THE PR. COMMISSIONER OF INCOME-TAX, vs. KANVA DIAGNOSTIC SERVICES PVT LTD

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ITA/180/2025HC KarnatakaKAHC01073353202502 July 2026Bench: S.G.PANDIT,RAJESH RAI K6 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the Tribunal had clearly found that no materials were placed on record to substantiate the suppression of sales or unaccounted cash. The Tribunal specifically noted that the allegation of sales suppression was based solely on statements without corroborative material. It also found no unaccounted investment, unexplained asset, or expenditure. The Tribunal observed that the source of suppressed turnover, if any, was disclosed and included in the return, and income had been taxed. Since there was no material to support the revenue's case, the Tribunal was justified in allowing the assessee's appeal and dismissing the revenue's appeal. The High Court found that the Tribunal had arrived at a factual finding, which the High Court could not interfere with, and therefore, no substantial question of law arose. Consequently, the appeals were rejected.

What were the facts?

The assessee, Kanva Diagnostic Services Pvt Ltd, was subjected to a search under Section 132 of the Income Tax Act, 1961. Incriminating materials and employee statements were collected. The revenue alleged suppression of sales and unaccounted cash, leading to additions. The assessee appealed to the Commissioner of Income Tax (Appeals) [CIT(A)]. For Assessment Year 2018-19, the CIT(A) deleted additions for suppression of sales but confirmed additions for unexplained cash under Section 69A. Both the revenue and the assessee appealed to the Income Tax Appellate Tribunal (ITAT). The ITAT dismissed the revenue's appeal and allowed the assessee's cross-objection and appeal. The revenue has filed these appeals before the High Court against the ITAT's order for Assessment Year 2018-19.

What were the issues?

The High Court had to decide on two substantial questions of law: 1. Whether, on the facts and in the circumstances of the case, the Tribunal was correct in not considering the extensive and credible corroborative evidence brought on record during the course of search and assessment proceedings to show that the assessee was engaged in suppression of sales? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was correct in not considering that the unexplained cash which was in possession of the assessee ought to have been brought to tax under Section 69A? Assessee's Contentions: The judgment does not record specific contentions made by the assessee before the High Court, but it notes that the assessee had filed appeals before the ITAT. Revenue's Contentions: The revenue contended that the Tribunal erred in not considering the corroborative evidence of sales suppression and in not taxing the unexplained cash under Section 69A.

Which sections of the Income-tax Act were involved?

Section 132,Section 153A,Section 69A,Section 260A

AI-generated summary — verify with the full judgment below

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HC-KAR NC: 2026:KHC:33017-DB ITA No. 179 of 2025 C/W ITA No. 180 of 2025 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 2ND DAY OF JULY, 2026 PRESENT THE HON'BLE MR. JUSTICE S.G.PANDIT AND THE HON'BLE MR. JUSTICE RAJESH RAI K INCOME TAX APPEAL NO. 179 OF 2025 C/W INCOME TAX APPEAL NO. 180 OF 2025 IN ITA No. 179/2025 BETWEEN: 1. THE PR. COMMISSIONER OF INCOME-TAX CENTRAL, 3RD FLOOR, C.R. BUILDING, QUEEN'S ROAD, BENGALURU-560 001. 2. THE DEPUTY COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-1(3), 3RD FLOOR, C.R BUILDING, QUEEN'S ROAD, BENGALURU-560 001. …APPELLANTS (BY SRI. DILIP FOR SRI. RAVI RAJ Y.V, ADVOCATE) AND:

KANVA DIAGNOSTIC SERVICES PVT LTD NO.2/10, DR. RAJKUMAR ROAD, RAJAJINAGAR 4TH BLOCK, BENGALURU-560 010. …RESPONDENT (BY SRI. PRASANNA URALA, ADVOCATE) Digitally signed by PANKAJA S Location: HIGH COURT OF KARNATAKA

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HC-KAR NC: 2026:KHC:33017-DB ITA No. 179 of 2025 C/W ITA No. 180 of 2025

THIS ITA / INCOME TAX APPEAL, PRAYING TO ALLOW THE APPEAL AND SET ASIDE THE ORDERS PASSED BY THE INCOME-TAX APPELLATE TRIBUNAL, BENGALURU IN ITA NO.2182/BANG/2024 DT.03.06.2025 FOR ASSESSMENT YEAR 2018-2019 ANNEXURE-A CONFIRMING THE ORDER OF THE APPELLATE COMMISSIONER AND CONFIRM THE ORDER PASSED BY THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-1(3), BENGALURU. IN ITA NO. 180/2025 BETWEEN: 1. THE PR. COMMISSIONER OF INCOME-TAX, CENTRAL, 3RD FLOOR, C.R. BUILDING, QUEEN'S ROAD, BENGALURU-560 001. 2. THE DEPUTY COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-1(3), 3RD FLOOR, C.R BUILDING, QUEEN'S ROAD, BENGALURU-560 001. ...APPELLANTS (BY SRI. M. DILIP FOR SRI. RAVI RAJ Y.V, ADVOCATE) AND:

