NITHYANANDA SHETTY vs. UNION OF INDIA

HC-KAR IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 18TH DAY OF AUGUST, 2026 BEFORE THE HON'BLE MR. JUSTICE B M SHYAM PRASAD WRIT PETITION NO. 25798 OF 2026 (T-IT) BETWEEN: NITHYANANDA SHETTY AGED ABOUT 58 YEARS, 1401, MONT TIARA APARTMENTS, CALVARY HILLS, NANTHOOR, MANGALORE, KARNATAKA, PIN 575002 …PETITIONER (BY SRI. PRANAAV G AMBEKAR., ADVOCATE) AND:

Digitally signed by VANAMALA N Location: HIGH COURT OF KARNATAKA HC-KAR DC/ACIT(IT), CIRCLE 2(1), BMTC BUILDING, 80 FEET ROAD, 6TH BLOCK, NEAR KHB GAMES VILLAGE, KORAMANGALA, BENGALURU, KARNATAKA 560065

THIS WP IS FILED UNDER ARTICLES 226 & 227 OF THE CONSTITUTION OF INDIA PRAYING TO HOLD THAT THE IMPUGNED INSERTION OF SECTION 147A OF THE ACT IN ANNEXURE-C IS ILLEGAL, ARBITRARY, UNREASONABLE, VOID, UNFAIR AND VIOLATIVE OF ARTICLES 14 AND 265 OF CONSTITUTION OF INDIA AND ISSUE A WRIT OF CERTIORARI OR ANY OTHER APPROPRIATE WRIT OR ORDER OR DIRECTION AND QUASH THE IMPUGNED SECTION 147A OF THE ACT ENCLOSED AS ANNEXURE - C. B) QUASHING THE ASSESSMENT ORDER DATED 12.05.2026 PASSED UNDER SECTION 147 OF THE INCOME TAX ACT, 1961 FOR THE ASSESSMENT YEAR 2017-18 BY R3 BEARING HC-KAR DIN NO. ITBA/AST/S/147/2026-27/1088950825(1) HEREIN MARKED AS ANNEXURE- A1. C) QUASHING THE COMPUTATION SHEET DATED 12.05.2026 FOR THE ASSESSMENT YEAR 2017-18 ISSUED BY R3 BEARING DIN AND DOCUMENT NO. ITBA/AST/S/213/2026-27/1088950862(1) HEREIN MARKED AS ANNEXURE - A2. D) QUASHING THE NOTICE OF DEMAND DATED 12.05.2026 ISSUED UNDER SECTION 156 OF THE INCOME TAX ACT, 1961 FOR THE ASSESSMENT YEAR 2017-18 BY R3 BEARING DIN AND NOTICE NO. ITBA/AST/S/156/2026-27/ 1088950861(1) HEREIN MARKED AS ANNEXURE A3. E) QUASHING THE PENALTY NOTICE DATED 12.05.2026 ISSUED UNDER SECTION 272A(1) (D) OF THE ACT FOR THE ASSESSMENT YEAR 2017-18 BY R3 BEARING DIN NO. ITBA/PNL/S/272A(1)(D)/2026-27/1088954230(1) HEREIN MARKED AS ANNEXURE - A4. F) QUASHING THE PENALTY NOTICE DATED 12.05.2026 ISSUED UNDER SECTION 271AAC(1) OF THE ACT FOR THE ASSESSMENT YEAR 2017-18 BY THE RESPONDENT NO.3 BEARING DIN NO. ITBA/PNL/S/271AAC(1)/2026- 27/1088953984(1) HEREIN MARKED AS ANNEXURE - A5. G) QUASHING THE PENALTY NOTICE DATED 12.05.2026 ISSUED UNDER SECTION 271F OF THE ACT FOR THE ASSESSMENT YEAR 2017-18 BY THE RESPONDENT NO.3 BEARING DIN AND NOTICE NO. ITBA/PNL/S/271F/2026-27/1088954330(1) HEREIN MARKED AS ANNEXURE A6. H) QUASHING THE NOTICE DATED 08.02.2024 ISSUED UNDER SECTION 148A(A) OF THE ACT FOR THE ASSESSMENT YEAR 2017-18 BY THE RESPONDENT NO.3 BEARING DIN AND NOTICE NO. ITBA/AST/F/17/2023-24/1060682770(1) HEREIN MARKED ANNEXURE - B1. I) QUASHING THE NOTICE DATED 09.03.2024 ISSUED UNDER SECTION 148A(B) OF THE ACT FOR THE ASSESSMENT YEAR 2017-18 BY THE RESPONDENT NO.3 BEARING DIN AND NOTICE NO.ITBA/AST/F/148A(SCN)/2023-24/ 1062288129(1) HEREIN MARKED AS ANNEXURE - B2. J) QUASHING THE ORDER DATED 16.04.2024 PASSED UNDER SECTION 148A(D) OF THE INCOME TAX ACT, 1961 FOR THE ASSESSMENT YEAR 2017-18 BY THE HC-KAR RESPONDENT NO.3 BEARING DIN AND NOTICE NO. ITBA/AST/F/148A/2024-25/1064116965(1) HEREIN MARKED AS ANNEXURE B3. K) QUASHING THE NOTICE DATED 16.04.2024 ISSUED UNDER SECTION 148 OF THE ACT FOR THE ASSESSMENT YEAR 2017-18 BY THE RESPONDENT NO.3 BEARING DIN AND NOTICE NO. ITBA / AST / S / 148_1 / 2024 - 25 / 1064117053(1) HEREIN MARKED AS ANNEXURE- B4.

