Karnataka HC Quashes Assessment, Gives Property Seller Chance To Prove His ₹43.87 Lakh Receipt Was Below Reopening Threshold

The petitioner was one of several family members who executed a sale deed dated 18 August 2018.

The Income Tax Department initiated reassessment proceedings for AY 2018–19, culminating in an assessment under Sections 147, 144 and 144B, a demand notice, and penalty-related proceedings.

The petitioner contended that the Department had treated the entire sale consideration as his income, although he had received only ₹43,87,804, with corresponding TDS, and that this amount was below the ₹50 lakh threshold he said applied under Section 149.

He had not responded during the Section 148A proceedings.

He sought to quash the reopening proceedings and consequential orders.

The Court considered the reassessment framework under Sections 148A, 148 and 149 of the Income-tax Act, 1961, including the petitioner’s contention that the amount escaping assessment was below the threshold for commencing proceedings under Section 149 without the benefit of an extended limitation period.

It also referred to Pramila Mahadev Tadkase v. Income Tax Officer, [2024] 158 taxmann.com 246, where the Court had intervened after a detailed response to a Section 148A notice was not considered; the present case was distinguishable because the petitioner had not filed a response or produced the sale deed at that stage.

The Court did not decide the Section 149 threshold question on its merits; it left the relevant questions open for consideration by the first respondent.

The Court noted that the petitioner’s claim—that he received only ₹43,87,804 and that the balance of the sale consideration was distributed among the co-vendors—could potentially bear on whether the reassessment proceedings were maintainable.

But the petitioner had not presented the sale deed or supporting evidence during the Section 148A inquiry, unlike the petitioner in Pramila Mahadev Tadkase.

In view of the petitioner’s plea of bona fides, the Court considered limited interference appropriate: it restored the matter to the Section 148A stage so that the petitioner could submit the sale deed, evidence of remittances towards TDS, and appropriate affirmation from the co-vendors.

It did not determine whether the petitioner’s claim was correct or whether the Section 149 threshold was met.

The Court quashed the assessment order dated 19 January 2026, the consequential demand notice, the penalty show-cause notice, and the letter dated 22 July 2026.

It directed the petitioner to respond to the Section 148A(b) notice by 26 November 2026, without further notice, and directed the first respondent to consider all questions, which remained open.

The Court did not quash the Section 148A(d) order or the Section 148 notice, nor did it decide the merits of the petitioner’s Section 149 threshold argument.