Gauraklara Shivakumar Namratha Vs Assessment Unit (Karnataka High Court)
₹40-Lakh Reassessment Misses the Limitation Bus: Karnataka HC Quashes Notices u/s 148A(b), 148, Ex Parte Assessment &; Penalty
Summary:
In Gauraklara Shivakumar Namratha v. Assessment Unit, Income Tax Department & Another, the Karnataka High Court considered a writ petition relating to AY 2015-16. The petitioner challenged the reassessment proceedings initiated by the Income Tax Department through a show-cause notice dated 19.03.2022 u/s 148A(b) of the Income-tax Act, 1961.
This was followed by an order dated 29.03.2022 u/s 148A(d) & a consequential reassessment notice of the same date u/s 148. The Department alleged that income amounting to ₹40 lakh had escaped assessment. Pursuant to these proceedings, an ex parte assessment order was passed u/s 147 read with sections 144 & 144B. A consequential penalty order dated 11.09.2023 u/s 271(1)(c) was also passed against the petitioner.
The petitioner invoked the writ jurisdiction of the High Court u/a 226 & 227 of the Constitution, seeking quashing of the notice u/s 148A(b), the order u/s 148A(d), the notice u/s 148, the ex parte assessment order & the penalty order. The controversy primarily concerned whether reassessment proceedings for AY 2015-16 could legally be initiated after 31.03.2021, particularly where the alleged escaped income was only ₹40 lakh.
The judgment refers to the ex parte assessment order with different dates at different places. However, the operative portion specifically quashed the assessment order described as dated 24.03.2022, together with the subsequent penalty order.
Issue Before the Court
The principal issue was whether the reassessment notice issued on 29.03.2022 for AY 2015-16 was barred by limitation in view of the Supreme Court’s ruling in Union of India v. Rajeev Bansal, reported in [2024] 469 ITR 46 (SC).
A connected issue was whether the extended limitation period could save the reassessment when the alleged escaped income was ₹40 lakh, which was below the statutory threshold required for reopening an assessment beyond the ordinary limitation period.
The validity of the ex parte assessment & penalty necessarily depended upon the legality of the foundational reassessment notices. If initiation itself was time-barred, every consequential proceeding would lose its legal foundation.
Petitioner’s Submissions
The petitioner’s counsel raised a short but decisive contention. It was submitted that the proceedings related to AY 2015-16, whereas the notice u/s 148 was issued only on 29.03.2022. Relying upon Rajeev Bansal, counsel argued that the last permissible date for issuing such notice was 31.03.2021.
The petitioner also relied upon the Karnataka High Court’s earlier decision in W.P. No. 20292/2023, where the binding principles laid down in Rajeev Bansal had been applied. It was contended that a reassessment notice issued after the prescribed limitation period could not be sustained merely because it was subsequently followed by an order u/s 148A(d), assessment proceedings, or penalty proceedings.
Another significant feature supporting the petitioner was that the escaped income alleged by the Department was only ₹40 lakh. Thus, the case did not satisfy the monetary threshold necessary to invoke the longer reopening period. The petitioner consequently argued that the notices, assessment & penalty were all without jurisdiction.
Revenue’s Contention
Counsel for the Revenue was heard & proposed to distinguish the authorities relied upon by the petitioner. However, the order does not record any detailed factual or legal distinction advanced by the Department.
The Court evidently found that no proposed distinction could overcome the two controlling circumstances: first, the reassessment concerned AY 2015-16, while the notice was issued after 31.03.2021; secondly, the alleged escaped income of ₹40 lakh remained below the statutory threshold.
Findings & Legal Reasoning
The High Court accepted the petitioner’s case. It held that the notice u/s 148 dated 29.03.2022, concerning AY 2015-16, was issued beyond the legally permissible deadline of 31.03.2021.
The Court relied upon Rajeev Bansal, as reiterated in its earlier decision in W.P. No. 20292/2023. It also referred to the Supreme Court’s subsequent application of the same principle in Assistant Commissioner of Income Tax & Others v. Nehal Ashit Shah, SLP (Civil) Diary No. 57209/2024, decided on 04.04.2025.
The decisive reasoning was that a notice u/s 148 for AY 2015-16 could not be issued after 31.03.2021 in the circumstances of the case. Further, the alleged escaped income was ₹40 lakh, below the statutory threshold permitting recourse to the extended limitation period. The reassessment was therefore not a mere procedural irregularity; it suffered from a jurisdictional defect of limitation.
Once the foundational notices were invalid, the consequential ex parte assessment & penalty could not survive. The Court accordingly allowed the writ petition & quashed the notice u/s 148A(b), order u/s 148A(d), notice u/s 148, ex parte assessment order & penalty order u/s 271(1)(c).
Practical Implications
The decision reinforces that limitation is a jurisdictional safeguard, not a technical formality. Before reopening older assessments, the AO must verify both the applicable time limit & the monetary threshold governing the extended period.
For taxpayers, the judgment provides a strong basis to challenge stale reassessment notices where the escaped income is below the prescribed threshold. It also confirms that once the reopening notice is time-barred, all consequential assessment & penalty proceedings collapse with it. The Department cannot cure an invalid initiation through later orders or continued proceedings.
Cases Discussed
- Union of India v. Rajeev Bansal, [2024] 469 ITR 46 (SC).
- W.P. No. 20292/2023, Karnataka High Court.
- Assistant Commissioner of Income Tax and Others v. Nehal Ashit Shah, SLP (Civil) Diary No. 57209/2024, decided on 04.04.2025.
FULL TEXT OF THE JUDGMENT/ORDER OF KARNATAKA HIGH COURT
The petitioner has called in question the Notice under Section 148A[b] of the Income-Tax Act, 1961 [for short ‘the Act’] dated 19.03.2022 [Annexure-A] while also calling in question the subsequent Notice under Section 148 of the Act dated 29.03.2022 [Annexure-C]. The petitioner has also called in question the subsequent ex parte Assessment Order dated 24.03.2023 [Annexure-F].
However, Sri R. Rama Murthy, the learned counsel for the petitioner, presents a short ground for interference in asserting that the impugned
proceedings are for the assessment year 2015-16 and that with the decision of the Apex Court in Union of India v. Rajeev Bansal reported in [2024] 469 ITR 46 (SC), a notice issued after 31.03.2021 would be saved. In fact, the learned counsel relies upon the decision of this Court in W.P.No.20292/2023. Sri M. Thirumalesh, the learned counsel for the Revenue, is heard, and the learned Standing Counsel proposes to make a distinction.
This Court must favour the petitioner’s case because the Assessment year is 2015-16 and the notice under Section 148 of the Act is dated 29.03.2022 and is issued beyond 31.03.2021. The Apex Court, as reiterated by this Court in WP No.20292/2023, in Union of India v. Rajeev Bansal and subsequently followed in Assistant Commissioner of Income Tax and Others vs Nehal Ashit Shah [SLP (Civil) Diary No.(s)-57209/2024 dated 04.04.2025], has held that the notice Under Section 148 of the Act for the Assessment Year 2015-16 cannot be after 31.03.2021. This Court must also observe that the proceedings are begun because there must be an addition towards income that has escaped tax in a sum of Rs.40,00,000/-, a sum below the statutory threshold. Hence the following
ORDER
The petition is allowed quashing the ex parte Assessment Order dated 24.03.2022 [Annexure-F] and the subsequent Penalty Order dated 11.09.2023 [Annexure-H) as also the Notices issued under Section 148 of the Act [Annexures – A, B and C].
