In a recent ruling, the Karnataka High Court quashed the income tax assessment proceedings under section 148A (b) of the Income Tax Act, 1961 due to non-service of the show-cause notice.
Sithappana Halli Bychappa Padmanabha Gowda, the petitioner challenged the validity of several notices and orders issued by the Income Tax Department, particularly the notice under Section 148A(b) of the Income Tax Act for the assessment year 2016-17.
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The petitioner’s counsel submitted that the notice under Section 148A(b) of the Income Tax Act was not served which violated the procedural requirements for reassessment. The petitioner argued that they were unaware of the proceedings until they received notices related to the penalty, indicating that they had not been allowed to respond to the show-cause notice.
It was further argued that if the petitioner had been given the opportunity, they could have explained the source of the Rs. 63,70,000 deposit and prayed to give an opportunity to reply to Section 148A(b) notice.
Justice S Sunil Dutt Yadav observed that the petitioner’s claim regarding the non-service of the show-cause notice under Section 148A(b) remained uncontroverted by the respondents. The court observed that the assessment order was passed based on an inference drawn from the petitioner’s failure to file a return or respond to the show-cause notice.
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Since the petitioner was not properly served with the notice, the court concluded that the petitioner was deprived of the opportunity to present their case and explain the source of the cash deposit.
Thus, the court set aside the impugned notices and orders. The court restored the matter to the stage of the reply to the Section 148A(b) notice, allowing the petitioner an opportunity to explain the source of the cash deposit.
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