Karnataka High Court entertains writ petition challenging reassessment proceedings with respect to capital gains case where sale consideration exceeds Rs.50 Lacs but capital gains is below Rs.50 Lacs

The Karnataka High Court has recently granted an interim stay on the reassessment proceedings in a capital gains case, where the sale consideration exceeds Rs. 50 Lacs but the capital gains amount is below Rs. 50 Lacs. The notice in question pertains to the Assessment Year 2016-17, which was issued in March 2023.

The petitioner, who is the assessee in this case, has challenged the reassessment proceedings on the basis that his case is covered by Section 149(1)(a), which means that no proceedings could be initiated beyond 31.03.2020. The petitioner has argued that for the application of the extended limitation period of 10 years under Section 149(1)(b), the income escaping assessment should be Rs.50 Lacs or more. However, in this case, the petitioner’s long-term capital gain, which was computed after reducing the indexed cost of acquisition from the sale consideration of Rs. 55.77 Lacs, amounts only to Rs. 33.85 Lacs.

Therefore, the petitioner submits that the reassessment proceedings are not within the four corners of the amended reassessment framework and violate the rights enshrined under Articles 14, 19, 21 and 265 of the Constitution. The petitioner has also argued that the sanction given under Section 151 is without the application of mind, as the petitioner’s case fell under Section 149(1)(a) and not under Section 149(1)(b).

The High Court, after granting interim stay, has put the matter for hearing in the week commencing May 22, 2023. The petitioner is seeking relief on the grounds that the reassessment proceedings are illegal and without jurisdiction, and has challenged the validity of the notice issued under Section 148 of the Income Tax Act, 1961.

It is important to note that the reassessment proceedings in this case are being challenged on technical grounds, and it remains to be seen how the High Court will decide on the matter. The case highlights the importance of understanding the intricacies of tax laws and seeking professional advice when dealing with tax-related issues.

For taxpayers in Gurgaon, it is essential to stay updated on the latest tax laws and regulations, as the tax landscape in India is constantly evolving. Consulting a qualified chartered accountant (CA) can help taxpayers navigate complex tax laws and regulations and avoid potential legal issues. A CA can provide expert guidance on tax planning, compliance, and dispute resolution, helping taxpayers optimize their tax liabilities while ensuring full compliance with the law.

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