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 constitutionality of Section 147A of the Income Tax Act, 1961 [for short, 'the IT Act'] while impugning the Reassessment Order dated 12.05.2026 under Section 147 read with Section 144 of the IT Act [Annexure - A1]. The reassessment proceedings are commenced because of the investments made by the petitioner in mutual funds and failing to declare the same in the Returns.

Mr. Pranaav G. Ambekar, the learned counsel for the petitioner, submits that the petitioner will not HC-KAR pursue the grievance with the constitutionality of Section 147A of the IT Act but this Court must consider whether the Reassessment Order must be disturbed with opportunity to the petitioner to file response to the Show Cause Notice dated 09.03.2024 for an enquiry under Section 148A of the IT Act. In elaboration, the learned counsel submits that the following. [A] The petitioner's e-mail as available on the Income-Tax Business Application Portal is shettynithy1@rediffmail.com but the notice for enquiry under 148A of the IT Act and the notice under 148 thereof are addressed, as seen from the details now available to e-mail ID is shettynithy1@gmail.com. [B] For the assessment year 2018-19, the petitioner was duly served with the notice and the petitioner's explanation that the HC-KAR salary received in old NRE account as an employee of United Nations organization is invested in mutual funds after closure of such accounts and that the income earned from the deposits in NRE would be exempt under Section 10(4) of the IT Act.

Mr. E. I. Sanmathi, the learned Senior Standing Counsel, and Mr. Nirmal Mathew, a learned Standing Counsel, for the respondents, are heard in the light of these submissions.

This Court is persuaded to interfere because the notice is addressed to an incorrect e-mail ID and the petitioner's explanation for another Re-assessment order in similar circumstances is accepted. If indeed the petitioner can justify the cause in the inquiry under Section 148A of the IT Act, there could be complete adjudication without precipitation, and even otherwise, there would be an occasion for proceeding HC-KAR after examination of all the circumstances. In view of the same, the following. ORDER A. The petition is allowed-in-part quashing the impugned Reassessment Order dated 12.05.2026 under Section 147 read with Section 144 of the IT Act [Annexure - A1], Computation Sheet dated 12.05.2026 [Annexure - A2], Demand Notice dated 12.05.2026 under Section 156 of the IT Act [Annexure - A3] and Penalty Notices dated 12.05.2026 [Annexures - A4 to A6]. B. The petitioner is reserved with liberty to file a response to the Show Cause Notice dated 09.03.2024 [Annexure-B2] with the second respondent by 05.10.2026.

Sd/- (B M SHYAM PRASAD) JUDGE RB