SHREE VIJAYALAXMI URBAN COOP CREDIT SOCIETY LTD vs. THE ADDITIONAL/JOINT/DEPUTY/ASSISTANT COMMISSIONER OF INCOME TAX

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WP/104498/2022HC KarnatakaKAHC02014578202227 September 2024Bench: JYOTI MULIMANI8 pages
AI SummaryRemanded

What did the High Court hold?

The High Court held that while the department issued notices to the PAN available in its records, the petitioner's contention that the notice was issued referencing an old, surrendered PAN, which prevented them from replying, was significant. The Court found it appropriate to provide the petitioner with an opportunity to reply to the Section 148 notice. Consequently, the reassessment order, penalty order, and demand notices were set aside. The matter was remanded to the second respondent (Income Tax Officer) to the stage of providing an additional reply to the Section 148 notice. The Court also directed that an opportunity for a personal hearing be provided to the petitioner before passing fresh orders. The Court explicitly stated that it had not expressed any opinion on the merits of the case. The Writ of Certiorari was ordered.

What were the facts?

The petitioner, Shree Vijayalaxmi Urban Co-op Credit Society Ltd., converted from a society registered under the Karnataka Co-op. Societies Act, 1959, to one under the Karnataka Souhard Act, 1997, obtaining a new PAN (AAEAS0544G) and surrendering its old PAN (AADFS9937M) in 2012. Despite surrendering the old PAN and filing returns under the new one, the Income Tax Officer issued notices for non-filing of returns for Assessment Years 2010-11, 2011-12, 2013-14, and 2014-15, referencing the old PAN. Subsequently, a notice under Section 148 was issued on March 19, 2021, for reassessment year 2015-16, citing the old PAN and alleging escaped income from un-declared cash transactions. This led to a reassessment order under Section 144 on March 20, 2022, and a penalty order under Section 271(1)(c) on August 29, 2022, imposing a penalty of Rs. 1,78,42,490/-. The petitioner filed a writ petition challenging these actions.

What were the issues?

1. Whether the reassessment proceedings initiated under Section 148 of the Income Tax Act, 1961, for Assessment Year 2015-16, citing the old PAN (AADFS9937M) instead of the new PAN (AAEAS0544G), are valid, considering the petitioner had surrendered the old PAN and was filing returns under the new PAN. (Question of law and fact) 2. Whether the reassessment order passed under Section 144 and the penalty order under Section 271(1)(c) are sustainable when the petitioner contends they did not receive proper notice due to the use of the incorrect PAN and were not afforded an adequate opportunity to respond. Assessee's Arguments: The petitioner argued that all transactions were accounted for, audited, and returns filed under the new PAN. They contended that notices issued to the old PAN were invalid as it had been surrendered, preventing them from replying. They sought an opportunity to reply to the notice. Revenue's Arguments: The revenue contended that notices were issued to the PAN available in their records. They argued that the petitioner's bank account was still linked to the old PAN and that the petitioner had not informed the department of the PAN change or proven their case. They justified the department's actions and sought dismissal of the petition.

Which sections of the Income-tax Act were involved?

Section 148,Section 144,Section 144B,Section 156,Section 271(1)(c)

AI-generated summary — verify with the full judgment below

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NC: 2024:KHC-D:14164 WP No. 104498 of 2022

IN THE HIGH COURT OF KARNATAKA, DHARWAD BENCH DATED THIS THE 27TH DAY OF SEPTEMBER, 2024 BEFORE THE HON'BLE MS. JUSTICE JYOTI MULIMANI WRIT PETITION NO. 104498 OF 2022 (T-IT)

BETWEEN:

SHREE VIJAYALAXMI URBAN CO-OP CREDIT SOCIETY LTD., OPP. RAYA MATH, MALMADDI, DHARWAD-580 007. REPRESENTED BY ITS CHIEF EXECUTIVE OFFICER, SHRI MANOJ S/O GANAPATRAO JOSHI, AGE. 54 YEARS, OCC. SERVICE, R/O. DHARWAD. …PETITIONER (BY SRI. SANGRAM.S.KULKARNI., ADVOCATE)

AND:

1.

THE ADDITIONAL/JOINT/DEPUTY/ASSISTANT COMMISSIONER OF INCOME TAX, NATIONAL FACELESS ASSESSMENT CENTER, NEW DELHI-110 001.

2.

THE INCOME TAX OFFICER WARD-1(1), HUBLI, C.R.BUILDING, NAVANAGAR, HUBBALI-580 025. …RESPONDENTS (BY SRI. M.THIRUMALESH AND MS. ROOPA ANAVEKAR., ADVOCATE FOR R1-2)

THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA, SEEKING CERTAIN RELIEFS.

Digitally signed by THEJASKUMAR N Location: HIGH COURT OF KARNATAKA

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NC: 2024:KHC-D:14164 WP No. 104498 of 2022

THIS WRIT PETITION IS LISTED FOR PRELIMINARY HEARING IN ‘B’ GROUP, THIS DAY, AN ORDER IS MADE AS UNDER: ORAL ORDER Sri.Sangram S.Kulkarni., counsel for the petitioner and Ms.Roopa Anavekar., counsel for the respondents have appeared in person. Sri.M.Thirumalesh., counsel for the respondents has appeared through video conferencing. 2. The short facts are these: The petitioner is an Urban Credit Society which was earlier registered under the Karnataka Co-op. Societies Act, 1959. The petitioner had obtained a PAN Card bearing No.AADFS9937M for the Society. The petitioner later got itself converted into Shree Vijayalaxmi Urban Credit Souhard Sahakari Ltd., as per the Karnataka Souhard Act, 1997. Because of the conversion of the Society under Souhard Act, the petitioner obtained a new PAN Card bearing No.AAEAS0544G. Thereafter, the petitioner stopped filing its income tax returns under the old PAN Card as it had

