Case Law Details
Kovi Veeraraghavulunaidu Vs Assessment Unit (Karnataka High Court)
Karnataka High Court Quashes Reassessment for Non-Service of Section 148A(b) Notice and Breach of Faceless Assessment SOP
The Karnataka High Court set aside the reassessment order, computation sheet, demand notice and penalty proceedings after finding that the assessee had not been served with the notice under Section 148A(b), thereby depriving him of the statutory opportunity to respond before initiation of reassessment proceedings.
The Court also relied on its earlier decision in W.P. No. 6410/2026, wherein it had held that failure to grant the minimum response time prescribed under the Standard Operating Procedure (SOP) for the National Faceless Assessment Scheme dated 03.08.2022 vitiates the entire assessment proceedings. Since the Revenue did not controvert the assessee’s assertion regarding non-service of the Section 148A(b) notice, the Court held that interference was warranted.
Accordingly, the Court quashed the reassessment order, computation sheet, demand notice and penalty proceedings, while granting liberty to the assessee to file a reply to the first notice issued under Section 142(1). The Department was directed to provide the assessee an effective opportunity to submit its response, with all issues on merits left open for fresh consideration.
FULL TEXT OF THE JUDGMENT/ORDER OF KARNATAKA HIGH COURT
The petitioner has called in question the Assessment Order dated 03.02.2026 and the subsequent computation and demand/penalty notices that are also even dated. The impugned annexures are produced as Annexures – Al to A5. The assessment order is without a response from the petitioner, and the petitioner’s case is it is not served with any of the notices, including notices under Section 148A(b) of the Income Tax Act, 1961 [for short the IT Act].
2. Sri Annamalai S, the learned counsel for the petitioner, submits that the authority’s failure to extend an opportunity when the first notice is issued would render all the subsequent proceedings void, and in this regard, the learned Counsel invites this Court’s attention to the Order dated 03.03.2026 in WP No. 6410/2026.
3. Sri E.I. Sanmathi and Sri Nirmal Mathew, the learned Standing counsels for the respondents, are called upon to accept notice for the respondents. This Court in WP No. 6410/2026 has held thus observing that the first Notice under Section 142[1] of the Income-Tax Act, 1961 [for short, the ‘Act’] did not allow time limit prescribed in the SOP for National Faceless Assessment Scheme dated 03.08.2022:
“4. It is submitted that it is the initial notice that has been adverted to in the Order-in-Original and once such notice was not replied to due to the absence of sufficient opportunity as provided under the SOP, all consequential proceedings thereon are required to be set aside.
5. Having perused the notice and the time prescribed for response being in contravention of the time prescribed under D.2.1.1 of the SOP applicable for proceedings under the National Faceless Assessment Scheme, the orders and notices at Annexure-A2 to A7 are set aside. Annexures-B 1 to B3, Annexures-Cl to C3, as well as Annexure-D are also set aside.”
4. This Court is persuaded to intervene in the light of this observation because the petitioner’s case that it is not served with notice under Section 148A(b) of the IT Act remains uncontroversial. Hence the petition stands disposed of quashing the impugned Assessment Order and the subsequent computation of demand and penalty with liberty to the petitioner to reply to the first Notice under Section 142[1] of the Act dated 04.09.2025. The authorities are called upon to enable the petitioner to file its response. It is needless to observe that all questions are left open for consideration.
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