Karnataka High Court
The Income Tax Officer vs Smt Supriya S Shetty on 16 February, 2026
Author: S.G.Pandit
Bench: S.G.Pandit
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NC: 2026:KHC:9220-DB
WA No. 68 of 2026
HC-KAR
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 16TH DAY OF FEBRUARY, 2026
PRESENT
THE HON'BLE MR. JUSTICE S.G.PANDIT
AND
THE HON'BLE MR. JUSTICE K. V. ARAVIND
WRIT APPEAL No. 68 OF 2026 (T-IT)
BETWEEN:
1. THE INCOME TAX OFFICER,
TDS WARD, ATTAVARA,
MANGALORE-575001.
2. THE CHIEF COMMISSIONER OF INCOME TAX
BENGALURU,
C.R. BUILDING, No.1,
QUEENS' ROAD,
BENGALURU-560001.
Digitally 3. THE CENTRAL BOARD OF DIRECT TAXES
signed by
VINUTHA B S DEPARTMENT OF REVENUE
Location: REPRESENTED BY ITS CHAIRMAN
High Court of NORTH BLOCK,
Karnataka
NEW DELHI-110001.
4. UNION OF INDIA,
REPRESENTED BY ITS SECRETARY
MINISTRY OF FINANCE
NORTH BLOCK,
CENTRAL SECRETARIAT,
NEW DELHI-110001.
5. UNION OF INDIA,
REPRESENTED BY ITS SECRETARY,
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NC: 2026:KHC:9220-DB
WA No. 68 of 2026
HC-KAR
SECRETARY,
MINISTRY OF ROAD TRANSPORT AND
HIGHWAYS TRANSPORT BHAWAN-1,
PARLIAMENT STREET,
NEW DELHI-110001.
...APPELLANTS
(BY SRI ARAVIND V. CHAVAN, SENIOR STANDING COUSNEL)
AND:
1. SMT. SUPRIYA S. SHETTY,
AGED 53 YEARS,
WIFE OF SANATH SHETTY,
RESIDING AT 3501, PLANET,
S.K.S. KADRI HILLS,
MANGALORE-575 002.
2. THE PROJECT DIRECTOR
NATIONAL HIGHWAYS AUTHORITY OF INDIA,
DOOR No.3-29 BETHEL,
THARETHOTA
MANGALORE-575 005.
3. THE SPECIAL LAND ACQUISITION OFFICER\
AND THE COMPETENT AUTHORITY AND
NATIONAL HIGHWAY,
BEHIND MINI VIDHANA SOUDHA,
MANGALORE-575 001.
4. THE DEPUTY COMMISSIONER AND ARBITRATOR,
DAKSHINA KANNADA DISTRICT,
MANGALORE-575 001.
...RESPONDENTS
(BY SRI OJASWI, ADVOCATE FOR
SRI K. V. DHANANJAY, ADVOCATE FOR R1)
THIS WRIT APPEAL IS FILED UNDER SECTION 4 OF THE
KARNATAKA HIGH COURT ACT PRAYING TO SET ASIDE THE
ORDER PASSED BY THE LEARNED SINGLE JUDGE IN WP
No.30804/2024 DATED 20/11/2025.
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NC: 2026:KHC:9220-DB
WA No. 68 of 2026
HC-KAR
THIS APPEAL, COMING ON FOR ORDERS THIS DAY,
JUDGMENT WAS DELIVERED THEREIN AS UNDER:
CORAM: HON'BLE MR. JUSTICE S.G.PANDIT
and
HON'BLE MR. JUSTICE K. V. ARAVIND
ORAL JUDGMENT
(PER: HON'BLE MR. JUSTICE K. V. ARAVIND) Heard Sri Aravind V. Chavan, learned Senior Standing Counsel for the appellants and Sri Ojaswi, learned counsel for Sri K.V. Dhananjay, learned counsel for respondent No.1.
2. This intra-court appeal is filed under Section 4 of the Karnataka High Court Act by the Income-tax Department, challenging the order dated 20.11.2025 passed in Writ Petition No.30804/2024.
