INCOME TAX OFFICER WARD1(2)(1) vs. ATC EXPORTS

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WA/266/2026HC KarnatakaKAHC01008228202625 June 2026Author: S.G.PANDIT,RAJESH RAI K9 pages
AI SummaryRemanded

What did the High Court hold?

The High Court, in its writ appeal, set aside the order of the learned Single Judge dated 23.10.2025. The Court acknowledged the orders passed by the Hon'ble Apex Court in Civil Appeal No.4716/2026 and SLP(C).No.8682/2024. These Apex Court orders, in identical fact situations, set aside High Court judgments that had quashed reassessment notices on grounds of lack of competence of the issuing officers. The Apex Court noted the insertion of Section 147A with retrospective effect from 01.04.2021, which clarified the definition of 'Assessing Officer'. Consequently, the High Court deemed it appropriate not to go into the merits of the case. It remitted the matter back to the learned Single Judge with liberty to the assessee to challenge Section 147A of the Act and any connected provisions. All contentions of the parties were left open for consideration by the learned Single Judge, including the observations made by the Apex Court. The interim order granted by the Apex Court was to enure to the benefit of the parties.

What were the facts?

The Income Tax Officer, Assessment Unit Income Tax Department, and Commissioner of Income Tax (Appellants/Revenue) filed a writ appeal challenging an order dated 23.10.2025 by a learned Single Judge of the High Court of Karnataka. The Single Judge had allowed a writ petition, quashing a show cause notice and consequential orders issued to ATC Exports (Respondent/Assessee). The appeal arises from the Revenue's challenge to the Single Judge's decision to quash these notices. The core of the dispute revolves around the authority of certain officers to issue such notices, particularly in light of amendments to the Income Tax Act.

What were the issues?

1. Whether the learned Single Judge erred in quashing the show cause notice and consequential orders issued to the assessee, considering the subsequent amendments to the Income Tax Act, specifically the insertion of Section 147A and amendment to Section 279? The Revenue contended that the insertion of Section 147A, with retrospective effect from 01.04.2021, clarified that the 'Assessing Officer' for sections 148 and 148A excludes faceless units, aligning with the intent of the original provisions. They argued that Parliament's retrospective amendment removed any ambiguity, and fresh notices would be issued. The Revenue also cited the Apex Court's order in Civil Appeal No.4716/2026, which set aside High Court judgments in similar situations and remitted matters for fresh consideration in light of the amendments. The Assessee argued that the amendment was not clarificatory but an attempt to fasten penal liability retrospectively, which is impermissible. They contended that amending laws with civil consequences should be construed strictly. The Assessee also sought liberty to challenge the amending provisions.

Which sections of the Income-tax Act were involved?

Section 147A,Section 279,Section 148,Section 148A,Section 280,Section 281,Section 151A,Section 144B,Section 273(3)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 25TH DAY OF JUNE, 2026 PRESENT THE HON'BLE MR. JUSTICE S.G.PANDIT AND THE HON'BLE MR. JUSTICE RAJESH RAI K WRIT APPEAL NO. 266 OF 2026 (T-IT) BETWEEN: 1. INCOME TAX OFFICER WARD1(2)(1) BMTC BUILDING, 80 FEET ROAD, 6TH BLOCK, NEAR KHB GAMES VILLAGE, KORAMANGALA, BENGALURU 560 095 2. ASSESSMENT UNIT INCOME TAX DEPARTMENT 2ND FLOOR, E-RAMP, JAWAHARLAL NEHRU STADIUM, DELHI-110 003 3. COMMISSIONER OF INCOME TAX RANGE-1 BENGALURU BMTC BUILDING, 80 FEET ROAD, 6TH BLOCK, NEAR KHB GAMES VILLAGE, KORAMANGALA, BENGALURU-560 095 …APPELLANTS (BY SRI. RAVI RAJ Y.V, ADVOCATE ALONG WITH SRI. DILIP M, ADVOCATE) AND:

ATC EXPORTS REP. BY PARTNER, MR. PREM GOYAL Digitally signed by PANKAJA S Location: HIGH COURT OF KARNATAKA

4/10 HOSUR ROAD BAMMANAHALLI BENGALURU ROAD-560 068 …RESPONDENT (BY SRI. ANKUR PAI DHUNGAT, ADVOCATE AND SRI. K.R. VASUDEVAH, ADVOCATE)

THIS WRIT APPEAL IS FILED U/S 4 OF THE KARNATAKA HIGH COURT ACT PRAYING TO SET ASIDE THE ORDER DATED 23/10/2025 IN WP NO.31480/2025 PASSED BY THE HON'BLE LEARNED SINGLE JUDGE.

