M/S NATURAL SPIRITS vs. INCOME TAX OFFICER

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WP/16392/2025HC KarnatakaKAHC01034650202502 July 2025Bench: SURAJ GOVINDARAJ6 pages
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What did the High Court hold?

The High Court allowed the writ petition. While not accepting the petitioner's reasoning that not commencing business and not activating PAN was a valid excuse for non-response, the Court, in the interest of justice, acknowledged that an ex-parte order had been passed and the petitioner wished to furnish documents. The Court quashed the assessment order and penalty notices. The matter was remitted to the first respondent (Income Tax Officer) for fresh consideration from the stage of Section 148A(b). The petitioner was granted four weeks to file a reply to the Section 148A(b) notice. If the reply was filed within the stipulated time, the first respondent was directed to consider it in accordance with law and pass necessary orders within eight weeks thereafter. Failure to file the reply would result in the confirmation of the impugned order.

What were the facts?

The petitioner, M/s Natural Spirits, a partnership firm, filed a writ petition before the High Court of Karnataka challenging an ex-parte order passed under Section 147 read with Section 144B of the Income Tax Act, 1961, and several penalty notices issued by the Income Tax Officer for the Assessment Year 2017-18. The petitioner contended that they did not have an opportunity to reply to the notice under Section 148A(b) because they had stopped business operations and consequently did not activate their PAN. The firm had received capital but had not commenced any business. The impugned orders were passed without the petitioner being able to present their case.

What were the issues?

1. Whether the ex-parte assessment order passed under Section 147 read with Section 144B of the Income Tax Act, 1961, and the subsequent penalty notices for Assessment Year 2017-18 are liable to be quashed on the grounds that the petitioner did not have an opportunity to respond to the notice under Section 148A(b)? Assessee's Contention: The petitioner argued that they could not reply to the Section 148A(b) notice because they had ceased business operations and had not activated their PAN, despite receiving capital. They believed they had a strong case on merits and sought permission to reply to the notice, expecting favorable consideration. Revenue's Contention: The judgment does not record specific arguments from the revenue's side regarding the merits of the case or the validity of the ex-parte proceedings. However, the revenue was represented and accepted notice.

Which sections of the Income-tax Act were involved?

Section 147,Section 144B,Section 270A,Section 271AAC(1),Section 271F,Section 272A(1)(d),Section 148A(b)

AI-generated summary — verify with the full judgment below

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HC-KAR NC: 2025:KHC:23770 WP No. 16392 of 2025

IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 2ND DAY OF JULY, 2025 BEFORE THE HON'BLE MR. JUSTICE SURAJ GOVINDARAJ WRIT PETITION NO. 16392 OF 2025 (T-IT) BETWEEN:

M/S NATURAL SPIRITS A REGISTERED PARTNERSHIP FIRM, SITE NO. 1 IIIRD FLOOR, SHANTHIPURA, ELECTRONIC CITY PHASE II, BANGALORE – 560 099.

PRESENTLY SITUATED AT. NO. 97, M L A LAYOUT, R T NAGAR, BANGALORE – 560 032. PAN AAGFN0873L REPRESENTED BY THE POWER OF ATTORNEY HOLDER. B SRINVAS MURTHY, NO. 1308, 3RD CROSS, CHOWDAPPA GARDEN. KAVAL BYRASANDRA R T NAGAR, BANGALORE – 560 032. …PETITIONER (BY SRI. RAVI SHANKAR S.V, ADVOCATE)

AND:

1.

INCOME TAX OFFICER WARD 4(3)(3), BANGALORE – 560 095.

2.

THE PRINCIPAL COMMISSIONER OF INCOME TAX -2 THE OFFICE OF THE PRINCIPAL COMMISSIONER OF INCOME TAX, 2, BMTC BUILDING, KORAMANGALA, BANGALORE – 560 095. …RESPONDENTS (BY SRI. SANMATHI.E.I, ADVOCATE)

Digitally signed by SHWETHA RAGHAVENDRA Location: HIGH COURT OF KARNATAKA

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HC-KAR NC: 2025:KHC:23770 WP No. 16392 of 2025

THIS WP IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASHING THE ORDER PASSED UNDER SECTION 147 R.W.S. 1448 DATED 22/03/2025 BEARING DIN NO. ITBA/AST/S/147/2024- 25/1074857220(1) PASSED BY THE RESPONDENT NO.1 FOR THE ASSESSMENT YEAR 2017-18 HEREIN MARKED AS ANNEXURE - A. QUASHING THE PENALTY NOTICE UNDER SECTION 270A OF THE ACT DATED 22/03/2025 BEARING DIN NO. ITBA/PNL/S/270A/2024-25/1074857337(1) PASSED BY THE RESPONDENT NO.1 FOR THE ASSESSMENT YEAR 2017-18 HEREIN MARKED AS ANNEXURE - A1 AND ETC.

