PANDARAPURAVIL BALAKRISHNAN vs. INCOME TAX OFFICER WARD 6 (1) (1)

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WP/18869/2026HC KarnatakaKAHC01041074202631 July 2026Author: B M SHYAM PRASAD11 pages
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What did the High Court hold?

The High Court allowed the petition in part. It held that the reassessment order was vitiated by a failure to provide a speaking order, specifically on the crucial issue of whether the petitioner was entitled to claim the fair market value of land and building as of 2001-2002 and compute indexed costs for capital gains. The Court found that the assessment order did not adequately address this point, rendering it non-speaking. Consequently, the Court quashed the order under Section 148A(d) dated 20.08.2024, the notice under Section 148 dated 20.08.2024, the reassessment order dated 20.03.2026, the demand notice dated 20.03.2026, and the penalty notice dated 20.03.2026. The proceedings were restored, with liberty granted to the petitioner to file a detailed response to the notice under Section 148A(b) dated 30.07.2024, furnishing all supporting documents. The petitioner was directed to appear before the jurisdictional Assessing Officer on 22.09.2026.

What were the facts?

The petitioner, Pandarapuravil Balakrishnan, filed a writ petition challenging several notices and orders issued by the Income Tax Department concerning Assessment Year 2018-19. These included a notice under Section 148A(b) dated 30.07.2024, an order under Section 148A(d) dated 20.08.2024, a notice under Section 148 dated 20.08.2024, a reassessment order under Section 147 read with Section 144 dated 20.03.2026, a demand notice under Section 156 dated 20.03.2026, and a penalty notice under Section 274 read with Section 270A dated 20.03.2026. The petitioner's primary grievance was that he could not produce original invoices for construction costs incurred in 1991, having relied on the fair market value as of 2001-2002 and indexed costs for capital gains computation.

What were the issues?

1. Whether the reassessment proceedings initiated under Section 147 read with Section 144 of the Income Tax Act, 1961, for Assessment Year 2018-19, are vitiated by a lack of a speaking order concerning the petitioner's claim for fair market value and indexed cost of construction. Assessee's Contention: The petitioner argued that the reassessment order failed to provide a reasoned conclusion on whether claiming the fair market value of land and building as of 2001-2002, with indexed costs, was permissible under the statute, given the inability to produce old invoices. The petitioner also contended that the details supporting this claim were provided in response to a subsequent show cause notice, not at the initial 148A(b) stage, as they were only requested later. Revenue's Contention: The revenue, through its counsel, emphasized that the petitioner's grounds touched upon the merits of the case, which should ideally be examined in an appeal. The revenue highlighted the assessment order's reasoning, which disallowed construction costs due to a lack of supporting details and took only the land cost of Rs. 1,20,000/-.

Which sections of the Income-tax Act were involved?

Section 148A(b),Section 148A(d),Section 148,Section 147,Section 144,Section 156,Section 274,Section 270A

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 31ST DAY OF JULY, 2026 BEFORE THE HON'BLE MR. JUSTICE B M SHYAM PRASAD WRIT PETITION NO. 18869 OF 2026 (T-IT)

BETWEEN:

PANDARAPURAVIL BALAKRISHNAN S/O KUMARAN, M AGED ABOUT 72 YEARS 53, CELEBRITY SERENITY, BANDENALLASANDRA, JIGANI S.O BANDENALLASANDRA, BANGALORE - 560105. …PETITIONER (BY SRI.PRASANNA B M., ADVOCATE)

AND:

1.

INCOME TAX OFFICER WARD 6 (1) (1) BMTC BUILDING, 80 FEET ROAD, 6TH BLOCK, KORAMANGALA, BENGALURU, KARNATAKA. PIN CODE- 560095.

2.

INCOME TAX OFFICER WARD 4(3)(3) BMTC BUILDING, 80 FEET ROAD, 6TH BLOCK, KORAMANGALA, BENGALURU, KARNATAKA.

PIN CODE- 560095.

Digitally signed by VANAMALA N Location: HIGH COURT OF KARNATAKA

3.

