SRI. CHANDRASHEKAR vs. INCOME TAX OFFICER

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WP/21993/2026HC KarnatakaKAHC01048380202621 July 2026Author: B M SHYAM PRASAD10 pages
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What did the High Court hold?

The High Court quashed all impugned orders and notices, except for the Show Cause Notice under Section 148A(b) dated 14.03.2022. The Court reasoned that for a complete adjudication and to determine liability in accordance with the law, the petitioner must be given an opportunity to show cause against reassessment. Therefore, the petitioner was granted liberty to file a response to the Notice dated 14.03.2022 under Section 148A(b) by 24.09.2026. The first respondent (Income Tax Officer) was directed to proceed in accordance with law thereafter. The Court explicitly stated that all questions are left open for future adjudication. The challenge to the vires of Section 147A was not decided on merits as the proceedings were remitted.

What were the facts?

The assessee, Sri. Chandrashekar, is challenging notices and orders issued by the Income Tax Department for the assessment year 2018-19. These include a notice under Section 148A(b) dated 14.03.2022, an order under Section 148A(d) dated 31.03.2022, a notice under Section 148 dated 31.03.2022, an assessment order under Section 147 read with Sections 144 and 144B dated 09.01.2023, and penalty orders under Section 271AAC(1) dated 19.07.2023 and Section 272A(1)(d) dated 12.07.2023. The assessee claims to be an aggregator who received an advance of Rs. 75,00,000/- for purchasing immovable properties for a Co-operative Society, utilized Rs. 50,00,000/-, and was entitled to a refund. The assessee also challenges the vires of Section 147A of the Income Tax Act.

What were the issues?

1. Whether the notices and orders issued under Sections 148A(b), 148A(d), 148, 147, 144, 144B, 271AAC(1), and 272A(1)(d) of the Income Tax Act, 1961, for the assessment year 2018-19 are liable to be quashed. 2. Whether Section 147A of the Income Tax Act, 1961, is ultra vires the Constitution of India. Assessee's contentions: The petitioner argues that he did not receive certain notices and that the transactions were not complete when the notices were issued. He claims that even with the advance, his income would be Rs. 25,62,781/- and he would be entitled to a refund of Rs. 61,749/-. He also states that his tax practitioner could not have filed returns reflecting the advance as the transactions were incomplete. The petitioner seeks an opportunity to reply to the notice dated 14.03.2022. Revenue's contentions: The judgment notes that the learned standing counsel for the respondents was heard in light of the circumstances presented by the petitioner. No specific arguments from the revenue are recorded in the provided text.

Which sections of the Income-tax Act were involved?

Section 148A,Section 148A(b),Section 148A(d),Section 148,Section 147,Section 144,Section 144B,Section 271AAC(1),Section 272A(1)(d),Section 147A

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 21ST DAY OF JULY, 2026 BEFORE THE HON'BLE MR. JUSTICE B M SHYAM PRASAD WRIT PETITION NO. 21993 OF 2026 (T-IT)

BETWEEN:

SRI. CHANDRASHEKAR AGED ABOUT 42 YEARS, S/O LATE T GOVINDAIAH, MEDANAHALLI, WARD 18, BIDADI, RAMNAGARA 571511

ALSO AT: NO.22, DIXIT COMPLEX, NEAR KSRTC BUS STAND, B M ROAD, IJOOR, RAMANAGARA- 571511 …PETITIONER (BY SRI. RAVI SHANKAR S.V., ADVOCATE) AND:

1.

INCOME TAX OFFICER WARD 1, RAMNAGAR 562159

2.

NATIONAL FACELESS ASSESSMENT CENTRE, 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

Digitally signed by VANAMALA N Location: HIGH COURT OF KARNATAKA

3.

PRINCIPAL COMMISSIONER OF INCOME TAX, BANGALORE - 3, BMTC BUILDING, KORAMANGALA BANGALORE 560095

4.

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

5.

CENTRAL BOARD OF DIRECT TAXES, REP. BY ITS CHAIRMAN, KARTAVYA BHAVAN - 1, NEW DELHI 110 001 …RESPONDENTS (BY SRI.M. THIRUMALESH, ADVOCATE A/W ; SRI. NIRMAL MATHEW, ADVOCATE)

THIS WP IS FILED PRAYING TOI) QUASHING THE NOTICE UNDER SECTION 148A(B) OF THE ACT, DATED 14/03/2022 ITBA/AST/F/148A(SCN)/2021- 22/1040683069(1) ISSUED BY THE RESPONDENT NO.1 FOR THE ASSESSMENT YEAR 2018-19 HEREIN MARKED AS ANNEXURE A. II) QUASHING THE ORDER PASSED UNDER SECTION 148A(D) OF ACT DATED 31/03/2022 ITBA/AST/F/148A/2021- 22/1042246912(1) PASSED BY THE RESPONDENT NO.1 FOR THE ASSESSMENT YEAR 2018-19 HEREIN MARKED AS ANNEXURE A1. III) QUASHING THE NOTICE ISSUED