KANVA DIAGNOSTIC SERVICES PVT.LTD NO.2/10, DR. RAJKUMAR ROAD, RAJAJINAGAR, 4TH BLOCK, BENGALURU-560 010. ...RESPONDENT (BY SRI. PRASANNA URALA, ADVOCATE) THIS ITA FILED UNDER SECTION 260 A OF THE INCOME TAX ACT, PRAYING TO ALLOW THE APPEAL AND SET ASIDE THE ORDERS PASSED BY THE INCOME-TAX APPELLATE TRIBUNAL, BENGALURU IN ITA

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HC-KAR NC: 2026:KHC:33017-DB ITA No. 179 of 2025 C/W ITA No. 180 of 2025 NO.2233/BANG/2024 DT.03.06.2025 FOR ASSESSMENT YEAR 2018-2019 ANNEXURE-A CONFIRMING THE ORDER OF THE APPELLATE COMMISSIONER AND CONFIRM THE ORDER PASSED BY THE DEPUTY COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-1(3), BENGALURU.

THESE APPEALS, COMING ON FOR ADMISSION, THIS DAY, JUDGMENT WAS DELIVERED THEREIN AS UNDER: CORAM: HON'BLE MR. JUSTICE S.G.PANDIT and HON'BLE MR. JUSTICE RAJESH RAI K ORAL JUDGMENT (PER: HON'BLE MR. JUSTICE S.G.PANDIT)

Heard learned counsel Sri M. Dilip for Sri Y.V. Ravi Raj for the appellants-revenue and learned counsel Sri Prasanna Urala for the respondent-assessee in both the appeals.

2.

The above appeals are filed on the common substantial questions of law, which reads as follows: "1. Whether on the facts and in the circumstances of the case, the Tribunal was correct in not considering the extensive and credible corroborative evidence brought on record during the course of search and assessment proceedings to show that the assessee was engaged in suppression of sales? 2. Whether on the facts and in the circumstances of the case, the Tribunal was correct in not considering that the unexplained cash which was in possession of

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HC-KAR NC: 2026:KHC:33017-DB ITA No. 179 of 2025 C/W ITA No. 180 of 2025 the assessee ought to have been brought to tax under Section 69A?"

3.

The brief facts of the case are that the respondent- assessee was engaged in the business of providing medical and diagnostic services and was subjected to search under Section 132 of the Income Act, 1961 (for short 'the Act'). It is stated that the incriminating materials and information were collected during the course of search and the statement of employees were recorded in the search.

4.

It is the case of the appellant that certain admitted amounts were not offered to tax in the returns filed under Section 153A of the Act. Accordingly, a show cause notice came to be issued in respect of above added unaccounted cash, which was due to suppression of sales. Against the order of the Assessing Officer, the respondent filed an appeal before the Commissioner of Income Tax (Appeals) [CIT(A)]. The CIT(A) dismissed the appeal for the Assessment Year 2014-15 to 2017-18 but allowed the assessee's appeal on the additions for the Assessment Year 2014-15 to 2017-18. For the Assessment Year 2018-19, the CIT(A) deleted the addition made on account

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HC-KAR NC: 2026:KHC:33017-DB ITA No. 179 of 2025 C/W ITA No. 180 of 2025 of suppression of sale. However, confirmed the addition on account of cash found as unexplained money under Section 69A of the Act. Being aggrieved by the order of CIT(A) appeal, both the revenue as well as the assessee filed appeal before the Income Tax Appellate Tribunal, 'A' Bench, Bangalore (for short, "the Tribunal"). The Tribunal, dismissed the revenue's appeal and allowed the assessee's cross objection and appeal. Aggrieved by dismissal of the revenue's appeal and allowing of the respondent-assessee's appeal, the revenue is in appeal raising the above stated substantial questions of law.

5.

We have gone through the order passed by the Tribunal. The Tribunal has clearly held that no materials were placed to substantiate the suppression of sales or unaccounted cash. The Tribunal has specifically found that the allegation of suppression of sales is based solely on the statements and there is no corroborative material in support of such statement. The Tribunal also found that there is no unaccounted investment, unexplained asset or expenditure. Material on record would indicate that source of suppressed turnover was disclosed and included in the return. Furthermore, income has

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HC-KAR NC: 2026:KHC:33017-DB ITA No. 179 of 2025 C/W ITA No. 180 of 2025 been taxed, as found by the Tribunal. As there is no material to substantiate the case of the revenue, the Tribunal is justified in allowing the assessee's appeal and dismissing the revenue's appeal. The Tribunal has come to a factual finding and this Court cannot venture into examining or interfering with the said factual finding. As such, no substantial question of law would arise for consideration.

Accordingly, the appeals stand rejected. SD/- (S.G.PANDIT) JUDGE SD/- (RAJESH RAI K) JUDGE HKV List No.: 1 Sl No.: 23

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