NATIONAL FACELESS ASSESSMENT UNIT 2ND FLOOR, E-RAMP, JAWAHARLAL NEHRU STADIUM, NEW DELHI-110003. …RESPONDENTS (BY SRI.M. DILIP., ADVOCATE A/W SRI. VINAY S PANDIT., ADVOCATE)

THIS W.P. IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO I. QUASHING AND SETTING ASIDE THE IMPUGNED NOTICE 30.07.2024 ITBA/AST/F/148A(SCN)/2024-25/ 1067160376(1) ISSUED UNDER SECTION 148A(b) OF THE ACT BY THE 1ST RESPONDENT, ENCLOSED AS ANNEXURE-A TO II. QUASHING SETTING ASIDE IMPUGNED ORDER DATED 20.08.2024 BEARING DIN ITBA/AST/F/148A/2024-25/1067771208(1) PASSED UNDER SECTION 148A(d) OF THE ACT BY THE 1ST RESPONDENT, ENCLOSED AS ANNEXURE-B TO III. QUASHING SETTING ASIDE IMPUGNED NOTICE DATED 20.08.2024 BEARING DIN ITBA/AST/S/148-1/2024-25/1067771571(1) ISSUED UNDER SECTION 148 OF THE ACT BY THE 1ST RESPONDENT, ENCLOSED AS ANNEXURE-C TO THIS

IV. QUASHING AND SETTING ASIDE THE IMPUGNED ASSESSMENT ORDER DATED 20.03.2026 BEARING DIN NO.ITBA/AST/S/147/2025-26/1087675418(1) PASSED UNDER SECTION 147 READ WITH SECTION 144 OF THE ACT BY 2ND RESPONDENT, ENCLOSED AS ANNEXURE-P ASSESSMENT YEAR 2018-19 AND; V. QUASHING AND SETTING ASIDE THE IMPUGNED DEMAND NOTICE ITBA/AST/S/156/2025-26/1087675523(1) ISSUED UNDER SECTION 156 OF THE ACT BY THE 2ND RESPONDENT, ENCLOSED AS ANNEXURE-Q TO THIS VI. QUASHING AND SETTING ASIDE THE IMPUGNED PENALTY NOTICE DATED 20.03.2026 BEARING DIN NO. ITBA/PNL/S/270A/2025-26/1087675588(1) ISSUED UNDER SECTION 274 READ WITH SECTION 270A OF THE ACT BY THE 2ND RESPONDENT, ENCLOSED AS ANNEXURE-R ASSESSMENT YEAR 2018-19 AND; VII. DIRECTING THE IMPUGNED NOTICE DATED 30.07.2024 BEARING DIN ITBA/AST/F/148A(SCN)/2024-25/1067160376(1) ISSUED UNDER SECTION 148A(b) OF THE ACT BY THE 1ST RESPONDENT, ENCLOSED AS ANNEXURE-A TO VIII. DIRECTING RESPONDENTS WITHDRAW AND CANCEL THE IMPUGNED ORDER

ITBA/AST/F/148A/2024-25/1067771208(1) PASSED UNDER SECTION 148A(d) OF THE ACT BY THE 1ST RESPONDENT, ENCLOSED AS ANNEXURE-B TO THIS IX. DIRECTING THE RESPONDENTS TO WITHDRAW AND CANCEL THE IMPUGNED NOTICE DATED 20.08.2024 ITBA/AST/S/148-1/2024- 25/1067771571(1) ISSUED UNDER SECTION 148 OF THE ACT BY THE 1ST RESPONDENT, ENCLOSED AS ANNEXURE-C ASSESSMENT YEAR 2018-19 AND; X. DIRECTING THE IMPUGNED ASSESSMENT ORDER DATED 20.03.2026 NO.ITBA/AST/S/147/2025- XI. DIRECTING THE RESPONDENTS TO WITHDRAW AND CANCEL THE IMPUGNED ASSESSMENT ORDER DATED 20.03.2026 BEARING DIN NO. ITBA/AST/S/147/2025- XII. DIRECTING THE RESPONDENTS TO WITHDRAW AND CANCEL THE IMPUGNED DEMAND NOTICE DATED

20.03.2026 BEARING DIN NO. ITBA/AST/S/156/2025- 26/1087675523(1) ISSUED UNDER SECTION 156 OF THE ACT BY THE 2ND RESPONDENT, ENCLOSED AS ANNEXURE-Q ASSESSMENT YEAR 2018-19 AND; XIII. DIRECTING THE IMPUGNED PENALTY NOTICE ITBA/PNL/S/270A/2025- 26/1087675588(1) ISSUED UNDER SECTION 274 READ WITH SECTION 270A OF THE ACT BY THE 2ND RESPONDENT, ENCLOSED AS ANNEXURE-R TO THIS XIV. DIRECTION UNDER ARTICLE

CONSTITUTION INDIA, PROHIBITING RESTRAINING THE RESPONDENTS, BY THEMSELVES, THEIR SUBORDINATES, SERVANTS, AND AGENTS, FROM TAKING ANY FURTHER ACTION IN FURTHERANCE OR CONSEQUENT IMPUGNED ASSESSMENT ORDER DATED 20.03.2026 ITBA/AST/S/147/2025- PETITION, FOR THE ASSESSMENT YEAR 2018-19 AND ETC.

