Case Law Details
Sithappana Halli Bychappa Vs ITO (Karnataka High Court)
In the case of Sithappana Halli Bychappa Vs ITO, the Karnataka High Court set aside income tax assessment proceedings initiated under Section 148A(b) of the Income Tax Act, 1961, due to the non-service of the show cause notice (SCN) to the petitioner. The petitioner challenged the assessment order, penalty notices, and related proceedings on the grounds that he was unaware of the proceedings until a penalty notice was issued. The petitioner argued that the assessment under Section 147, as well as orders under Section 148A(d), were invalid as no opportunity was provided to respond to the SCN.
The court found that the assertion of non-service of the SCN was uncontroverted and noted that the income tax department had drawn conclusions against the petitioner without giving him a chance to explain a cash deposit of ₹63,70,000 in his bank account. Acknowledging the petitioner’s argument that he could explain the source of the deposit if given the opportunity, the court quashed the assessment order and related penalty notices. The matter was remanded to the stage of replying to the Section 148A(b) notice, allowing the petitioner another opportunity to present his case before the tax authorities.
This summary highlights the procedural lapse in non-service of the SCN and the High Court’s decision to provide the petitioner with a fresh opportunity to defend his case, ensuring compliance with due process under the Income Tax Act.
FULL TEXT OF THE JUDGMENT/ORDER OF KARNATAKA HIGH COURT
The petitioner has called in question the validity of the notice under Section 148A(b) of the Income Tax Act, 1961 (“the Act”, for short) at Annexure-A.
2. The petitioner has also sought for setting aside of the order under Section 148A(d) of the Act at Annexure-B.
3. The petitioner has also sought for setting aside of the notice under Section 148 of the Act at Annexure-C.
4. The petitioner has also sought for setting aside of the assessment order under Section 147 r/w 144 r/w 144B of the Act at Annexure-D.
5. The petitioner has also sought for setting aside of the penalty order at Annexure-H, J and K and sought for writ of prohibition restraining the respondents to take out proceedings pursuant to notice under Section 148 of the Act. Certain allied reliefs are also sought for in the petition.
6. It is the case of the petitioner that show-cause notice has not been served on the petitioner and it is only at the stage of service of show-cause notice for levy of penalty, petitioner became aware of the assessment order passed. Petitioner submits that he has a good case on merits and if an opportunity is granted, he would be in a position to demonstrate that 148A(b) notice itself ought not to have been passed. Accordingly, it is prayed that opportunity may be given to reply to Section 148A(b) notice.
7. Taking note that the assertion of the petitioner regarding non-service remains uncontroverted and also noticing that the order at Annexure-D has been passed in the absence of any stand by the respondent while recording a finding that variations could be made on the basis of inference drawn as the assessee has not filed return nor responded to the show-cause notice and accordingly, recording a finding that cash deposit of Rs.63,70,000/- noticed in the bank account has not been explained by any source of such deposit, it would be appropriate in light of such finding and in light of the stand of the learned counsel for petitioner that he would be in a position to explain the source of deposit, to set aside at the order at Annexure-D and penalty notices at Annexure-H, J and K.
8. Accordingly, the impugned order at Annexure-A, B, notices at Annexure-C and D and penalty notices at Annexure-H, J and K are set aside. The matter is restored to the stage of reply to Section 148A(b) notice.
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