3. Respondent No.1 filed writ petition with the following prayers;
"a) Issue a writ of mandamus or any other appropriate writ declaring that Section 96 of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 ('RFCTLARR Act') applies to the compensation received by the Petitioner for acquisition of her lands under the National Highways Act, 1956;
b) In the alternative, if this Hon'ble Court is not inclined to interpret Section 96 of the RFCTLARR Act, 2013 as applicable to acquisitions under the National -4- NC: 2026:KHC:9220-DB WA No. 68 of 2026 HC-KAR Highways Act, 1956, then, to declare that the limitation of tax Act to only acquisitions under that Act, while exemption under Section 96 of the RFCTLARR denying the same benefit to similarly situated landowners whose lands are acquired under the National Highways Act, 1956, is unconstitutional as violating Article 14 of the Constitution; and
c) Consequently, extend the benefit of tax exemption under Section 96 of the RFCTLARR Act to the Petitioner whose lands were acquired under the National Highways Act, 1956, a statute listed in the Fourth Schedule to the RFCTLARR Act, 2013;
d) Direct that no income tax shall be levied on the compensation received by the Petitioner;
e) Direct refund of tax deducted at source in respect of the Award passed by the Special Land Acquisition Officer and Competent Authority on 29-Jan-2021;
f) Pass such other Order or direction as this Hon'ble Court may deem fit in the facts and circumstances of this case."
4. The above prayers were made on the premise that the land belonging to respondent No.1 was acquired by the Special Land Acquisition Officer for the purpose of formation of a National Highway, and tax was deducted at source (TDS) to the extent of Rs.16,00,000/- from the compensation amount paid. It was further contended that, in view of Section 96 of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (for short, 'the 2013 Act'), the compensation awarded is exempt -5- NC: 2026:KHC:9220-DB WA No. 68 of 2026 HC-KAR from payment of income tax, and consequently, the amount deducted towards TDS is liable to be refunded.
4.1 The learned Single Judge, following the earlier orders passed by this Court in similar matters, held that the compensation paid by the National Highways Authority towards acquisition of land under the National Highways Act is exempt from payment of income tax, and that the amount deducted towards TDS is liable to be refunded.
5. Sri Aravind V. Chavan, learned Senior Standing Counsel appearing for the appellants, submits that the TDS deducted by the National Highways Authority was claimed as a refund in the return of income filed for the Assessment Year 2022-23, and the refund was determined in the intimation order dated 21.11.2022 issued under Section 143(1) of the Income-tax Act, 1961 (for short 'the IT Act').
5.1 Learned Senior Standing Counsel further submits that the grant of refund was duly communicated to respondent No.1 and that the same has been confirmed by email dated 12.12.2025. It is therefore contended that the refund directed -6- NC: 2026:KHC:9220-DB WA No. 68 of 2026 HC-KAR by the learned Single Judge would result in refund of the very same amount twice.
5.2 Learned Senior Standing Counsel further submits that the entire refund amount of Rs.16,92,465/-, along with applicable interest, was credited to the bank account of respondent No.1 on 23.11.2022.
6. Per contra, Sri Ojaswi, learned counsel appearing for Sri K.V. Dhananjay, learned counsel for respondent No.1, submits that respondent No.1 was not aware of the filing of the return of income claiming refund, nor of the consequential credit of the refund amount to her bank account.
6.1 It is further submitted that, in view of the law laid down by this Court declaring that compensation paid for acquisition of land under the National Highways Act is not eligible to income tax and that no TDS is liable to be deducted thereon, respondent No.1 had proceeded on a bona fide belief that the TDS deducted had remained with the Department. On such belief, the writ petition came to be filed seeking refund of the said amount along with a declaration that the compensation -7- NC: 2026:KHC:9220-DB WA No. 68 of 2026 HC-KAR is not exigible to income tax. It is therefore contended that the writ petition was filed by respondent No.1 under a bona fide belief that no refund had been issued by the appellants.
7. We have considered the submissions of learned counsel for the parties and perused the record.
8. Respondent No.1 preferred the writ petition on 06.11.2024 seeking a direction to refund the TDS deducted from the compensation amount and also for a declaration that, in view of Section 96 of the 2013 Act, the compensation paid for acquisition of land by the National Highways Authority under the National Highways Act, 1956 is exempt from income tax and, consequently, no TDS is liable to be deducted.
9. Respondent No.1 persuaded the learned Single Judge that the issue involved stood covered by earlier judgments of this Court. The learned Single Judge, following the said earlier orders, proceeded to issue the following directions:
"(i) Petition is hereby allowed.
(ii) Respondents 2, 3, 4 and 8 are directed to refund the income tax / TDS deducted from the compensation as per the award passed by -8- NC: 2026:KHC:9220-DB WA No. 68 of 2026 HC-KAR respondent Nos.5 and 6 back to the petitioner together with applicable interest within a period of three months from the date of receipt of a copy of this order."
