Case Law Details
Satyadeva Builders Vs DCIT (Karnataka High Court)
The Karnataka High Court partly allowed a writ petition filed by a partnership firm engaged in the construction business, challenging a notice issued under Section 148A(b) of the Income Tax Act, 1961, the order under Section 148A(d), the assessment order dated 25.02.2026 passed under Section 147 read with Section 144B, and the subsequent penalty show cause notices for the assessment year 2020-21.
The petitioner contended that the proceedings initiated under Section 148A referred only to the sale of a single unit. However, the show cause notice dated 03.02.2026 allegedly expanded the scope of the proceedings by referring, for the first time, to the sale of multiple units, namely 119 apartments. The petitioner further argued that the period between the show cause notice dated 03.02.2026 and the assessment order dated 25.02.2026 was insufficient to collate the necessary payment details and provide an effective response.
The High Court observed that the petitioner was required to respond to allegations relating to the sale of 119 apartments without having the benefit of prior notice under the Section 148A proceedings on that issue. Holding that limited interference was justified, the Court quashed the assessment order dated 25.02.2026 and the consequential penalty notices. The petitioner was granted four weeks to file a detailed response, and the Assessing Officer was directed to conclude the proceedings after duly considering that response.
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.
2. Mr. Hemant Venkatray Pai, the learned counsel for the petitioner, submits that the petitioner’s grievance insofar as the present petition could be redressed if this Court interferes with the Assessment Order dated 25.02.2026 and the penalty Show Cause Notices with liberty to file a detailed response to the Show Cause Notice dated 02.05.2024 leaving open all questions to be answered afresh by the Assessing Officer. In elaboration, the learned counsel submits that [i] the proceedings under Section 148A of the IT Act only referred to sale of one unit but the Show Cause Notice dated 03.02.2026 has referred, for the first time, to multiple units sold by the petitioner, and [ii] if the Show Cause Notice is dated 03.02.2026, the impugned order is dated 25.02.2026 allowing the petitioner only two weeks to collate all payments.
3. Mr. Hemant Venkatray Pai argues for a reasonable opportunity before the petitioner is fastened with liability. Mr. E. I Sanmathi, the learned Senior Standing counsel for the respondents, is heard for final disposal of the petition in the light of these circumstances. The petitioner is allowed time between the Show Cause Notice dated 03.02.2026 and the impugned Assessment Order dated 25.02.2026 to respond to a deficiency in filing returns on the sale of 119 apartments but without the advantage of notice of the proceedings based on this in the proceedings under Section 148A of the IT Act.
4. This Court finds that, in these circumstances, the petitioner’s case for a limited interference with the Assessment Order and the consequent penalty notices with opportunity to file response to the Show Cause Notices will be just and reasonable, especially when this Court can observe that all questions otherwise are left open for decision on restoration but based on the response that the petitioner can file within the time allowed by this Court. In the light of the afore, the following:
ORDER
The petition is allowed-in-part quashing the impugned Assessment Order dated 25.02.2026 and the subsequent penalty Show Cause Notices [Annexures – A3, A4, A5] with liberty to the petitioner to file a detailed response within four [4] weeks from today observing that the Assessing Officer shall conclude all proceedings upon due consideration of the response that is offered.
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