- 1 - HC-KAR NC: 2026:KHC:15040-DB WA No. 713 of 2026 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 18TH DAY OF MARCH, 2026 PRESENT THE HON'BLE MR. JUSTICE S.G.PANDIT AND THE HON'BLE MR. JUSTICE K. V. ARAVIND WRIT APPEAL No. 713 OF 2026 (T-IT) BETWEEN: 1. THE INCOME TAX OFFICER, WARD-1(2)(4), BANGALORE, BMTC BUILDING, 80 FEET ROAD, 6TH BLOCK, NEAR KHB GAMES VILLAGE, KORMANGALA, BENGALURU-560 095. 2. THE ASSESSMENT UNIT REP.BY ADDL./JOINT/DEPUTY/ ASSISTANT COMMISSIONER OF INCOME TAX/ INCOME TAX OFFICER, INCOME TAX DEPARTMENT, MINISTRY OF FINANCE, ROOM No.401, 2ND FLOOR, E RAMP, JAWAHARLAL NEHRU STADIUM, DELHI-110 003. 3. THE NATIONAL FACELESS ASSESSMENT CENTRE REPRESENTED BY ADDL./ JOINT/DEPUTY/ ASSISTANT COMMISSIONER OF INCOME TAX/ INCOME TAX OFFICER, INCOME TAX DEPARTMENT, MINISTRY OF FINANCE, Digitally signed by VINUTHA B S Location: High Court of Karnataka - 2 - HC-KAR NC: 2026:KHC:15040-DB WA No. 713 of 2026 ROOM No.401, 2ND FLOOR, E-RAMP, JAWAHARLAL NEHRU STADIUM, DELHI-110 003. …APPELLANTS (BY SRI RAVI RAJ Y. V., ADVOCATE) AND: 1. MR. M. MUNISWAMY REDDY, SON OF LATE MUNIAPPA REDDY, AGED ABOUT 65 YEARS, RESIDING AT No.93/A, VAJRESHWARI NILAYA, 13TH CROSS, HENNUR MAIN ROAD, BENGALURU-560 084. …RESPONDENT (BY SRI VIKRAM HUILGOL, SENIOR ADVOCATE A/W SRI ALOKE MADAPPA, ADVOCATE FOR SMT. MARIA JOSEPH, ADVOCATE FOR C/R) THIS WRIT APPEAL IS FILED UNDER SECTION 4 OF THE KARNATAKA HIGH COURT ACT PRAYING TO SET ASIDE THE ORDER PASSED BY THE LEARNED SINGLE JUDGE IN WP No. 37835/2025 (T-IT) DATED 15.12.2025. THIS APPEAL, COMING ON FOR FURTHER HEARING, THIS DAY, JUDGMENT WAS DELIVERED THEREIN AS UNDER: CORAM: HON'BLE MR. JUSTICE S.G.PANDIT and HON'BLE MR. JUSTICE K. V. ARAVIND - 3 - HC-KAR NC: 2026:KHC:15040-DB WA No. 713 of 2026 ORAL JUDGMENT (PER: HON'BLE MR. JUSTICE S. G. PANDIT) Heard Sri Y.V. Raviraj, learned Senior Standing Counsel for the petitioners and Sri Vikram Huilgol, learned Senior Advocate along with Sri Aloke Madappa, learned counsel for Smt. Maria Joseph, learned counsel for caveator-respondent. 2. This intra-court appeal is filed by the Revenue under Section 4 of the Karnataka High Court Act, impugning the order of the learned Single Judge in Writ Petition No.37835/2025 dated 15.12.2025. 3. The appellants completed the assessment under Section 144 of the Income-tax Act, 1961 (for short, “the IT Act”) for the Assessment Year 2017–18 on 06.12.2019, making an addition of Rs.32,00,500/-. The assessee preferred an appeal before the Commissioner of Income-tax (Appeals), which came to be dismissed by order dated 31.03.2024. 3.1 Being further aggrieved, the respondent preferred an appeal before the Income-tax Appellate Tribunal, Bengaluru (for short, “the Tribunal”). The Tribunal, by order dated - 4 - HC-KAR NC: 2026:KHC:15040-DB WA No. 713 of 2026 27.06.2024, remanded the matter to the file of the Assessing Officer for fresh consideration. 3.2 Pursuant thereto, the Assessing Officer, by order dated 05.12.2025, completed the assessment once again, making an addition of Rs.32,00,500/-. The said order was challenged in the writ petition. The learned Single Judge, under the impugned order, allowed the writ petition and quashed the order of assessment and the demand notice dated 05.12.2025. Consequential penalty notices were also quashed. 4. Sri Y.V. Raviraj, learned Senior Standing Counsel appearing for the appellants–Revenue, submits that for the period from 09.11.2016 to 31.12.2016, the respondent had deposited cash amounting to Rs.32,00,500/-. It is submitted that, in the earlier round, the respondent did not participate in the proceedings and, therefore, the assessment came to be completed. 4.1 It is further submitted that, in the remand proceedings, the assessee contended that, out of the said cash deposits, a sum of Rs.26,50,000/- represents the consideration received - 5 - HC-KAR NC: 2026:KHC:15040-DB WA No. 713 of 2026 pursuant to a registered agreement of sale entered into on 11.12.2014. It is submitted that, out of the balance amount, a sum of Rs.4,50,000/- is stated to have been given by the son of the assessee, which has not been established. 