2025 (3) TMI 833 - HC - Income Tax

Revenue's Appeal Dismissed: Court Affirms Deductions in Escaped Income, Nullifies Section 148 Notice and Order.

The Income Tax Officer Ward-4 (3) (3), The Pr. Commissioner Of Income Tax-4, Central Board Of Direct Taxes and The Pr. Chief Commissioner Of Income Tax, Bengaluru Versus Mr. Sanath Kumar Murali, Bengaluru

The Income Tax Officer Ward-4 (3) (3), The Pr. Commissioner Of Income Tax-4, Central Board Of Direct Taxes and The Pr. Chief Commissioner Of Income Tax, ... The High Court of Karnataka, comprising Hon'ble Mr. Justice Krishna S. Dixit and Hon'ble Mr. Justice G. Basavaraja, delivered an oral judgment in an intra-court appeal challenging a Single Judge's order dated May 24, 2023. The order favored the respondent-Assessee's Writ Petition No. 7647 of 2023, setting aside an order under Section 148A(d) and a notice under Section 148 of the Income Tax Act, 1961, concerning the Assessment Year 2016-2017.The Revenue argued that the Single Judge's order contradicted Section 149 of the Income Tax Act, as an amount of Rs. 50.00 lakh was identified as escaped income. In contrast, the Assessee contended that the amount of Rs. 55.00 lakh mentioned in the conveyance should not automatically be considered escaped income without deducting the cost of acquisition, which would reduce it below the Rs. 50.00 lakh threshold. This argument was supported by a precedent from the Madhya Pradesh High Court in NITIN NEMA v. OFFICE OF PRINCIPAL CHIEF COMMISSIONER OF INCOME TAX, which was upheld by the Apex Court.The High Court agreed with the Single Judge's view that the quantum of escaped income should consider deductions for the cost of acquisition. The appeal was dismissed, affirming the Single Judge's order, with costs made easy.