seized; only the assessee’s ledger account in the Society’s books was found. Thus, the material merely indicated that cash deposited by the assessee in his account with the Society might represent unaccounted income and that similar deposits had been layered and transferred to unidentified beneficiaries. The search of the cooperative bank found no books of account or other material belonging to the assessee. Accordingly, this is a case for invoking section 148 of the Act on the basis of information received, and the assessee’s assessment was reopened on that basis.

20) Section 153C of the Income-tax Act provides for assessment of a person other than the searched person where the Assessing Officer is satisfied that seized or requisitioned books, documents, or information contained therein belong to, pertain to, or relate to that other person. The material must be handed over to the Assessing Officer having jurisdiction over that person, who may proceed under section 153A if satisfied that it bears on the determination of the person’s total income for the relevant assessment years. Thus, the Assessing Officer of the searched person must identify and transfer the relevant material, and the Assessing Officer of the other person must independently record satisfaction regarding its bearing on that person’s income.

21) By contrast, section 147 permits reassessment where information in the Assessing Officer’s possession indicates that income has escaped assessment. Such information may arise from a search conducted on any person or from any other source. Reassessment may be initiated upon recording the requisite satisfaction and obtaining approval from the competent authority.

22) Accordingly, sections 153C and 148 operate in distinct fields and are mutually exclusive.

23) For section 153C of the Act to apply, the search of Renuka Mata Multi-State Urban Co-operative Credit Society Ltd. must have yielded books of account or other material belonging to or relating to the assessee. That is not the case here. No books of account of Mr. Dukandar were found at the Society’s premises; only the Society’s own books were found, from which the ledger account of the assessee, as a customer, was extracted. The ledger recorded only the cash deposited by the assessee in his account. Therefore, section 153C is not attracted.

24) We now consider the decision of the Hon’ble Karnataka High Court in VLS Mining. In that case, the Department searched the assessee and Shri Manoj Kumar Jain. During the search of Shri Jain, material relating to the assessee’s unaccounted transactions was found. The Department recorded several statements from Shri Jain under section 132(4) and section 131 of the Act concerning material found and seized from his premises. He stated that some transactions related to the assessee’s unaccounted purchases and sales of iron and that he had made certain payments from cash kept by Shri Anil H. Lad and his group, which were not recorded in the books of account. These facts were recorded by the Coordinate Bench in ITA No. 1854/Bang/2013, M/s VSL Mining v. Deputy Commissioner of Income-tax, for Assessment Year 2008– 09, decided on 28 June 2019. Thus, material found during the search belonged or pertained to the assessee and contained information relating to it. On those facts, the Hon’ble Karnataka High Court in PCIT v. VSL Mining Company (P.) Ltd. (2024) 301 Taxman 631; (2025) 342 CTR 690; (2025) 479 ITR 433 (Karn.) held that the Assessing Officer ought to have invoked section 153C of the Act. The facts of the present case are clearly distinguishable.

25) Further, accepting the assessee’s argument would mean that whenever a bank is subjected to search and seizure, notices under section 153C of the Act must be issued to all its millions of customers, even when no material pertaining to or belonging to those customers is found, merely because they maintain accounts with that bank. That is not the provision of the law, nor can it be read in that manner.

26) The Income-tax Act clearly defines the distinct scope and conditions governing sections 148 and 153C. Although mutually exclusive, each provision applies only when its prescribed conditions are satisfied.

27) In Principal Commissioner of Income-tax v. Agroha Fincap Ltd. [2024] 169 taxmann.com 133 (Delhi), decided on 20 November 2024, the Hon’ble Delhi High Court followed ITO v. Vikram Sujitkumar Bhatia [2023] 149 taxmann.com 123/293 Taxman 4/453 ITR 417 (SC) (para 16) and Pr. CIT v. Abhisar Buildwell (P.) Ltd. [2023] 149 taxmann.com 399/293 Taxman 141/454 ITR 212 (SC) (para 17), and held as follows:

“4. By a separate judgment delivered in ITA No. 401/2022, the question of law as framed has been answered in favour of the Revenue and against the Assessee. For the sake of brevity, we do not consider it apposite to reproduce the reasons and discussion as set out in the said decision in this order. However, the same may also be read as a part of this order. 15. For the said reasons, the question framed in the present petition is also required to be answered in favour of the Revenue and against the Assessee. 16. Having stated the above, we also note that in the present case, no satisfaction note was recorded by the AO of the search person or forwarded to the AO of the Assessee. Thus, in any event the conditions for reopening of the assessment under Section 153C of the Act were not satisfied. For this reason as well, recourse to Section 147 of the Act based on information as received by the Investigation Wing was not precluded. The AO could not be faulted for proceedings under Section 147/148 of the Act instead of Section 153C of the Act. It is also material to note that the search in the case of Jain Brothers was conducted on 14.09.2010. Section 153C(1) of the Act as in force at the material time postulated that the assessment/reassessment of income of person (other than the searched person) under Section 153C of the Act could be initiated only if the assets, documents or books of accounts or material found during the search under Section 132 of the Act or requisitioned under Section 132A of the Act in respect of another person, "belongs or belong to" such person other than the one searched who could then be assessed under Section 153C of the Act subject to other conditions being satisfied. Thus, on the date on which the AO had received the information from the Investigation Wing, which is stated to be 12.03.2013, reassessment under Section 153C of the Act, was impermissible. Section 153(1) of the Act was amended subsequently by virtue of the Finance Act, 2015. However, the Supreme Court in ITO v. Vikram Sujitkumar Bhatia [2023] 149 taxmann.com 123/293 Taxman 4/453 ITR 417 (SC), clarified that the amendment would also be applicable to search conducted prior to 01.06.2015. 17. The present case is covered squarely by the decision of the Supreme Court in Pr. CIT v. Abhisar Buildwell (P.) Ltd. [2023] 149 taxmann.com 399/293 Taxman 141/454 ITR 212 (SC) as the jurisdictional condition for the AO of the Assessee to assume jurisdiction under Section 153C of the Act was not satisfied.” 28) Accordingly, the decision in Vishal Kishorilal Jain, relied upon by the learned authorised representative, is neither binding nor persuasive, as it did not analyse the relevant statutory provisions and overlooked the decisions of the High Courts. The decision relied upon by the learned authorised representative of the coordinate bench neither referred to nor discussed any of the provisions of the Act but has followed a decision of another coordinate bench without applying the provisions of the law to the facts before it.

