Case Law Details
Susan Thomas Vs ITO (Karnataka High Court)
The Karnataka High Court set aside a rectification order passed under Section 154 for AY 2011–12, holding that the assessee’s claim of exemption under Section 54-based on deposit in the Capital Gains Account-required proper consideration. Since supporting material was produced, the Court found it appropriate to remand the matter to the Assessing Officer for fresh adjudication. Importantly, the issue of whether Section 154 proceedings were validly invoked was kept open for reconsideration. The assessee was directed to appear before the AO without awaiting fresh notice.
FULL TEXT OF THE JUDGMENT/ORDER OF KARNATAKA HIGH COURT
The petitioner has sought for setting aside of the impugned order passed under Section 154 of the Income Tax Act, 1961 (for short ‘the IT Act’)for the Assessment Year 2011-12 and has also sought for setting aside of the consequential demand notice.
2. It is the case of the petitioner that the proceedings under Section 154 of the IT Act ought not to have been initiated by the revenue, as the grounds made out in the notice would not satisfy the ingredients for the exercise of power under Section 154 of the IT Act. It is further submitted that it is the specific case of the assessee that he has deposited the amount in the Capital Gains Account and hence, he is entitled to claim exemption under Section 54 of the IT Act, which has not been taken note of. It is accordingly submitted that if the petitioner is exempted by virtue of the deposit made, then the petitioner is entitled to exemption under Section 54 of the IT Act and hence, no ground was made out to pass orders under Section 154 of the IT Act and raise the demand. The petitioner has filed along with the memo, records to indicate that he has deposited the amount in the Capital Gains Account. The same is taken on record.
3. Taking note of the assertion that the petitioner is entitled to exemption and in light of the material produced, it will be appropriate to set aside the order at Annexure-D and remit the matter for fresh consideration. Needless to state that the contention raised regarding the exercise of power not being made out under Section 154 of the IT Act is kept open to be raised before the authority.
4. Accordingly, the order at Annexure-D is set aside and the matter is remitted to the respondent No.1-Jurisdictional Assessing Officer. The petitioner to appear before respondent No.1 without awaiting fresh notice on 06.04.2026.
5. Accordingly, the writ petition is disposed of and all contentions are kept open.
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