4.2 It is contended that the burden of proof lies on the respondent–assessee to establish the source of the cash deposits. In the absence of any acceptable explanation, the entire cash deposit has been rightly treated as unexplained money under Section 69A read with Section 115BBE of the IT Act. 4.3 It is further submitted that, if the respondent was aggrieved, the appropriate remedy was to prefer an appeal before the Commissioner of Income-tax (Appeals). Hence, the writ petition was not maintainable. 5. Sri Vikram Huilgol, learned Senior Advocate, along with Sri Aloke Madappa, learned counsel for Smt. Maria Joseph, learned counsel for the caveator–respondent, submits that, in order to establish the source of the cash deposits, the - 6 - HC-KAR NC: 2026:KHC:15040-DB WA No. 713 of 2026 respondent has produced the registered agreement of sale, which indicates receipt of a sum of Rs.26,50,000/-. 5.1 It is further submitted that the remaining amount of Rs.4,50,000/- was received from the son of the respondent, who has sufficient source of income. It is contended that the order of the Assessing Officer suffers from perversity and is based on presumptive reasoning. Hence, the writ petition was rightly entertained by the learned Single Judge. 6. We have considered the submissions made by learned counsel appearing for the parties on both sides and perused the writ papers. We are not inclined to entertain this intra-court appeal for more than one reason. 6.1 The respondent has furnished an explanation with regard to the source of Rs.26,50,000/- and has produced the registered agreement evidencing receipt of the said amount. The Assessing Officer rejected the explanation on the ground that the respondent had not established that the said cash remained in the possession of the assessee till December 2016 for the purpose of deposit, and also doubted the agreement. - 7 - HC-KAR NC: 2026:KHC:15040-DB WA No. 713 of 2026 The Assessing Officer further observed that, having regard to normal human conduct, a prudent person would not retain a sum of Rs.26,50,000/- in cash at home for a period of two years without depositing, investing, or utilising the same. These findings, in our considered view, are unsustainable. 6.2 The respondent has explained the availability of cash of Rs.26,50,000/- as being sourced from a registered agreement of sale. The same has been disbelieved on presumptive reasoning. Such an approach is not only unreasonable but also overlooks the practical difficulty in establishing that the cash deposited in December 2016 is the very same cash received under the registered agreement dated 11.12.2014. The nature of proof expected by the Assessing Officer borders on impossibility of performance. 6.3 The further reliance placed on “human conduct” is, again, hypothetical. The prudence of an individual varies from person to person, and the explanation offered cannot be disbelieved solely on the basis of presumed standards of human prudence. It is not even the case of the Assessing Officer that the source of the deposit is other than the agreement. In the absence of - 8 - HC-KAR NC: 2026:KHC:15040-DB WA No. 713 of 2026 any material to that effect, the finding recorded is arbitrary and unacceptable. 6.4 Insofar as the source of Rs.4,50,000/- stated to have been received from the son of the respondent is concerned, the Income Tax Return of the son has been produced, reflecting an income of Rs.5,09,270/-. Though the return pertains to one assessment year, once an income of Rs.5,09,270/- is disclosed therein, doubting the source of Rs.4,50,000/- is without any basis. 6.5 Once explanation in respect of the cash deposits is furnished, the Assessing Officer has committed a jurisdictional error in treating the same as unexplained money under Section 69A read with Section 115BBE of the 1961 Act. Consequently, the penalty notices are also unsustainable. 6.6 The learned Single Judge, having recorded that the source of the cash deposits was established by relevant documents, set aside the order of assessment, the computation sheet, the demand notice, all dated 05.12.2025, as well as the penalty notices of even date. - 9 - HC-KAR NC: 2026:KHC:15040-DB WA No. 713 of 2026 7. We find no justifiable reason or demonstrable ground to interfere with the order of the learned Single Judge. The impugned order is well-founded on cogent reasons. The appeal is devoid of merit and is accordingly dismissed. Sd/- (S.G.PANDIT) JUDGE Sd/- (K. V. ARAVIND) JUDGE DDU List No.: 1 Sl No.: 11