29) The learned authorised representative also relied on the decision of the Hon’ble Bombay High Court in Segal Jewellery, 2025:BHC-OS:2735-DB. In that case, a search and survey under section 132 conducted on 4 October 2018 against Shilpi Jewellers Pvt. Ltd. and key persons yielded incriminating loose papers and electronic data revealing substantial unsecured loans from suspected shell companies, including Sejal Jewellery’s loan of ₹25,00,000 from Green Valley Gems Pvt. Ltd. Enquiries indicated that the lender lacked existence and creditworthiness and exhibited suspicious financial patterns, while statements recorded under section 132(4) failed to substantiate the lender or intermediaries. The loan therefore remained unexplained, resulting in escapement of income for Assessment Year 2012–13. Despite incriminating material relating to the assessee being found during the search of another person, the Assessing Officer initiated reassessment proceedings. The High Court held that section 153C, rather than section 148, should have been invoked and accordingly invalidated the reassessment. The facts of that case are materially distinguishable from those before us.

30) In the present case, the search under section 132 of the Income-tax Act at Renuka Mata Multi-State Co-operative Bank Ltd. revealed the assessee’s ledger account in the Bank’s books, showing substantial cash deposits. The information indicated that several persons had deposited cash with the Bank, after which the funds were layered and transferred to beneficiaries. On the basis of this information, the Assessing Officer validly initiated reassessment proceedings under section 148 of the Act. In contrast, proceedings under section 153C could be initiated only if the Assessing Officer of the searched entity found incriminating material belonging or pertaining to the assessee and transferred it to the assessee’s Assessing Officer. As no such material was found, the assessee’s contention is rejected.

31) On the merits, the assessee deposited ₹1,82,30,050 into his account with Renuka Mata Multi-State Urban Co-operative Credit Society Ltd. He explained that he was a commission agent in the cotton trade, procuring cotton locally from farmers and supplying it to buyers in Maharashtra. Cash collected from buyers was deposited with the Society and withdrawn at its Gulbarga branch to pay the farmers. He also dealt in Shahabad stone and operated a transport business. In support, he furnished bank statements, books of account, a cash book, a ledger, a cash-flow statement, purchase and sales invoices, receipts, details of the parties from whom cash was received and to whom payments were made, and his Agricultural Produce Market Committee registration. His books reflected the turnover and the corresponding commission income. In the remand report, after verifying these documents, the Assessing Officer found no unaccounted income in the deposits. Nevertheless, the learned CIT(A) sustained the addition principally because the assessee had not obtained an audit under section 44AB and had declared commission income under the category of “commission business without books.” These circumstances may attract separate statutory consequences but do not establish that the income recorded in the books was unaccounted. The suspicion arising from cash realisations exactly matching individual invoices also cannot override the evidence produced. As the assessee furnished third-party evidence supporting the purchases, receipts, and payments, the addition cannot be sustained. We therefore direct the Assessing Officer to delete the addition of ₹1,82,30,050 relating to cash deposited with the Society. All grounds concerning this issue are allowed.

32) No other grounds raised in the memorandum of appeal were advanced before us; they are therefore dismissed.

33) ITA No. 1923/Bang/2024 for Assessment Year 2017–18 involves identical facts, on which the Assessing Officer made an addition of ₹1,65,99,815. As both parties confirmed that the facts and circumstances remain unchanged, and for the reasons given in the appeal for Assessment Year 2016–17, we direct the Assessing Officer to delete this addition and to partly allow the appeal.

34) In the result, both appeals filed by the assessee are partly allowed. Order pronounced in the open court on 21st October, 2026.

Sd/- Sd/- SOUNDARARAJAN K. PRASHANT MAHARISHI JUDICIAL MEMBER VICE PRESIDENT Bangalore Dated: *TNTS* Copy to:

JAGANNATH ANVEERAPPA DUKANDAR H NO. 7-1101/30A 1 NEAR ISHWAR TEMPLE, GUNJ BANK COLONY, KALABURGI-585104, KARNATAKA INCOME TAX OFFICER, 2 WARD-1 & TPS, GULBARGA-585105, KARNATAKA 3 THE PCIT / CIT, 4 THE CIT(APPEALS) 5 THE D.R., ITAT, BANGALORE BENCH BY ORDER

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

Digitally signed P G by P G RAJANI Date: RAJANI 2026.10.30 16:34:37 +05'30'