10. The order of the learned Single Judge is dated 20.11.2025. The present appeal has been filed on 05.01.2026. The learned Senior Standing Counsel for the appellants has filed a memo dated 09.01.2026, enclosing the intimation issued under Section 143(1) of the Income-tax Act and a copy of the email dated 12.12.2025. The intimation dated 21.11.2022 issued under Section 143(1) of the IT Act clearly indicates that a refund of Rs.17,62,407/-, comprising refund of tax of Rs.16,94,623/- and interest under Section 244-A amounting to Rs.67,784/-, was determined and credited to the account of respondent No.1. The credit of the said refund on 23.11.2022 has been confirmed by respondent No.1 in the email dated 12.12.2025.
11. Despite such confirmation of credit of the TDS amount, no steps were taken by respondent No.1 to seek recall of the order passed by the learned Single Judge, which had been obtained on the basis of incorrect and misleading facts, -9- NC: 2026:KHC:9220-DB WA No. 68 of 2026 HC-KAR until the filing of the memo on 09.01.2026 and the listing of the matter before this Court on 09.02.2026.
12. It appears that, had the appellants not placed on record the memo along with the material evidencing confirmation of the refund, respondent No.1 would have proceeded to avail the benefit of the order passed by the learned Single Judge. The direction issued by the learned Single Judge, in effect, results in refund of the very same amount for a second time, which is impermissible under the provisions of the IT Act.
13. On the earlier date of hearing, this Court had granted one opportunity to respondent No.1 to set right the illegality committed in presenting the writ petition on the basis of misleading statements and suppression of material facts. Today, a memo dated 13.02.2026 filed in the writ petition is placed before this Court. In the said memo it is stated that the refund was obtained by the Chartered Accountant on behalf of respondent No.1 and the same was not within the knowledge of respondent No.1. The said submission is difficult to accept.
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14. Even assuming that the return of income claiming refund was prepared and filed by the Chartered Accountant, the refund amount was admittedly credited to the bank account of respondent No.1. It cannot be accepted that respondent No.1 was unaware of the credit of a substantial amount of Rs.17,62,407/- to her account.
15. Further, even after 12.12.2025, if the omission on the part of respondent No.1 was truly bona fide, there was sufficient time to move the learned Single Judge by seeking recall of the order upon placing on record the factum of refund. However, no such steps were taken until certain observations were made by this Court during the course of hearing on 09.02.2026. Even the memo stated to have been filed before the learned Single Judge on 13.02.2026 does not disclose any expression of regret for having presented the writ petition on the basis of misleading or incomplete facts. Moreover, the contents of the said memo are conditional in nature.
16. We find sufficient material on record to reasonably infer that, despite having knowledge of the refund already credited, respondent No.1 attempted to secure a second refund
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NC: 2026:KHC:9220-DB WA No. 68 of 2026 HC-KAR of the tax amount by placing reliance on the pronouncements of this Court regarding the taxability, or otherwise, of compensation awarded on acquisition of land.
17. In view of the foregoing, the order of the learned Single Judge, having been obtained on the basis of misleading and incorrect facts, cannot be sustained in law and is accordingly set aside. We are constrained to make the above observation, as the order came to be passed on the basis of misleading statements and misrepresentation of material facts at the instance of respondent No.1.
18. In view of our findings recorded hereinabove that the writ petition was presented on the basis of misleading and misrepresented facts, and that respondent No.1, by such conduct, has consumed considerable judicial time, resulting in the learned Single Judge rendering a detailed order running into 56 pages, we are unable to accept the contention that the petition was filed out of ignorance of the refund already credited. For the reasons stated supra, the said explanation does not merit acceptance.
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19. Accordingly, while setting aside the order of the learned Single Judge, we deem it appropriate to impose costs of Rs.5,00,000/- (Rupees Five Lakhs only) on respondent No.1. The said amount shall be paid to the Karnataka State Legal Services Authority within 15 days from the date of this order and produce acknowledgment for having paid the cost.
19.1 In the event the aforesaid costs are not paid within the stipulated time, the appellants are directed to adjust the said amount from any refund, if due and payable to respondent No.1, and remit the same to the Karnataka State Legal Services Authority.
19.2 If no refund is available, the said costs shall be recovered in accordance with the recovery mechanism provided under the Income-tax Act, as arrears of income tax, and upon such recovery, the amount shall be remitted to the Karnataka State Legal Services Authority.
20. With the above observations, the appeal is allowed.
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NC: 2026:KHC:9220-DB WA No. 68 of 2026 HC-KAR Pending interlocutory applications, if any, stand disposed of.
Sd/-
(S.G.PANDIT) JUDGE Sd/-
(K. V. ARAVIND) JUDGE DDU List No.: 1 Sl No.: 30