THIS PETITION, COMING ON FOR PRELIMINARY HEARING, THIS DAY, ORDER WAS MADE THEREIN AS UNDER:

CORAM: HON'BLE MR. JUSTICE SURAJ GOVINDARAJ

ORAL ORDER

1.

Sri E.I.Sanmathi, learned counsel, accepts notice for respondent Nos.1 and 2. 2. The petitioner is before this Court seeking for the following reliefs: i) “Issue a writ of Certiorari or direction in the nature of a writ of certiorari quashing the order passed under section 147 r.w.s.144 B dated 22/03/2025 bearing DIN No. ITBA/AST/S/147/2024- 25/1074857220(1) passed by the Respondent No.1 for the assessment year 2017-18 herein marked as Annexure - A.

ii) Issue a writ of Certiorari or direction in the nature of a writ of certiorari quashing the penalty notice under Section 270A of the Act dated 22/03/2025 bearing DIN No. ITBA/PNL/S/270A/2024-25/1074857337(1) passed by the Respondent No.1 for the assessment year 2017-18 herein marked as Annexure - A1.

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HC-KAR NC: 2025:KHC:23770 WP No. 16392 of 2025

iii) Issue a writ of Certiorari or direction in the nature of a writ of certiorari quashing the penalty notice under Section 271AAC(1) of the Act dated 29/03/2025 bearing DIN No.ITBA/PNL/S/271AAC(1)/2024- 25/1075239051(1) passed by the Respondent No.1 for the assessment year 2017-18 herein marked as Annexure - A2.

iv) Issue a writ of Certiorari or direction in the nature of a writ of certiorari quashing the penalty notice under Section 271F of the Act dated 29/03/2025 bearing DIN No. ITBA/PNL/S/271F/2024-25/1075239668(1) passed by the Respondent No.1 for the assessment year 2017-18 herein marked as Annexure - A3.

v) Issue a writ of Certiorari or direction in the nature of a writ of certiorari quashing the penalty notice under Section 272A(1)(d) of the Act dated 29/03/2025 bearing DIN No. ITBA/PNL/S/272A(1)(d)/2024- 25/1075240467(1) passed by the Respondent No.1 for the assessment year 2017-18 herein marked as Annexure - A4.

vi) And pass such other orders as this Hon'ble Court deems fit and proper in the interest of justice and equity.”

3.

The grievance of the petitioner is that the impugned order is an ex-parte order, and as such, the petitioner did not have an opportunity to reply to the notice under Section 148A(b) on account of the petitioner having stopped the business. 4. The submission of Sri S.V. Ravi Shankar, learned counsel for the petitioner, is that though the partnership firm had been formed and the capital

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HC-KAR NC: 2025:KHC:23770 WP No. 16392 of 2025

received, the firm did not carry on any business and as such, did not apply for and activate the PAN number. Therefore, the reply could not be issued by the petitioner. 5. His submission is that the petitioner has a good case on merits, and the petitioner is permitted to reply to the 148A(b) notice and the same would be favorably considered by the respondents. 6. Though the reason for the submission made by Sri.S.V.Ravi Shankar, learned counsel for the petitioner, cannot be accepted, that the petitioner did not commence the business and therefore did not activate its PAN number. In the interest of justice, considering that there is an ex-parte order passed and the petitioner is interested in furnishing certain documents for consideration by the respondents- Authority, indulgence is extended by quashing the assessment order which had been passed and remanding the matter to the first respondent for fresh

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HC-KAR NC: 2025:KHC:23770 WP No. 16392 of 2025

consideration from the Section 148A(b) stage by permitting the petitioner to reply to the notice under Section 148A(b). 7. In that view of the matter, I pass the following: ORDER a) The writ petition is allowed. b) The order dated 22.03.2025 at Annexure-A, the penalty notice dated 22.03.2025 at Annexure- A1, the penalty notice dated 29.03.2025 at Annexure-A2, A3 and A4, are quashed. c) The matter is remitted to the first respondent. d) The petitioner is permitted to reply to the notice under Section 148A(b) dated 05.02.2024 which reply shall be furnished within a period of 4 weeks from this today i.e., on or before 30.07.2025. e) In the event of no reply issued by 30-07-2025 the petitioner will lose the benefit of this order and the impugned order shall stand confirmed.

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HC-KAR NC: 2025:KHC:23770 WP No. 16392 of 2025

If reply is furnished by 30-07.2025, the first respondent shall consider the same in accordance with law and pass necessary orders within a period of 8 weeks thereafter.

SD/- (SURAJ GOVINDARAJ) JUDGE

KTY List No.: 1 Sl No.: 40

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