SRI AJITH RAMACHANDRA, vs. INCOME TAX OFFICER WARD 1,

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WP/23584/2026HC KarnatakaKAHC01051815202613 August 2026Author: B M SHYAM PRASAD8 pages
AI SummaryPartly Allowed

What did the High Court hold?

The High Court allowed the petition in part, quashing the order under Section 148A(d) dated March 11, 2023 (Annexure A1), the notice under Section 148 dated March 11, 2023 (Annexure A2), the assessment order dated January 8, 2024 (Annexure A3), and the penalty orders under Section 271(1)(b) dated July 18, 2024 (Annexure A4) and Section 271(1)(c) dated July 22, 2024 (Annexure A5). The Court did not decide on the challenge to the vires of Section 147A of the IT Act. Instead, it restored the proceedings with liberty to the petitioner to file a response to the show cause notice under Section 148A(b) dated February 22, 2023, by October 5, 2026. The reasoning was that the proceedings, including the orders under Section 148A, were ex parte and did not consider the circumstances demonstrated by the sale deed and bank statement, which indicated the source of income. The Court found merit in disposing of the petition by allowing the petitioner to present his case on merits.

What were the facts?

The petitioner, Sri Ajith Ramachandra, a Non-resident Indian, challenged several notices and orders issued by the Income Tax Department for Assessment Year 2016-17. These included a show cause notice under Section 148A(b), an order under Section 148A(d), a notice under Section 148, an assessment order under Section 147 read with Sections 144 and 144B, and penalty orders under Section 271(1)(b) and Section 271(1)(c). The petitioner's wife, represented by a Power of Attorney holder, had purchased an immovable property for Rs. 83,72,000/- on March 10, 2016, availing a loan of Rs. 67,00,000/- from HDFC Bank. The petitioner argued that the proceedings should have been initiated against his wife, not him, and that the source of funds was evident from the sale deed and loan documents. He also contended that even if the difference was considered escaped income, it was below the threshold for reassessment.

What were the issues?

1. Whether the reassessment proceedings initiated under Section 147 of the Income Tax Act, 1961, for Assessment Year 2016-17 were validly commenced against the petitioner, Sri Ajith Ramachandra, or if they should have been against his wife, Mrs. Namrata Ganesh, who purchased the property. 2. Whether the proceedings could be commenced at all, given that the sale deed and loan papers demonstrated the source of funds for the property purchase, and if the difference between the property cost and loan amount, even if considered escaped income, fell below the threshold of Rs. 50,00,000/- stipulated under Section 147. 3. Whether Section 147A of the IT Act, as inserted by the Finance Act, 2026, with retrospective effect from April 1, 2021, is ultra vires the Constitution of India. Assessee's Contentions: - The proceedings should have been against the petitioner's wife, not the petitioner. - The sale deed and loan documents clearly show the source of income for the property purchase. - Even if the difference between the property cost and loan amount is considered escaped income, it is below the Rs. 50,00,000/- threshold for reassessment under Section 147. - The proceedings were ex parte and did not consider these circumstances. - A challenge to the vires of Section 147A of the IT Act. Revenue's Contentions: - Not recorded in the judgment.

Which sections of the Income-tax Act were involved?

Section 148A(b),Section 148A(d),Section 148,Section 147,Section 144,Section 144B,Section 271(1)(b),Section 271(1)(c),Section 147A

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 13TH DAY OF AUGUST, 2026 BEFORE THE HON'BLE MR. JUSTICE B M SHYAM PRASAD WRIT PETITION NO. 23584 OF 2026 (T-IT) BETWEEN:

SRI AJITH RAMACHANDRA, AGED ABOUT 42 YEARS, S/O LATE RAMACHANDRA APPAIAH, RESIDING AT NO.207, HOURET DRIVE, MILPITAS, CALIFORNIA - 95035.

PERMANENT RESIDENT OF NO.133, SRI SAI ANUGRAHA APARTMENT, 4TH FLOOR, 1ST MAIN, T C PALYA MAIN ROAD, NRI LAYOUT, DOORAVANI NAGAR POST, BANGALORE 560016

REPRESENTED BY POWER OF ATTORNEY HOLDER OF THE PETITIONER, MRS P KRISHNAVENI, AGED 70 YEARS, W/O LATE RAMACHANDRA APPAIAH, RESIDING AT NO.133, SRI SAI ANUGRAHA APARTMENT, 4TH FLOOR, 1ST MAIN, T C PALYA MAIN ROAD, NRI LAYOUT, DOORAVANI NAGAR POST, BANGALORE - 560016 …PETITIONER (BY SRI. RAVI SHANKAR S V.,ADVOCATE)

Digitally signed by VANAMALA N Location: HIGH COURT OF KARNATAKA

AND:

INCOME TAX OFFICER WARD 1, KOLAR 563101

INCOME TAX OFFICER, WARD 5(3)(4), BANGALORE - 560032

NATIONAL FACELESS ASSESSMENT CENTRE, ASSESSMENT UNIT, ADDITIONAL /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 110003

PRINCIPAL CHIEF COMMISSIONER OF INCOME TAX, C R BUILDING, QUEENS ROAD, BANGALORE 560001

UNION OF INDIA, REP. BY SECRETARY, DEPARTMENT OF REVENUE, MINISTRY OF FINANCE, KARTAVYA BHAVAN - 1, NEW DELHI 110 001

6.

