Question

why can't we use a bar magnet instead of a rectangular coil in a moving coil galvanometer

Answer 1

A moving coil galvanometer works on the principle of electromagnetic induction, much like a typical stator-rotor arrangement you find in motors and generators.
If the emphasis of your question lies in the material used, the answer is that soft iron has high permeability when compared to air, and unlike some other magnetic materials, has very low retentivity. That makes it ideal for use in a measuring instrument