SHIVARAMAIAH vs. THE INCOME TAX OFFICER

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WP/22631/2026HC KarnatakaKAHC01050094202628 July 2026Author: B M SHYAM PRASAD6 pages
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What did the High Court hold?

The High Court allowed the petition in part. It quashed the impugned Assessment Order dated 11.03.2026 (Annexure-A) and the Penalty Notices dated 11.03.2026 (Annexures-A1 and A2). The Court reasoned that in the circumstances where proceedings were concluded due to non-compliance with a notice, there must be an opportunity for the assessee to respond. The proceedings were restored to the first respondent (Income Tax Officer) with liberty to the petitioner to file a response and clarifications to the Notice dated 09.02.2026 under Section 142(1) of the Act. The petitioner was directed to file this response by 22.09.2026. The ratio decidendi is that a procedural opportunity should be granted when an assessment is finalized due to non-response, particularly when the assessee claims they can justify their position.

What were the facts?

The assessee, Shivaraimaiah, filed a writ petition challenging an assessment order under Section 143(3) read with Section 144B of the Income Tax Act, 1961, and two penalty notices under Section 271AAC(1) and Section 272A(1)(d) of the Act. These were issued by the National Faceless Assessment Centre for Assessment Year 2024-25. The assessment order was passed after the assessee failed to provide details in response to a notice under Section 142(1) dated 09.02.2026, regarding claimed exempt income from the sale of agricultural land, loans for property purchase, and business receipts. The assessee's return claimed exempt income of Rs. 11,99,360/- from the sale of agricultural land.

What were the issues?

1. Whether the impugned assessment order and penalty notices passed under Section 143(3) r.w.s. 144B, Section 271AAC(1), and Section 272A(1)(d) of the Income Tax Act, 1961, for Assessment Year 2024-25 are liable to be quashed. Assessee's Contention: The petitioner argues that interference is warranted to restore the proceedings and provide an opportunity to file a response/clarification to the notice dated 09.02.2026 under Section 142(1) of the Act. The assessee claims they can demonstrate that surplus proceeds and loans availed are not taxable as they were invested in property, allowing for exemption from capital gains, and can justify business receipts and expenses. Revenue's Contention: The judgment records that the learned senior standing counsel for the respondents were heard, but their specific arguments are not detailed.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 144B,Section 142(1),Section 271AAC(1),Section 272A(1)(d)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 28TH DAY OF JULY, 2026 BEFORE THE HON'BLE MR. JUSTICE B M SHYAM PRASAD WRIT PETITION NO. 22631 OF 2026 (T-IT)

BETWEEN:

SHIVARAMAIAH AGED ABOUT 60 YEARS S/O BHEMANNA NO.78 SHANTI APARTMENT WEST PARK ROAD B BANGALORE NORTH BANGALORE 560055.

…PETITIONER (BY SRI. RAVI SHANKAR S V., ADVOCATE)

AND:

1.

THE INCOME TAX OFFICER WARD -4(2) (1) BANGALORE 560095.

2.

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

Digitally signed by VANAMALA N Location: HIGH COURT KARNATAKA

E-RAMP JAWAHARLAL NEHRU STADIUM DELHI 110003.

…RESPONDENTS (BY SRI.E.I. SANMATHI., ADVOCATE FOR SRI. NIRMAL MATHEW., ADVOCATE)

THIS WP IS FILED UNDER ARTICLES 226 AND 227 THE CONSTITUTION INDIA PRAYING TO I) QUASHING THE ORDER PASSED U/S 143(3) R.W.S DATED 11/03/2026 BEARING DIN ITBA/AST/S/143(3)/2025-26/1087231949(1) PASSED BY THE RESPONDENT NO.2 FOR THE ASSESSMENT YEAR 2024-25 HEREIN MARKED AS ANNEXURE - A; II) QUASHING THE PENALTY NOTICE U/S 271AAC(1) OF THE ACT DATED 11/03/2026 BEARING DIN NO. ITBA/PNL/S/271AAC(1)/2025-26/1087232485(1) BY THE RESPONDENT NO.2 FOR THE ASSESSMENT YEAR 2024-25 HEREIN MARKED AS ANNEXURE A1; III) QUASHING THE PENALTY NOTICE U/S 272A(1) (D) OF THE ACT 11/03/2026 BEARING DATED DIN NO. ITBA/PNL/S/272A(1)(D)/2025-26/1087186708(1) BY THE RESPONDENT NO.2 FOR THE ASSESSMENT YEAR 2024-25 HEREIN MARKED AS ANNEXURE - A2.

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 Order/Notices, and Sri S.V. Ravi Shankar, the learned counsel for the petitioner, argues for interference with restoration of the proceedings with an opportunity to file response/clarification to the Notice dated 09.02.2026 under 142(1) of the Income Tax Act, 1961 [for short, ‘the IT Act’]. Sri E.I. Sanmathi, a learned senior standing counsel for the respondents who is assisted by Sri Nirmal Mathew, another learned standing counsel for the respondents, are heard. The details of the impugned Order/Notices are as follows.

Sl. No.

Notices/ Orders

Date Provisions of Income Tax Act, 1961

Annexures

Order 143(3) r/w. A

271AAC(1) A1

272A(1)(d) A2

2.

The proceedings are relevant to the assessment year 2024-25, and the petitioner during this year has sold

agricultural land, has availed loans for purchase of a property and has received business receipts and these are included for the variation resulting in the impugned Assessment Order. The assessment is completed in the light of the petitioner's response and the opportunity which is recorded as under: “On perusal of the return of income filed by the assessee, it is noticed that the assessee has claimed exempt income of Respondent.11,99,360/- on account of profit from sale of Agricultural Land. During the course of assessment proceedings vide notice u/s 142 (1) of the Act, the assessee has been requested to furnish complete details of agricultural income, sale of crops, details of expenses, justification regarding claim of exempt income. In response thereto, the assessee has not submitted any details /supporting documents till date. Thus, the agricultural income claimed as exempt remained unexplained, due to non- compliance on assessee’s part.”

3.

Sri S.V. Ravi Shankar submits that the petitioner can demonstrate that surplus proceeds and the

loan availed will not be taxable because these have been invested in purchase of a property, that this transaction allows him exemption from capital gains and that the petitioner can also justify business receipts and the expenses claimed in the Returns. This Court is of the view that in the circumstances in which the proceedings are concluded as seen from the afore, there must be an opportunity. This Court concludes that the interference must be to extend an opportunity to the petitioner to file response to the Notice dated 09.02.2026 under Section 142 (1) of the Act with the first respondent. In the light of the afore, the following: ORDER [A] The petition is allowed-in-part. The impugned Assessment Order and the Penalty Notices as below are quashed.

Sl. No.

Notices/ Orders

Date Provisions of Income Tax Act, 1961

Annexures

Order 143(3) r/w. A

271AAC(1) A1

272A(1)(d) A2

[B] The proceedings are restored to the first respondent with liberty to the petitioner to file response with clarifications if required to the Notice dated 09.02.2026 under Section 142(1) of the Act.

[C] The petitioner shall file such response without further notice with the first respondent by 22.09.2026.

Sd/- (B M SHYAM PRASAD) JUDGE

SA ct:sr

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