- 1 - HC-KAR NC: 2026:KHC:31055 WP No. 18169 of 2026 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 23RD DAY OF JUNE, 2026 BEFORE THE HON'BLE MR. JUSTICE B M SHYAM PRASAD WRIT PETITION NO. 18169 OF 2026 (T-IT) BETWEEN: O9 SOLUTIONS MANAGEMENT INDIA PRIVATE LIMITED BUILDING-2, 9TH FLOOR PRESTIGE TECHNOSTAR, BROOKFIELD MAIN ROAD DODDANEKKUNDI INDUSTRIAL AREA, BENGALURU- 560048 (REPRESENTED BY ITS DIRECTOR MR. SIDDHARTHA NIYOGI, S/O MR. RANJITH KUMAR, AGED ABOUT 53 YEARS) COMPANY INCORPORATED UNDER COMPANIES ACT 1956. …PETITIONER (BY SRI.NARENDRA KUMAR JAIN., ADVOCATE) AND: 1. THE ASSESSMENT UNIT INCOME TAX DEPARTMENT, MINISTRY OF FINANCE, ROOM NO.401, 2ND FLOOR, E-RAMP, JAWAHARLAL NEHRU STADIUM, DELHI-110003. Digitally signed by VANAMALA N Location: HIGH COURT OF KARNATAKA - 2 - HC-KAR NC: 2026:KHC:31055 WP No. 18169 of 2026 2. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 5(1)(1), BMTC BUILDING, 80 FEET ROAD, KORAMANGALA BANGALORE-560095. 3. THE ADDITIONAL/JOINT COMMISSIONER OF INCOME RANGE 5(1), BMTC BUILDING, 80 FEET ROAD, KORAMANGALA BANGALORE-560095. …RESPONDENTS (BY SRI.M. THIRUMALESH., ADVOCATE A/W SRI. NIRMAL MATHEW., ADVOCATE) THIS WP IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO (A) QUASH AS FAR AS THE PETITIONER IS CONCERNED BY AN APPROPRIATE WRIT OR ORDER IN THE NATURE OF CERTIORARI OR OTHERWISE THE IMPUGNED PENALTY ORDER DATED 15.05.2026 ISSUED BY THE LEARNED FIRST RESPONDENT UNDER SECTION 270A VIDE DIN ITBA/PNL/F/270A/2026- 27/1089021391(1) FOR AY 2022-23, ENCLOSED IN ANNEXURE A; (B) QUASH AS FAR AS THE PETITIONER IS CONCERNED BY AN APPROPRIATE WRIT OR ORDER IN THE NATURE OF CERTIORARI OR OTHERWISE THE IMPUGNED DEMAND NOTICE UNDER SECTION 156 VIDE DIN ITBA/PNL/S/156/2026-27/1089018271(1) DATED 15.05.2026 ISSUED BY THE LEARNED FIRST RESPONDENT FOR THE AY 2022-23, ENCLOSED IN ANNEXURE B. - 3 - HC-KAR NC: 2026:KHC:31055 WP No. 18169 of 2026 THIS PETITION, COMING ON FOR PRELIMINARY HEARING, THIS DAY, ORDER WAS MADE THEREIN AS UNDER: CORAM: HON'BLE MR. JUSTICE B M SHYAM PRASAD ORAL ORDER The petitioner's grievance is with the first respondent's Penalty Order dated 15.05.2026 [Annexure-A] and the consequential Demand Notice dated 15.05.2026 [Annexure-B]. The first respondent in Para 3.5.1 of the Penalty Order dated 15.05.2026, capturing the circumstances under which the petitioner’s appeal with the Income Tax Appellate Tribunal, Bangalore Bench in ITTPA 284/BANG/2026 is pending for disposal, has recorded the following reasons as the justification for issuance of the impugned Penalty Order and the consequential Demand. “It is needless to mention that now CIT(A) is also under faceless scheme for which order passed u/s.251 by Id.CIT(A) is automatically getting activated in ITBA and message is coming in mobile of the Income Tax - 4 - HC-KAR NC: 2026:KHC:31055 WP No. 18169 of 2026 Authority for which after removing the flag of kept in abeyance, limitation period for penalty automatically gets extended for finalization of penalty proceeding. But as on today ITAT has not come within the purview of faceless manner for which there is no control over passing of order by ITAT. There is possibility to skip the penalty proceeding, if marked as kept in abeyance, even after receiving the order from ITAT and if any adverse findings are drawn against the assessee by the Id.ITAT. There is only scope to track the same is by way of checking/ monitoring of status of the ITAT order from Google Site from time to time which is practically not possible as there are voluminous cases marked as kept in abeyance being appeals have been filed before CIT(A). For this reason, it is construed that it is better to complete the penalty proceeding without keeping the same in abeyance till final outcome of ITAT decision to safeguard the interest of revenue. Further, if at later stage Id. ITAT gave its verdict in favour of assessee without upholding the direction of the DRP and consequential effect given vide order Dtd.28- 11-2025, then while giving effect u/s.254 of the Act, imposition of penalty shall also be dropped accordingly. Further, as per provision - 5 - HC-KAR NC: 2026:KHC:31055 WP No. 18169 of 2026 of Sec. 153(4), limitation period for completion of assessment was extended further for 12 months being reference was made to TPO. Also, as per Sec.144C(12), limitation period was further extended for 9 months being challenges were made before DRP. In view of this, the challenges made before Id.ITAT in regard to limitation period for completion of assessment is found baseless and not acceptable.” Sri Narendra Kumar Jain, the learned counsel for the petitioner, and Sri M Thirumalesh, a learned Senior Standing Counsel assisted by Sri Nirmal Mathew who are called upon to accept notice for the respondents, are heard for disposal of the petition in the light of the reasons assigned and this Court's order in similar circumstances in the writ petition in W.P. No.23073/2024 which is decided on 28.08.2024. It is not in dispute that this Court, in similar circumstances, has interfered with the Penalty Order and the consequential Demand Notice reserving - 6 - HC-KAR NC: 2026:KHC:31055 WP No. 18169 of 2026 liberty to the Authorities to proceed further after the disposal of the concerned appeal by the Tribunal. This Court has observed thus in the order dated 28.08.2024 in WP No. 23073/2024. Though several contentions have been urged by both sides in support of their rival contentions, it is matter on record and undisputed fact that prior to respondent No.1 issuing three show- cause notices and passing of the impugned order, the petitioner had already preferred the aforesaid appeal on 07.03.2024, which was pending before the ITAT as on those dates, under these circumstances, without expressing any opinion on the merits/demerits of the rival contentions in the appeal(s) before the ITAT, I deem it just and appropriate to set aside the impugned penalty order and reserve liberty in favour of the respondents to proceed further in accordance with law, after disposal of the appeal filed by the petitioner. This Court is of the view that the reasons assigned would not justify the penalty proceedings with the questions raised being at large in the pending appeal. Therefore, the following. - 7 - HC-KAR NC: 2026:KHC:31055 WP No. 18169 of 2026 ORDER The writ petition is allowed quashing the impugned Penalty Order dated 15.05.2026 [Annexure-A] and the consequential Demand Notice dated 15.05.2026 [Annexure-B] reserving liberty to the respondents to proceed further subject to the outcome in the pending appeal in ITTPA 284/BANG/2026. Sd/- (B M SHYAM PRASAD) JUDGE AN/-