SMT LAKSHMI ARLA PRABHU vs. THE INCOME TAX OFFICER

PDF · subscribers
WP/17393/2024HC KarnatakaKAHC01036799202424 July 2024Bench: S SUNIL DUTT YADAV4 pages
AI SummaryRemanded

What did the High Court hold?

The High Court held that the assessment order, penalty order, and demand notices were to be set aside. The Court noted that the petitioner had not participated in the proceedings, leading to a best judgment assessment where a cash deposit of Rs. 1,33,97,700/- was treated as income chargeable to tax that had escaped assessment. Given the petitioner's submission that she could explain the source of the deposit if an opportunity was afforded, the Court found it appropriate to grant such an opportunity. This would allow for the actual income that escaped assessment to be determined based on the petitioner's explanation. The matter was remitted to the stage of reply to the show cause notice, with all contentions kept open. The penalty order (Annexure-A), demand notice (Annexure-B), assessment order (Annexure-C), and another demand notice (Annexure-E) were set aside.

What were the facts?

The petitioner, Smt. Lakshmi Arla Prabhu, filed a writ petition challenging a penalty order under Section 271AAC(1), a demand notice under Section 156, and an assessment order under Section 147 read with Sections 144 and 144B of the Income Tax Act, 1961, all dated 21/06/2024 and 16/01/2024 respectively. The petitioner contended that she could not participate in the assessment proceedings due to her husband's ill-health, who managed her accounts and business. Consequently, the assessment was completed under Section 144 based on best judgment, treating a cash deposit of Rs. 1,33,97,700/- as income that had escaped assessment due to non-participation and lack of explanation for the deposit.

What were the issues?

1. Whether the assessment order, demand notice, and penalty order passed by the Income Tax Officer are liable to be quashed on the grounds of the petitioner's inability to participate in the proceedings due to her husband's ill-health, and if an opportunity should be granted to explain the source of a cash deposit of Rs. 1,33,97,700/-. (Mixed question of law and fact, turning on principles of natural justice and assessment procedures under the Income Tax Act, 1961). Assessee's contention: The petitioner argued that her non-participation was due to her husband's severe ill-health, which prevented her from responding to show cause notices and participating in the assessment proceedings. She submitted that if an opportunity were provided, she could explain the source of the cash deposit. Revenue's contention: The judgment does not record specific arguments from the revenue regarding the petitioner's contentions. However, the assessment order itself notes the non-participation of the petitioner and the absence of a return of income or clarification of the cash deposit.

Which sections of the Income-tax Act were involved?

Section 271AAC(1),Section 156,Section 147,Section 144,Section 144B,Section 272-A(1)(d)

AI-generated summary — verify with the full judgment below

Before: SMT. LAKSHMI ARLA PRABHU

- 1 -

NC: 2024:KHC:28950 WP No. 17393 of 2024 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 24TH DAY OF JULY, 2024 BEFORE THE HON'BLE MR JUSTICE S SUNIL DUTT YADAV WRIT PETITION NO. 17393 OF 2024 (T-IT) BETWEEN: 1. SMT. LAKSHMI ARLA PRABHU W/O A. V PRABHU AGED ABOUT 40 YEARS R/A, NO.7-92, MAIN ROAD, BANTWAL KASABA VILLAGE, BANTWAL POST, BANTWAL TALUK, DAKSHINA KANNADA - 574 219. …PETITIONER (BY SRI. SUYOG HERELE E., ADVOCATE) AND: 1. THE INCOME TAX OFFICER, BMTC BUILDING, 80 FEET ROAD, 6TH BLOCK, KORAMANGALA, BENGALURU - 560 095. …RESPONDENT (BY SRI. DILIP M., ADVOCATE)

THIS WP IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE IMPUGNED PENALTY ORDER UNDER SECTION 271AAC(1) DATED 21/06/2024 OF THE IT ACT, DEMAND NOTICE DATED 21/06/2024 UNDER SECTION 156 OF THE IT ACT AND THE ASSESSMENT ORDER DATED 16/01/2024 UNDER SECTION 147 R.W.S. 144 R/W 144B OF THE IT ACT PASSED BY THE RESPONDENT (PRODUCED AT ANNEXURE-A, B AND C).AND ETC., Digitally signed by VIJAYA P Location: HIGH COURT OF KARNATAKA

- 2 -

NC: 2024:KHC:28950 WP No. 17393 of 2024

THIS PETITION, COMING ON FOR PRELIMINARY HEARING, THIS DAY, ORDER WAS MADE THEREIN AS UNDER: CORAM: HON'BLE MR JUSTICE S SUNIL DUTT YADAV ORAL ORDER (PER: HON'BLE MR JUSTICE S SUNIL DUTT YADAV)

Petitioner has filed the present petition seeking for issuance of writ in the nature of certiorari to set aside the assessment order, demand notice and penalty order. Petitioner has also sought for setting aside of the show cause notices under Section 271-AAC(1) and 272-A(1)(d) of the Income Tax Act, 1961 (for short 'the Act'). 2. It is the case of the petitioner that the petitioner was unable to participate in the proceedings due to the ill-health of petitioner's husband during the concerned assessment year. It is further submitted that the accounts and business was looked after by the petitioner's husband and in light of his ill-health, petitioner was not in a position to respond to the show cause notice.

- 3 -

NC: 2024:KHC:28950 WP No. 17393 of 2024 3. Perusal of the assessment order at Annexure-C would reveal that petitioner has not participated in the proceedings. It is noticed that by virtue of non-participation of the petitioner, assessment is concluded on the basis of best judgment assessment. In such proceedings, the assessing authority has observed that in the absence of return of income as well as any inspection / clarification of cash deposit to the extent of Rs.1,33,97,700/- the said amount has been treated as income chargeable to tax that has escaped assessment or remained unexplained. 4. In light of the same, as learned counsel for petitioner submits that if an opportunity is afforded petitioner would explain the source of such deposit, it would be appropriate to afford an opportunity to the petitioner to participate in the proceedings. This would also result in actual income that has escaped the tax to be determined on the basis of reply to be made out by the petitioner.

- 4 -

NC: 2024:KHC:28950 WP No. 17393 of 2024 5. Accordingly, the Penalty order at Annexure-A, Demand Notice at Annexure-B, Assessment order at Annexure-C and the Demand Notice at Annexure-E are set aside. The matter is remitted to the stage of reply to the show cause notice. All contentions are kept open. 6. Petition is accordingly disposed off. Sd/- (S. SUNIL DUTT YADAV) JUDGE VP

More judgments on Section 271AAC(1)

All 1,211 judgments and leading authorities on Section 271AAC(1) →

Recent GST High Court judgments

Search GST case law →