THIS APPEAL, COMING ON FOR ORDERS, THIS DAY, JUDGMENT WAS DELIVERED THEREIN AS UNDER: CORAM: HON'BLE MR. JUSTICE S.G.PANDIT HON'BLE MR. JUSTICE RAJESH RAI K ORAL JUDGMENT (PER: HON'BLE MR. JUSTICE S.G.PANDIT) The above writ appeal is filed questioning the learned Single Judge’s order dated 23.10.2025 in W.P.No.31480/2025, whereunder the writ petition is allowed, quashing the impugned show cause notice and consequential orders at Annexures-A, D C dated 06.08.2024, 26.08.2024 29.08.2024 respectively. 2. Learned counsel appearing for the parties bring to the notice of this Court the order passed by the Hon'ble Apex Court in Civil Appeal No.4716/2026 dated 10.04.2026 reported

in [2026] 185 Taxmann.com 1007 (SC), whereunder the Hon'ble Apex Court in identical fact situation, taking note of the amendment by way of insertion of Section 147A into the Income Tax Act, passed the following order: “15. It is stated by the Learned Assistant Solicitor General that by inserting Section 147A into the IT Act, the term ‘Assessing Officer’ has been expressly clarified to mean an officer other than the faceless units and the same is deemed to have come into effect retrospectively from 01.04.2021. The said provision reads as follows: Insertion of new section 147A. 9. After section 147 of the Income-tax Act, the following section shall be inserted and shall be deemed to have been inserted with effect from the 1st day of April, 2021, namely:–– “147A. Notwithstanding anything contained in any judgement, order or decree of any court or in section 151A or in any scheme framed thereunder, for the removal of doubts, it is hereby clarified that the Assessing Officer for the purposes of sections 148 and 148A shall mean and shall always be deemed to have meant to be an Assessing Officer other than the National Faceless Assessment Centre or any assessment unit referred to in sub-section (3) of section 144B.”. 16. It is also asserted that the amendment to Section 279 of the Income Tax Act, 2025 is to bring it in consonance with the newly inserted

Section 147A of the IT Act, thereby implying that the “Assessing Officer” for the purposes of Sections 280 and 281 of the Income Tax Act, 2025 shall mean to be an Assessing Officer other than the NFAC or any assessment unit referred to in Section 273(3). The amended Section 279 reads as follows: 71. In section 279 of the Income-tax Act, after sub-section (2), the following sub-section shall be inserted, namely: –– ‘(3) The “Assessing Officer” for the purposes of sections 280 and 281 shall mean to be an Assessing Officer other than the National Faceless Assessment Centre or any assessment unit referred to in section 273(3).’ 17. In this backdrop, where an interpretative issue concerning the older provisions is already under consideration, it is contended on behalf of Appellant-Revenue that Parliament, from the outset, intended that while notices could be issued by either the JAO or the Faceless Assessing Officer (FAO), the subsequent quasi-judicial adjudication of such notices was to be undertaken by the FAOs. 18. It is urged that, in light of the divergent views taken by the High Courts owing to perceived ambiguity in the existing law, Parliament has now made clarificatory amendment with retrospective effect from 01.04.2021, the date on which the original provisions came into force, and that the alleged anomalous situation, if any, has been removed. It was additionally submitted that the power to enact retrospective amendments is well settled in law, and that fresh notices will now be issued to assessees in accordance with the clarified position, so that pending reassessment

proceedings may be concluded in accordance with law. 19. Conversely, it has been vehemently urged on behalf of the assessees that the new Amendment is not ‘clarificatory’ in nature but is rather an abortive attempt to fasten penal liability retrospectively, which is impermissible under law. It is their contention that the amending laws having antedated civil consequences ought to be construed strictly. 20. In all fairness, we may add that several other contentions have also been raised by both sides, which we do not consider it necessary to advert to at this stage in light of the order we propose to pass. In the facts of the present batch, we are of the considered view that it is not necessary for this Court to examine the merits of the rival submissions concerning the correctness of the impugned judgments or the scope of the competing precedents at this juncture. 21. It appears to us that the assessees would be entitled to challenge the amending provisions as elaborated upon heretofore, for which it would only be appropriate to relegate them to the jurisdictional High Courts. All contentions raised before us, as well as any other grounds available to them to question the impugned notices, may be urged before the High Courts instead. 22. Since the High Courts have primarily quashed the reassessment notices on the ground that the JAOs lacked competence to initiate such proceedings, and the very foundation of that view now stands altered by the amending legislation, the impugned judgments in favor of the assessees are set aside on this limited ground. The matters are accordingly remitted to the respective High Courts for fresh consideration. Ordered accordingly.

