Case Law Details
Devanur Thimmasetty Srinivasa Vs ITO (Karnataka High Court)
Assessment order taking entirety of the sale consideration without taking note of the indexed cost of acquisition. is liable to set-aside- Karnataka HC
In a recent ruling, the Karnataka High Court quashed an income tax reassessment order and notice issued to the petitioner where the full sale consideration was considered in calculating capital gains without applying an indexed cost adjustment.
Petitioner submitted that he did not participate in the proceedings as he was not informed by his accountant regarding the proceedings initiated by the
Department perhaps because the petitioner had income only from salary. It is further submitted that reassessment is sought to be made on the basis of capital gain for AY 2015-16 though the sale deed itself is dated 20.07.2015 and hence, would relate to transaction to be taken note of for the AY 2016-17. It is further submitted that the entirety of the sale consideration is taken as capital gains as is evidenced from the assessment order without taking the indexed cost of acquisition and accordingly, it is submitted that an opportunity may be granted to make out reply to the notice under Section 148-A(b).
Taking into consideration the above submissions, Hon’ble HC set-aside the order under Section 148-A(d) and notice under Section 148 and the penalty orders and petitioner was directed to appear before concerned authority.
Writ Petition disposed off with above directions.
FULL TEXT OF THE JUDGMENT/ORDER OF KARNATAKA HIGH COURT
Petitioner has called in question the validity of the notice under Section 148-A(b) of the Income Tax Act, 1961 (for short ‘the Act’) at Annexure-A; the order under Section 148-A(d) of the Act at Annexure-A1; notice under Section 148 of the Act at Annexure-A2 and the consequential proceedings including the penalty orders at Annexures-A6 and A7.
2. It is the case of the petitioner that he did not participate in the proceedings as his Accountant failed to inform regarding the proceedings initiated by the Department perhaps because the petitioner had income only from salary. It is further submitted that reassessment is sought to be made on capital gains for the assessment year 2015-16 though the sale deed itself is dated 07.2015 and hence, would relate to transaction to be taken note of for the assessment year 2016-17. It is further submitted that the entirety of the sale consideration is taken as capital gains as is evidenced from the assessment order without taking the indexed cost of acquisition and accordingly, it is submitted that an opportunity may be granted to make out reply to the notice under Section 148-A(b).
3. Sri. M. Thirumalesh, learned counsel appearing for the respondent submits that the petitioner cannot take the contention that his accountant has not informed that the notice is issued by the Income Tax Authority.
4. It is to be noticed that the notice and the assessment proceedings are for the assessment year 2015-16. Admittedly, the sale deed is dated 20.07.2015. Prima facie the sale transaction would relate to the assessment year 2016-17. It is also noticed in the assessment order that the entirety of the sale consideration is taken without taking note of the indexed cost of acquisition.
5. In light of the above, the order under Section 148-A(d) of the Act at Annexure-A1; notice under Section 148 of the Act at Annexure-A2 and the penalty orders at Annexures-A6 and A7 are set aside.
6. The petitioner is relegated to the stage of making out reply to the notice under Section 148-A(b) of the All contentions are kept open. Petitioner to appear before respondent No.1 on 22.08.2024 to make out his reply.
7. Accordingly, petition is disposed off.
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