Satyadeva Builders Vs DCIT (Karnataka High Court)
Karnataka HC: Reassessment Order Quashed Where New Allegations Were Introduced Without Adequate Opportunity
The Karnataka High Court partly allowed the writ petition and quashed the reassessment order passed under Sections 147 read with 144B along with the consequential penalty notices, holding that the assessee had not been afforded a reasonable opportunity to meet the case ultimately made out by the Department. The Court noted that the Section 148A proceedings referred only to the sale of a single unit, whereas the subsequent show cause notice issued during the reassessment proceedings for the first time alleged suppression relating to the sale of 119 apartments, thereby substantially expanding the scope of the proceedings. Further, the assessee was granted only about two weeks between the issuance of the show cause notice and the passing of the reassessment order to collate voluminous records and explain the transactions.
Considering these circumstances, the High Court held that the principles of natural justice required that the assessee be given an effective opportunity to respond before being fastened with tax liability on issues not forming part of the original Section 148A proceedings. Accordingly, the Court set aside the reassessment order and the consequential penalty notices, while leaving all questions on merits open. The assessee was granted four weeks to file a comprehensive reply, and the Assessing Officer was directed to complete the reassessment afresh after duly considering the response in accordance with law.
FULL TEXT OF THE JUDGMENT/ORDER OF KARNATAKA HIGH COURT
The petitioner, a Partnership Firm engaged in the business of construction, has filed this petition calling in question the Show Cause Notice dated 02.05.2024 under Section 148A(b) of the Income Tax Act, 1961 [for short, ‘the IT Act’], the order under Section 148A(d), the Assessment Order dated 25.02.2026 under Section 147 read with Section 144B of the IT Act and the subsequent penalty Show Cause Notices. The proceedings are relevant to the assessment year 2020-21.