23.

The assessees are granted liberty to amend their writ petitions, if so advised, within a period of four (4) weeks from the date of uploading of this order, so as to enable them to lay challenge to Section 147A of the IT Act, as introduced by Act No. 4 of 2026, or to any other connected or consequential provision. 24. Similarly, the Appellant-Revenue shall be at liberty to file their written submissions and affidavits before the jurisdictional High Courts within a period of three (3) weeks thereafter. 25. No additional time shall be granted to the parties beyond what has been granted above. 26. We make it clear that we have not expressed any opinion on the merits of the controversy, including the validity, scope, effect, retrospectivity or applicability of the amended provisions, and all such questions are left open to be decided by the High Courts. 27. Finally, during the pendency of the writ petitions before the High Courts, there shall be an interim stay of further assessment/reassessment proceedings pursuant to the impugned notices, subject to such terms and conditions as may be imposed by the High Courts. 28. The High Courts are requested to decide the matters preferably by 30.09.2026. Learned counsel for the parties undertake to extend full cooperation to the High Courts in this regard. No adjournments may be granted by the High Courts on mere asking of the parties.” 3. Learned counsel appearing for the parties seek disposal of the above writ appeal in terms of the order passed

by the Hon'ble Apex Court, referred to above. Further, learned counsel appearing for the respondent/assessee seeks liberty to lay challenge to Section 147A of the Act in terms of the liberty granted by the Hon'ble Apex Court. 4. Learned counsel appearing for the parties also bring to the notice of this Court, order dated 04.05.2026 in SLP(C).No.8682/2024 passed by the Hon'ble Apex Court taking note of order dated 10.04.2026 in Civil Appeal.No.4716/2026, which reads as follows: “7. Consequently, keeping in mind the reasons set out in order dated 10.04.2026, the impugned judgment in each appeal is set aside and the instant appeals are disposed of by remitting the matters to the jurisdictional High Courts for redetermination of the issues. As observed above, the High Courts shall firstly determine whether the matters pertain to Assessment Year 2015-16. If it is found to be so, no further adjudicatory exercise shall be required to be undertaken by the High Court, except to declare the notices as being time- barred in light of Rajeev Bansal (supra). However, if it is found that the case does not pertain to Assessment Year 2015-16, then all the issues shall be resolved in terms of the order dated 10.04.2026 passed in Civil Appeal No.4716 of 2026.” 5. Taking note of the submissions of the learned counsel appearing for the parties as well as taking note of the

above referred orders of the Hon'ble Apex Court, we do not deem it fit to go into the merits of the case. We deem it appropriate to set aside the order passed by the learned Single Judge and remit the matter to the learned Single Judge with liberty to the respondent/assessee to lay challenge to Section 147A of the Act, keeping open all the contentions of the parties, including the observations made by the Hon'ble Apex Court in order dated 04.05.2026 in SLP(C).No.8456/2025 and Connected Appeals. 6. Hence, the following: ORDER

a) Writ appeal is allowed. b) Order passed by the learned Single Judge dated 23.10.2025 in W.P.No.31480/2025 is set-aside. c) Liberty is granted to the respondent/assessee to lay challenge to Section 147A of the Act as introduced by Act No.4 of 2026 or to any other connected or consequential provisions, within four weeks from today.

d) The appellant/Revenue is granted three weeks thereafter to file additional affidavit or submission. e) Learned Single Judge is requested to take note of the timeline laid down by the Hon'ble Apex Court as extracted above. f) The interim order as granted by the Hon'ble Apex Court would enure to the benefit of the parties herein. Pending I.As., if any, stand disposed of. SD/- (S.G.PANDIT) JUDGE SD/- (RAJESH RAI K) JUDGE HKV List No.: 1 Sl No.: 30

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