Karnataka HC Quashes Tax Assessment And Penalties After Taxpayer Was Given Four Days To Respond, Despite SOP’s Seven-Day Minimum

The petitioner challenged an assessment for AY 2024–25 and consequential penalty proceedings.

He contended that his reply dated 22 July 2025 to the notice under Section 143(2), issued on 23 June 2025, had not been considered.

He also argued that the final show-cause notice dated 7 February 2026 allowed only until 11 February 2026 to respond, despite the applicable SOP requiring at least seven days; the assessment order followed on 18 February 2026.

The petitioner sought to quash the show-cause notice, assessment and demand, and subsequent penalty orders and demands.

The Court considered the assessment framework under Sections 143(3) and 144B of the Income Tax Act, 1961, together with the procedural requirements governing the opportunity to respond to a final show-cause notice.

It treated the applicable SOP as requiring a minimum of seven days to respond and held that failure to consider a taxpayer’s reply to a Section 143(2) notice, if established, warrants interference.

The judgment cites no precedent.

The Court found two procedural concerns sufficient to warrant interference: the petitioner’s contention that his earlier reply had not been considered, and the short response period allowed for the final show-cause notice.

The notice dated 7 February 2026 allowed time only until 11 February, whereas the Court considered that the minimum seven-day period would run until 14 February.

The assessment was then completed on 18 February, without a reason being assigned for allowing less than the stated minimum period.

The Court concluded that the petitioner should be given an opportunity to respond.

It quashed the assessment order dated 18 February 2026, its computation sheet and demand notice, as well as the subsequent Section 270A penalty order and related documents and the Section 272A(1)(d) order and related documents.

The proceedings were restored, with liberty for the petitioner to respond to the final show-cause notice dated 7 February 2026 when the respondent enables him to do so.