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 Notice dated 30.07.2024 under Section 148A(b) of the Income Tax Act, 1961 [for short, the Act’] while also calling in question the subsequent Orders/Notices. The details of the impugned notices/orders are as follows: Sl. No. Notices/ Orders Date Provisions of Income Tax Act, 1961 Annexures

Show Cause 30.07.2024 148 A(b) A

Order 148A (d) B

Reassessment Order 147 r/w. 144 P

Demand

Penalty 274 r/w. 270A R

2.

Sri Prasanna B.M., the learned counsel for the petitioner, submits that the petitioner's grievance would be addressed if there is restoration of the proceedings with opportunity to the petitioner to file a

response to the notice under Section 148A(b) of the IT Act. The learned counsel asserts that the petitioner has purchased land and constructed a house in the year 1991 and has thereafter transferred the property with the construction in 2017 only to reinvest the amount in purchasing another property within two months and that the petitioner, because he did not have copies of invoices and bills to substantiate the actual cost of construction, he has relied upon fair market value of land and building as of the year 2001-2002 and then claimed indexed cost for the purposes of computation of capital gain.

3.

Sri Prasanna B.M. also submits that the petitioner filed these details as part of response to the Show Cause Notice dated 21.01.2026 and not at the stage of response to the Notice under Section 148A(b) because the petitioner was called upon to furnish these details only after the issuance of the Show Cause Notice. Sri M. Dilip, a learned standing

counsel for the respondent, is heard for disposal of the petition in the light of this canvass and on perusal of records.

4.

Sri M. Dilip emphasizes that petitioner's grounds touch upon the merits which must be examined in an appeal as provided for under the Act, but the question for interference and the terms therefor is examined in the light of the reason offered for conclusion of the assessment taking the cost of acquisition of the property of the land in 1991 at Rs.1,20,000/- and disallowing all costs towards construction. The relevant part of the assessment order reads as under: “As seen from the above, the assessee has claimed indexation for land and building to the tune of Respondent.68,54,400/- where cost claim is Respondent.25,20,000/-. However, the assessee has not furnished any details in support of cost of construction of his house. There is no Valuation report or any support of expenses incurred towards cost of construction. In the absence of such details,

the claim is untenable. Hence, cost of land at Respondent.1,20,00/- is taken as cost and no cost for construction is allowed in the absence of any details.”

5.

The petitioner's specific case is that after lapse of more than 30 years, he could not have produced the invoices and bills to establish the actual cost of construction and therefore, as permissible under the statute, has claimed fair market value of land and building as of 2001-2002 and has claimed indexed costs. This Court is of the considered view that for a reasoned demand there should have been a conclusion on whether it is indeed permissible under statute, if circumstances justify a claim for fair market value of the land and building and computation of indexed costs for the purposes of capital gains. The failure to consider this has resulted in an assessment without a speaking order.

6.

The next question for consideration is the term of interference. The reassessment order will have to fail, and because the petitioner's case is that these details were furnished when asked for after the orders under Section 148A(d) of the Act, this Court is of the considered view that the interference must be with the Orders under Section 148A(d) of the Act and subsequent orders/Notices/demands, consequential orders restoring the proceedings with liberty to the petitioner to file a detailed response with all documents to the notice under Section 148A(b) of the Act. Hence, the following: ORDER [A] The petition is allowed in-part quashing the following Notices/Orders impugned herein: Sl. No. Notices/ Orders Date Provisions of Income Tax Act, 1961 Annexures

Order 148A (d) B

Reassessment Order 147 r/w.

Demand

Penalty 274 r/w. 270A R

[B] The petitioner, without further notice, shall appear before the first respondent [the jurisdictional Assessing Officer] on 22.09.2026 and will be at liberty to file response to the Show Cause Notice dated 30.07.2024 under Section 148A(b) of the IT Act furnishing all documents to substantiate his case that he is entitled to avail Fair Market Value of land and building as of 2001 - 2002 and to indexed cost as Rs.68,54,400/-.

Sd/- (B M SHYAM PRASAD) JUDGE

SA Ct:sr

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