The Gujarat High Court has imposed the cost of Rs. 1 Crores on the Assessing Officer (AO) for high pitched assessment.
The bench of Justice Bhargav D. Karia and Justice D.N.Ray has observed that the Income Tax Officer as well as the Nation Faceless assessment Centre (NFAC) who passed the reassessment order against the amalgamated entity was without the application of mind and without considering the fact that PAN as well as the erstwhile Oriental Bank of Commerce in whose name the reassessment order was passed does not exist at any point of time.
The bench noted that the Income Tax Officer has not taken into consideration any books of account but merely on the basis of multi year NMS data accepting the same as a gospel truth has proceeded to pass the reassessment order by making a huge assessment of Rs. 393.97 crores.
“Merely because the multi-year NMS data (which is an abstract phenomenon unknown to anyone) not disclosed in the assessment order, what type of data multi-year NMS data is made available to the AO. The AO proceeded to make additions without making any enquiry, ignoring the facial statements made by the petitioner, Punjab National Bank to the effect that the OBC bank does not exist after 01/04/2020 and therefore there could not have been any assessment order passed in the name of the said bank having cancelled PAN,” the bench noted.
The bench stated that the reassessment proceedings were initiated with the prior permission of the higher authorities under Section 151 of the Income Tax Act. The ACIT has also without the application of mind granted the sanction for issuing the reassessment notice.
The court noted that the department oblivious of facts presented by the petitioner has proceeded to pass the reassessment order resulting into the high pitch assessment of Rs. 393.97 crores attracting the tax demand of Rs. 648.26 crores and therefore such high pitched assessment could not have been passed against the non-existing OBC Bank under a PAN which was already requested for the cancellation since 2013 and for no fault on the part of the petitioner bank the orders were passed by the Income Tax department.
The court imposed the cost of Rs. 1 Crore on the respondent department to be paid to the Petitioner Bank.
The petitioner bank, Punjab National Bank is a successor entity of the erstwhile Oriental Bank of Commerce (OBC), which as a nationalised bank engaged in activities of Pan India basis.
For the Assessment Year 2009-10, the TDS returns of the branch level of several classes of taxpayers were filed by the regional office of the OBC for TDS compliances. At the relevant time the OBC Bank received the letter and notice under Section 142(1) of the Income Tax Act, 1961 from the Income Tax Officer for not filing return of income for AY 2009-10 and AY 2010-11, which was responded by the OBC bank by filing provisional receipt of his TDS returns of the Baruch Branch for the relevant period.
The OBC Bank again received a communication from the Income Tax Officer for AY 2009-10 and AY 2010-11 addressed to its Baruch Branch stating that as per the officer’s record the return of income was not filed.
In reply, OBC Bank clarified that PAN being AAACO0191M under which it was duly filing the return of income regularly and being assessed at New Delhi and has already made a request for cancellation of PAN AAACA7436M through its head office. A specific request was also made to the income tax officer by the letter surrendering the PAN along with the screenshot of the correct PAN of the OBC bank being AAACO0191M.
The Income Tax Officer again by another letter made enquiries for non-filing of returns for AY 2009-10 and AY 2010-11 in the PAN No. AAACA7436M, which was already requested for cancellation by the OBC bank as the regular assessment of the OBC Bank was undertaken at New Delhi in its correct PAN.
Thereafter no further proceedings were initiated by the Income Tax Officer.
The OBC bank stood amalgamated with the Punjab National Bank w.e.f 1 April 2020. Accordingly the OBC bank ceased to exist and return of its Income Tax as per law were filed by the Petitioner Punjab national Bank under its PAN.
The petitioner bank contended that as many as 8 years after a specific request for cancellation of PAN was made before the Income Tax Dept. A year after OBC Bank ceased to exist, the Income Tax Officer issued the reassessment notice to the erstwhile Baruch Branch of OBC Bank seeking to reopen its assessment for AY 2017-18.
The petitioner bank submitted that the reassessment notices issued by the Income tax Officer on ITBA Portal linked with PAN AAACA7436M could not be accessed/recieved by the petitioner bank since the page of the portal relating the PAN AAACA7436M could not have been legally accessed by the petitioner.
The Income Tax Officer issued the notice under Section 142(1) of the Income Tax Act, 1961 referring to PAN AAACA7436M asked the amalgamated OBC Bank to file the return of Income. The amalgamated OBC Bank was naked to show cause why the return of Income as to AY 2017-18 was not filed and the reference was also made to purchase of time deposits aggregating to Rs. 393.97 crores during FY 2017-18 and documentary evidence was also called for.
The petitioner received the notices which were physically posted by the speed post by the income tax officer to the Baruch branch of the Punjab National Bank which was erstwhile branch of the OBC Bank. The petitioner filed the reply.
The income tax officer without considering the reply submitted by the petitioner bank passed the reassessment order determining the taxable income of Rs. 393.97 crores and raising a demand of Rs. 648.26 crores on erstwhile OBC Bank, Baruch branch in spite of informing by the petitioner that the OBC bank has already amalgamated with the petitioner bank w.e.f 1 April 2020 and the PAN was already cancelled in 2013.
The petitioner contended that the reassessment order against the non-existent OBC bank deserved to be quashed and set aside with the exemplary cost.
The department contended that the Income Tax Officer shall not enforce the demand as the order was passed against in the name of the pre-merged entity.
The court while allowing the petition and quashed the reassessment order.
Case Details
Case Title: Punjab National Bank Vs ITO
Case No.: Special Civil Application 11087/2022
