Escapement Quantum of 50 Lakhs:
ITO vs. Mr. Sanath Kumar Murali [Writ Appeal 968 of 2023]
Background of the Case
The Income Tax Department initiated reassessment proceedings against the respondent, Mr. Sanath Kumar Murali, under Section 148A(d) of the Income Tax Act, 1961, based on a conveyance deed showing a sale consideration of Rs. 55 lakh. The department argued that this amount constituted escaped income, exceeding the threshold of Rs. 50 lakh under Section 149. However, the respondent contended that the cost of acquisition should be deducted from the sale consideration, which would bring the escaped income below the threshold. The Single Judge quashed the reassessment proceedings.
Arguments by the Appellant
The petitioner argued that the Single Judge’s order was contrary to the scheme of Section 149, as the sale consideration of Rs. 55 lakh clearly exceeded the threshold of Rs. 50 lakh. The petitioner also contended that the Writ Court’s interference was unwarranted, as the reassessment proceedings were validly initiated.
Respondent’s Response
The respondent argued that the cost of acquisition must be deducted from the sale consideration to determine the actual escaped income. They relied on a Division Bench judgment of the Madhya Pradesh High Court in Nitin Nema v. Office of Principal Chief Commissioner of Income Tax, which had upheld a similar view. The Supreme Court had also dismissed the department’s challenge to this judgment in SLP No. 38708 of 2024.
Court Findings and Decision
The Karnataka High Court agreed with the Single Judge’s reasoning and held that the cost of acquisition must be deducted from the sale consideration to determine the escaped income. The court noted that the Madhya Pradesh High Court’s judgment in Nitin Nema had already addressed this issue, and the Supreme Court had upheld it. The court found no merit in the department’s appeal and dismissed it, stating that the Single Judge’s order was consistent with the law and judicial precedents.
The dismissal of the department’s appeal highlights the judiciary’s commitment to ensuring fairness and adherence to statutory provisions in tax proceedings. This ruling provides clarity on the application of Section 149 and serves as a precedent for similar cases in the future.
Escapement Quantum of 50 Lakhs
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