2020 (10) TMI 754 - HC - Income Tax

High Court quashes assessment order over PAN error, directs reassessment.

IY TEE CEE TRADING COMPANY Versus THE ASST. COMMISSIONER OF INCOME TAX CIRCLE 2 (1)

The High Court quashed the assessment order due to the assessing officer's failure to consider the petitioner's explanations and evidence regarding ... Deposits in bank account under the wrong PAN that showed the petitioner as a company - Petitioner firm issued with the PAN showing its status as a company - Department refuses to accept an appeal which is filed in the PAN of the petitioner which shows its status as a firm, whereas the PAN recorded in the system of the Department, based on the orders of the assessing authority, shows the petitioner as a company - HELD THAT:- This is a case where the basic issue that comes up for consideration is as to whether the petitioner firm had correctly accounted for the deposits made in its account. AO in Ext.P6 order states that the claims made by the petitioner could not be accepted in view of the same not being substantiated with proper evidence and due to paucity of time. While it may be a fact that the assessing authority was limited by time constraints, in view of the statutory provisions mandating the completion of assessments within a particular time, the same cannot be cited as a reason for abdicating his role as an adjudicating authority in tax assessment. Assessee cannot be prejudiced on account of the delay occasioned by the department in passing assessment orders, and the hasty manner in which an assessment order is passed without considering the material produced by an assessee, cannot be justified on the ground that the time limit for finalising assessment was nearing expiry. As a proper consideration of the materials produced by the petitioner assessee in Ext.P6 order, I quash Ext.P6 order and direct the respondent to redo the assessment in relation to the petitioner by considering the materials produced by the petitioner to justify his contentions on merit, and referring to the said material while passing final orders of assessment for the assessment year in question. Issues: Incorrect PAN status, assessment proceedings under Section 142(1), discrepancy in PAN, difficulty in filing appeal onlineIncorrect PAN status:The petitioner, a partnership firm, was issued a PAN reflecting its status as a company, which was incorrect. The firm only noticed this discrepancy in 2005 and subsequently applied for and received a new PAN correctly showing its status as a firm. During the financial year 2016-17, the firm made deposits including demonetized notes. Due to the incorrect PAN in the bank account, the cash deposit was reported to the Income Tax Department under the wrong PAN, showing the petitioner as a company. This led to the initiation of assessment proceedings under Section 142(1) against the petitioner.Assessment proceedings under Section 142(1):The respondent initiated assessment proceedings against the petitioner under Section 142(1) based on the incorrect PAN information provided by the bank. Despite the petitioner explaining the discrepancy in PAN and reiterating this in the reply to the pre-assessment notice, the respondent finalized the assessment without considering the objections and explanations provided by the petitioner. The petitioner faced difficulty in filing an appeal against the assessment order online as the web portal of the Income Tax Department did not accept appeals filed under the correct PAN status of the firm.Discrepancy in PAN and assessment order:The High Court considered the facts and submissions of both parties and analyzed the assessment order (Ext.P6) in question. The court found that the assessing officer did not properly consider the materials presented by the petitioner to substantiate their claims regarding the deposits made in the account. The court held that time constraints could not be used as a reason for passing a hasty assessment order without due consideration of the evidence provided by the assessee. As a result, the court quashed the assessment order (Ext.P6) and directed the respondent to redo the assessment, considering the materials presented by the petitioner to justify their contentions on merit.Difficulty in filing appeal online:The court's decision also addressed the issue raised by the petitioner regarding the difficulty in filing an appeal online due to the discrepancy in the PAN status recorded in the Income Tax Department's system. The court's directive for the respondent to redo the assessment within four months included a provision for hearing the petitioner and considering the materials presented before passing final orders for the assessment year in question. The writ petition was disposed of accordingly.