Global Tech Park Private Limited Vs DCIT (Karnataka High Court)
Summary: Karnataka High Court partly allowed the writ petition filed by Global Tech Park Private Limited challenging penalty proceedings under Section 271(1)(c) of the Income Tax Act for Assessment Year 2013-14. The assessee had been issued a notice dated 31 December 2019 under Section 274 read with Section 271(1)(c), while the penalty order and consequential demand notice were issued on 10 March 2026.
The petitioner relied upon CBDT Circular No. 25/2015 dated 31 December 2015 and contended that while the notice alleged furnishing of inaccurate particulars of income, the penalty order proceeded on concealment of income. It was further submitted that Explanation 4 to Section 271, as clarified by the Circular, operated prospectively and that for periods prior to 1 April 2016, levy of penalty depended upon the nature of the adjustment.
The High Court found that the penalty order had not considered Circular No. 25/2015 and therefore held that the proceedings required restoration to the Assessing Officer for reconsideration of the petitioner’s penalty liability in terms of the Circular. Accordingly, the Court quashed the penalty order dated 10 March 2026 and the demand notice of the same date, directed the petitioner to appear before the first respondent on 12 October 2026 without further notice, and left the authorities at liberty to issue a demand after reconsideration. The original penalty notice dated 31 December 2019 was not quashed.
FULL TEXT OF THE KARNATAKA HIGH COURT ORDER
The petitioner’s grievance is with the following Notices and Orders, and these relate to the Assessment Year 2013-14:
| Notices/ Orders | Date | Provisions of Income Tax Act, 1961 | Annexures |
|---|---|---|---|
| Notice | 31.12.2019 | 274 read with
271(1)(c) |
G |
| Order | 10.03.2026 | 271 (1)(c) | Q1 |
| Notice | 10.03.2026 | 271 (1)(c) | Q2 |
Sri Shreehari Kutsa, the learned counsel for the petitioner, and Sri. Y.V Raviraj, the learned standing counsel for the respondents, are heard on whether this Court must interfere only with the order dated 10.03.2026 [Annexure-Q1] deferring demand under the notice of the even date [Annexure-Q2].
Sri Shreehari Kutsa, relying upon Circular No.25/2015 dated 31.12.2015, submits that the material facts shorn of all other details is as follows.
A. The petitioner is issued with the notice dated 31.12.2019 for the assessment year 2013-14 under Section 274 read with Section 271 (1)(c) of the Income Tax Act, 1961 [for short, ‘the IT Act’] putting the petitioner on notice that it has filed inaccurate details of income and the penalty order is in the premise that there is a concealment of income.
B. The penalty order is in the light of Exploration 4 to Section 271 of the IT Act, but this explanation, as clarified in the Circular No.25/2015, would be applicable prospectively.
C. As stated in paragraph 5 of the clarification, for the period prior to 01.04.2016, if any, adjustment is made in the income computed, then the levy of penalty under Section 271(1)(c) will depend on the nature of adjustment.
This Court, because the penalty order does not consider Circular No.25/2015, is of the view that there must be a restoration of the proceedings calling upon the first respondent to re-examine the liability of penalty in terms of this Circular. As such, the following answering the question in favour of the petitioner:
ORDER
A. The petition is allowed-in-part quashing the order dated 10.03.2026 [Annexure-Q1] and the notice of the even date [Annexure-Q2].
B. The petitioner shall appear before the first respondent, without further notice, on 10.2026.
C. It is needless to observe that the authorities will be at liberty to issue a demand subject to reconsideration in terms of the liberty now reserved.
