2024 (11) TMI 322 - HC - Income Tax

Reassessment and penalty orders quashed due to procedural unfairness; fair opportunity mandated for response to notice.

The HC allowed the Writ Petition, quashing the reassessment and penalty orders issued under the old PAN, citing procedural unfairness. The court remanded ... Ex-parte order passed based on old PAN number - as argued all the transactions of the Society have been accounted for in the books of accounts and audited reports and income tax returns have been filed with new PAN number. However, the department has issued notice to the old PAN number. HELD THAR:- Suffice it to note that the department has issued a notice to the PAN which is available in their record. However, the petitioner contends that the notice was issued by mentioning the old PAN number, it could not give reply to the notice. Hence, this Court considers it proper to provide an opportunity for the petitioner to give reply to the 148 notice. Hence, the matter requires a remand. The assessment order, penalty order and demand notices are liable to be set-aside, so they are set-aside. Writ of Certiorari is ordered. The order passed by the first respondent u/s 147 R/w Section 144 R/w Section 144B and the demand notice issued under Section 156 quashed. Issues:1. Notice issued by the Income Tax Department to the petitioner based on an old PAN card.2. Alleged failure of the petitioner to update the department about the change in PAN card.3. Validity of reassessment order passed by the first respondent.4. Imposition of penalty under Section 271(1)(c) of the Income Tax Act.Analysis:Issue 1: Notice issued based on old PAN cardThe petitioner, an Urban Credit Society, had obtained a new PAN card after converting itself under the Karnataka Souhard Act. Despite surrendering the old PAN card to the Income Tax Officer in 2012, the department issued notices for non-filing of returns using the old PAN number. The petitioner argued that it could not respond as the transactions were accounted for under the new PAN. The court found the notice to be ex-parte and ordered a remand to allow the petitioner to reply to the notice issued under Section 148 of the Act.Issue 2: Failure to update PAN card informationThe department contended that the notice was sent to the PAN available in their records, which was still linked to the petitioner's bank account. The petitioner was accused of not informing the department about the change in PAN number, leading to the confusion. The court acknowledged the discrepancy but granted the petitioner an opportunity to respond to the notice and set aside the assessment order, penalty, and demand notices.Issue 3: Validity of reassessment orderThe reassessment order passed by the first respondent under Section 144 of the Act for the Assessment Year 2015-16 was challenged by the petitioner. The court found the order to be based on the old PAN number and lacking proper consideration of the petitioner's submissions. Consequently, the assessment order, penalty order, and demand notices were quashed, and the matter was remanded for further proceedings.Issue 4: Imposition of penaltyThe first respondent imposed a penalty of Rs.1,78,42,490 under Section 271(1)(c) of the Act, which was contested by the petitioner. The court set aside the penalty order along with the assessment order and demand notices, emphasizing the need for the department to consider the petitioner's responses and provide a fair opportunity for clarification.In conclusion, the Writ Petition was allowed, and the matter was remanded to the second respondent for appropriate action after giving the petitioner a chance to respond to the notice. The court did not express any opinion on the merits of the case, focusing on procedural fairness and adherence to legal requirements.