UNDER SECTION 148 OF THE ACT DATED 31/03/2022 ITBA/AST/S/148.1/2021-22/1042343511(1) ISSUED BY RESPONDENT NO.1 FOR ASSESSMENT YEAR 2018-19 HEREIN MARKED AS ANNEXURE - A2. IV) QUASHING THE ORDER OF ASSESSMENT PASSED UNDER SECTION 147 R.W.S 144, 144B, OF ACT, DATED 09/01/2023 ITBA/AST/S/147/2022-23/1048546957(1) PASSED BY THE RESPONDENT NO.2 FOR THE ASSESSMENT YEAR 2018-19 HEREIN MARKED AS ANNEXURE-A3. V) QUASHING THE PENALTY ORDER PASSED UNDER SECTION 271AAC(1) OF THE ACT DATED 19/07/2023 VIDE ITBA/PNL/F/271AAC(1) /2023-24/1054463489(1) BY THE RESPONDENT NO.2 FOR THE ASSESSMENT YEAR 2018-19 HEREIN MARKED AS ANNEXURE-A4. VI) QUASHING THE PENALTY ORDER PASSED UNDER SECTION 272A(1) (D) OF THE ACT DATED 12/07/2023 ITBA/PNL/F/272A(1)(D)/2023-24/1054300922(1) BY THE RESPONDENT NO.2 FOR THE ASSESSMENT YEAR 2018-19 HEREIN MARKED AS ANNEXURE-A5. VII) DECLARING THAT SECTION 147A OF THE ACT BY THE RESPONDENT NO.4 DATED 01/04/2026 IS ULTRA VIRES THE CONSTITUTION OF 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, while calling in question the vires of Section 147 A of the Income Tax Act, 1961 [for short, ‘the Act’], has called in question the Show Cause Notice dated 14.03.2022 under Section 148A[b] of the Act [Annexure-A] and the subsequent Orders/Penalty Orders/Notices. The impugned Orders/Notices are for the assessment year 2018-19. The details of which are as follows:

Sl. No.

Notices/ Orders

Date Provisions of Income Tax Act, 1961

Annexures

Show Cause Notice 14.03.2022 148A(b) A

Order 148A(d) A1

Notice

Order 09.01.2023 147 r/w 144, 144B A3

Penalty Notice 19.07.2023 271AA(1) A4

Penalty Order 12.07.2023 272A(1)(d) A5

2.

The petitioner's case is that [i] he is an aggregator who has rendered services to a Co- operative Society in purchasing immovable properties, [ii] during the assessment year 2018-19 he has received advance of Rs.75,00,000/- from the Co- operative Society for whom he was aggregating the land, [iii] he has utilised Rs.50,00,000/- in completion of the transaction during the same assessment year and first TDS is effected, [iv] he is entitled to refund in excess of Rs.61,000/- and [v] he has not filed returns reflecting the TDS effected by the Co-operative Society because he believed that it should be reflected in the year in which the transaction is completed.

3.

Sri. Ravi Shankar S.V., the learned counsel for petitioner, while submitting that petitioner’s grievance would be redressed if there is an opportunity with the restoration of the proceedings with liberty to the petitioners to reply to the Notice

dated 14.03.2022 under Section 148A[b] of the IT Act canvasses the following.

[a] The petitioner has filed returns in ITR- 1 for the assessment year 2018-19 on 06.05.2022 after receipt of Notice dated 31.03.2022 under Section 148 of the Act showing an income of Rs.3,50,000/. [b] The petitioner's tax practitioner, even as of this day, could not have filed returns showing receipt of Rs.75,00,000/- from the Co-operative Society because transactions between this Society and the land- owners were not complete even as of that date. [c] The petitioner has now prepared a Computation Sheet as per Annexure- B1, which would demonstrate that even

with the receipt of Rs.75,00,000/- the petitioner's income continues to be Rs.25,62,781/- and his entitlement to refund of Rs.61,749/-. [d] The Assessment Order refers to different Show Cause Notices issued to the petitioner during the year 2022 but the petitioner has not been served with any of these Notices. [e] The petitioner has learnt about the proceedings resulting in Assessment Order only after the Co- operative Society was served with the Assessment Order against it based on the receipts and payouts to the petitioner.

4.

Sri M. Thirumalesh and Sri Nirmal Mathew, the learned senior standing counsel/ the learned standing counsel for the respondents, is heard

in the light of these circumstances. The Assessment Order refers to the Notices issued to the petitioner during the year 2022 including the Notice under Section 148 of the Act. The details also refer to the fact that the petitioner has not received any of these Notices. The petitioner's Tax Practitioner, even according to the petitioner, has filed returns but without disclosing these transactions in the month of May 2022 [post the date of Notice under Section 148 of the Act].

5.

The petitioner's cause against reassessment hinges on the assertions that the advance by the Co-operative Society is towards a transaction completed post the date of Notice under Section 148 of the IT Act and the Returns filed thereafter and after all the expenses the petitioner would be entitled to refund in a sum of Rs.61,581/-. The petitioner to be entitled to relief based on these circumstances will have to produce documents to

justify the date of completion of the transaction and the expenditure. This Court is of the view that for complete adjudication and a liability thereafter in accordance with the law, the petitioner must be extended an opportunity to show cause against a reassessment under Section 147 of the IT Act with liberty to file a Response to the Notice dated 14.03.2022 [Annexure -A] under Section 148A[b] of the IT Act. Hence, the following: ORDER [A] The impugned Orders/Notices except the Show Cause Notice under Section 148A(b) of the Act are quashed. The details of the Notices/Orders quashed are as follows. Sl. No.

Notices/ Orders

Date

Annexures

The Order under Section 148A(b) of the IT Act. A1

The Notic under Section 148 of the IT Act A2

The Assessment Order under Section 147, 44 and 144B of the IT Act 09.01.2023 A3

Penalty Notice under Section 272A(1)(d) of the IT Act 19.07.2023 A4

Penalty Orde under Section 271AAC(1) of the IT Act r 12.07.2023 A5

[B] The petitioner, without further Notice, shall file response, if any, to the Notice under Section 148A[b] of the IT Act by 24.09.2026 and the first respondent shall proceed in accordance with law. It is needless to observe that all questions are left open.

Sd/- (B M SHYAM PRASAD) JUDGE

SA Ct:sr

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