CENTRAL BOARD OF DIRECT TAXES, REP. BY ITS CHAIRMAN,

KARTAVYA BHAVAN - 1, NEW DELHI 110 001 …RESPONDENTS (BY SRI. E.I. SANMATHI , ADVOCATE A/W SRI. NIRMAL MATHEW, ADVOCATE)

THIS WP IS FILED UNDER ARTICLES 226 & 227 CONSTITUTION INDIA PRAYING TOQUASHING THE NOTICE UNDER SECTION 148A(B) OF THE ACT, DATED 22/02/2023 VIDE ITBA /AST /F/ 148A(SCN)/2022-23/1050011677(1) ISSUED BY THE R2 FOR ASSESSMENT YEAR 2016-17 HEREIN MARKED AS ANNEXURE - A. II) QUASHING THE ORDER PASSED UNDER SECTION 148A(D) OF THE ACT DATED 11/03/2023 ITBA/AST/F/148A/2022-23/ 1050636111 (1) PASSED BY R2 FOR ASSESSMENT YEAR 2016-17 HEREIN MARKED AS ANNEXURE - A1. III) QUASHING THE NOTICE ISSUED UNDER SECTION 148 OF THE ACT DATED 11/03/2023 ITBA/AST/S/148_1/2022-23/1050636164(1) ISSUED BY R2 FOR THE ASSESSMENT YEAR 2016-17 HERE MARKED AS ANNEXURE - A2. IV) QUASHING THE ORDER PASSED UNDER SECTION 147 R.W.S 144, 144B ACT, DATED 08/01/2024 ITBA/AST/S/147/2023-24/1059475217(1) PASSED BY R2 FOR THE ASSESSMENT YEAR 2016-17 HEREIN MARKED AS ANNEXURE-A3. V) QUASHING THE PENALTY ORDER PASSED UNDER SECTION 271(1)(B) OF THE ACT DATED 18/07/2024 VIDE ITBA/PNL/F /271(1)(B)/2024-25/1066790897(1) BY R3 FOR THE ASSESSMENT YEAR 2016-17 HEREIN MARKED AS ANNEXURE - A4. VI) QUASHING THE PENALTY ORDER PASSED UNDER SECTION 271(1)(C) OF THE ACT DATED 22/07/2024 ITBA/PNL/F/271(1)(C)/2024-25/ 1066879911 (1) BY R3 FOR THE ASSESSMENT YEAR 2016-17 HEREIN MARKED AS ANNEXURE - A5. VIL) DIRECTION, DECLARING THAT SECTION 147A OF THE ACT INSERTED VIDE FINANCE ACT, 2026, WITH RETROSPECTIVE EFFECT FROM 01/04/2021, IS ULTRA VIRES CONSTITUTION INDIA AND

CONSEQUENTLY STRIKE DOWN THE SAME, HEREIN ENCLOSED AND MARKED AS ANNEXURE - A6.

THIS PETITION, COMING ON FOR PRELIMINARY HEARING, THIS DAY, ORDER WAS MADE THEREIN AS UNDER: CORAM: HON'BLE MR. JUSTICE B M SHYAM PRASAD

ORAL ORDER

The petitioner has called in question the following, including the Show Cause Notice dated 22.02.2023 under Section 148A(b) of the Income Tax Act, 1961 [for short, 'the IT Act']. The details of this notice and the other impugned orders/ notices are as follows.

Sl.No Particulars Income Tax Act, 1961 Date Annexure Show Cause 148A(b) 22.02.2023 A Order 148A(d) A1

A2 Assessment Order 147 r.w.s 144, 144B 08.01.2024 A3 271(1)(b) 18.07.2024 A4 6. 271(1)(c) 22.07.2024 A5

Mr. Ravi Shankar S V, the learned counsel for the petitioner, and Mr. E. I. Sanmathi and Mr. Nirmal Mathew, the learned Senior Standing counsel/the learned Standing counsel who accept notice for the respondents, are heard for disposal of the petition with Mr. Ravi Shankar S V emphasizing the following.

[a] The petitioner and his wife, Mrs. Namrata Ganesh, have been Non-resident Indians for over a decade, and the petitioner's wife, represented by her Power of Attorney, has purchased an immovable property under the Sale Deed dated 10.03.2016 for a valuable consideration of Rs.83,72,000/-.

[b] The petitioner's wife has availed a loan of Rs.67,00,000/- from M/s HDFC Bank for the purchase of the house.

[c] The proceedings, even if it could be commenced on the ground of escapement of income from assessment for reassessment under Section 147 of the IT Act, should have been commenced against the petitioner's wife and not the petitioner.

[d] The proceedings, even against petitioner's wife, could not have been commenced because the sale deed and the loan papers demonstrate the source of income for purchase of the property and even if difference between Rs.83,72,000/- and Rs.67,00,000/- is considered as income that has escaped assessment, it would be far below the threshold of Rs.50,00,000/- as envisaged under Section 147 of the IT Act.

These circumstances are considered in the light of the fact that the proceedings, including the Orders under Section 148A of the IT Act, are ex parte and without considering the afore circumstances which are shown by the documents viz., the Sale Deed and the Bank Statement. This Court, on a careful consideration is of the view that the petition must be disposed of notwithstanding the challenge of the vires of Section 147A of the IT Act restoring the proceedings with liberty to the petitioner to file response to the Show Cause Notice under Section 148A(b) of the IT Act dated 22.02.2023. In the light of the afore, the following. ORDER

The petition is allowed in-part quashing the following. Sl. No Particulars Income Tax Act, 1961 Date Annexu re Order 148A(d) A1

A2 Assessment 147 r.w.s 08.01.2024 A3

Order 144, 144B 271(1)(b) 18.07.2024 A4 271(1)(c) 22.07.2024 A5

The petitioner is reserved with liberty to file response to the Show Cause Notice under Section 148A(b) of the IT Act dated 22.02.2023 with the second respondent by 05.10.2026.

Sd/- (B M SHYAM PRASAD) JUDGE

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