Karnataka HC Quashes Assessment as Income Tax Portal Closed Before Approved Deadline

Bhavani Shankar Shetty Vs DCIT (Karnataka High Court)

The Karnataka High Court partly allowed a writ petition challenging an assessment order passed under Sections 143(3) read with 144B of the Income Tax Act, 1961, holding that the petitioner was not provided a reasonable opportunity to present his case. The petitioner had received notices under Sections 143(2) and 142(1) and was later issued a show cause notice regarding an investment of Rs. 2.50 crore in the purchase of a property. The petitioner sought an adjournment on 10.03.2026, which was accepted, granting time until 14.03.2026 to respond. However, the Assessing Officer closed the Income Tax portal on 13.03.2026, one day before the approved deadline, and subsequently passed the assessment order dated 17.03.2026, observing that the petitioner had failed to furnish documentary evidence explaining the source of the investment. The High Court held that there was a lack of reasonable opportunity to the petitioner. Accordingly, it quashed the assessment order, restored the assessment proceedings, permitted the petitioner to file documentary evidence regarding the source of investment, and directed the authorities to enable uploading of such evidence and pass appropriate orders thereafter.

FULL TEXT OF THE JUDGMENT/ORDER OF KARNATAKA HIGH COURT

The petitioner has called in question the Assessment Order dated 17.03.2026 under Section 143(3) read with Section 144B of the Income Tax Act, 1961 [for short, ‘the IT Act’], and the short question presented for consideration is: whether the assessment is concluded after a reasonable opportunity to the petitioner.

Mr. Jeevan J. Neeralgi, the learned counsel for petitioner, submits that the petitioner is not afforded such opportunity and that it is demonstrated by the following.

[a] The petitioner is issued with notices under Section 143(2) and 142(1) of the IT Act, and during the course of the proceedings, the petitioner was issued with another Show Cause Notice as against the investment of Rs.2,50,00,000/-.

[b] The petitioner, on 10.03.2026, filed a request for adjournment which was accepted allowing time upto 14.03.2026.

[c] However, the Assessing Officer has closed the Portal, on 13.03.2026 and concluded the assessment by the impugned order dated 17.03.2026 opining that the petitioner has failed to furnish documentary evidence to explain the source of his investment in the purchase of the property.

Mr. E. I. Sanmathi, the learned Standing counsel for the respondents, is heard in the light of these circumstances, and this Court must opine that there is a lack of opportunity which Mr. E. I. Sanmathi cannot deny. Therefore, the following:

ORDER

[A] The petition is allowed-in-part quashing the impugned Assessment Order dated 17.03.2026 restoring the assessment proceedings with liberty to the petitioner to file documentary evidence on the source of investment for purchase of the subject property calling upon the second respondent to consider such documentary evidence and pass just orders.

[B] It is needless to observe that upon communication of this order, the Authorities shall enable uploading of such documentary evidence.