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NC: 2024:KHC-D:14164 WP No. 104498 of 2022

surrendered the same to the ITO, Hubli on receipt of the new PAN card. As the matter stood thus, the Income tax officer 2(1) Navanagar, Hubli issued a letter to the petitioner on 07.03.2012 calling upon the petitioner to explain reasons for non-filing of return for the Reassessment Year 2010-11 relating to old Pan Number AADFS9937M. The petitioner replied to the said letter on 15.03.2012 informing that the old PAN card has been surrendered and the income tax return has been filed by quoting the new PAN Card. Subsequently, another letter dated 17.10.2013 was issued to the petitioner by the ITO Hubli for non-filing of return of income for Reassessment Years 2010-11 and 2011-12. The petitioner replied on 21.10.2013 which is received by the ITO Hubli on 22.10.2013. Similarly, another letter dated 04.02.2016 was issued to the petitioner seeking explanation for non filing of return of income for Reassessment Years 2013-14 and 2014-15. The petitioner replied to the said letter on 09.02.2016 which was received by the ITO, Hubli on 10.02.2016. On 17.02.2017, the petitioner sent a letter to the ITO, Ward 2(3), Hubli requesting

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NC: 2024:KHC-D:14164 WP No. 104498 of 2022

to deactivate the old PAN card. In the year 2019, the petitioner addressed a letter to the ITO Ward 2(3) Navanagar, Hubli stating that no action has been taken by the department for canceling the old PAN card issued to the petitioner. As the matter stood thus, on 19.03.2021 the second respondent issued a notice under Section 148 of the Act by mentioning the old PAN card number stating that the petitioner has not declared the cash transactions in its bank account during the reassessment year 2015-16 and the second respondent has reasons to believe that income chargeable to tax has escaped reassessment and the same requires to be brought to tax. Subsequently, 142(1) notices were issued and finally, a show cause notice was issued under Section 144 of the Act on 22.02.2022. The petitioner contends that the first respondent without properly considering the records and also without considering the fact that the petitioner Society had already surrendered the old PAN Card long back in the year 2012, went ahead and passed reassessment order under Section 144 of the Act on 20.03.2022 and issued demand notice under Section 156 of the Act. Consequently, penalty proceedings were initiated and an order was passed under

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NC: 2024:KHC-D:14164 WP No. 104498 of 2022

Section 271(1)(c) of the Act on 29.08.2022 imposing penalty of Rs.1,78,42,490/- (Rupees One Crore Seventy Eight Lakh Forty Two Thousand Four Hundred and Ninety only) and issued demand notice under Section 156 of the Act. Hence, the petitioner has filed the captioned Writ Petition under Articles 226 and 227 of the Constitution of India on several grounds as set-out in the Memorandum of Writ Petition. 3. Counsel Sri.Sangram S.Kulkarni., in presenting his arguments strenuously urged that 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. Hence, the petitioner could not give reply to the notice. He submits that an opportunity may be granted for the petitioner to give a reply to the notice. Counsel, therefore, submits that the Writ Petition may be allowed. By way of reply to this contention, counsel Sri.M.Thirumalesh., vehemently contends that the department has issued notice to the PAN which is available in their records and the bank account of the petitioner Society is still linked with the old PAN number. He argued by saying that the

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NC: 2024:KHC-D:14164 WP No. 104498 of 2022

petitioner has not brought to the notice of the department about the change in PAN number and it has not proved its case. Hence, he justified the action of the department. Counsel, therefore, submits that the Writ Petition is devoid of merits and the same may be dismissed. 4. Heard the contentions and perused the Writ papers with care. 5. The order passed under Section 147 R/w Section 144 R/w Section 144B of the Income Tax Act, 1961 is furnished along with the Writ Petition and the same is marked as Annexure-H. A perusal of the same reveals that it’s an ex-parte order. The order is passed for the Assessment Year 2015-16 by mentioning the PAN bearing No.AADFS9937M, which according to the petitioner is an old PAN number. 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

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NC: 2024:KHC-D:14164 WP No. 104498 of 2022

matter requires a remand. The assessment order, penalty order and demand notices are liable to be set-aside, so they are set- aside. 6. The Writ of Certiorari is ordered. The order dated 20.03.2022 passed by the first respondent under Section 147 R/w Section 144 R/w Section 144B of the Income Tax Act, 1961 in DIN No: ITBA/AST/S/147/2021-22/1041102498(1) for the Assessment Year 2015-16 vide Annexure-H, the demand Notice dated 20.03.2022 issued under Section 156 of the Income Tax Act, 1961 bearing DIN & Notice No:ITBA/AST/S/156/2021-22/1041102553(1) vide Annexure-J, the order dated 29.08.2022 passed under Section 271(1)(c) in DIN No:ITBA/PNL/F/271(1)(c)/2022-23/1045024090(1) for the Assessment Year 2015-16 vide Annexure-K and the demand notice dated 29.08.2022 issued under Section 156 of the Act in DIN & Notice No:ITBA/PNL/S/156/2022-23/1045039299(1) vide Annexure-L are quashed. The matter is remanded to the second respondent to the stage of giving added/ additional reply to 148 notice. The second respondent must provide an opportunity of a personal

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hearing to the petitioner and thereafter, pass orders as per the law. This Court has not expressed any opinion on the merits of the case. 7. Resultantly, the Writ Petition is allowed and remanded. Because of disposal of Writ Petition, pending interlocutory applications if any are disposed of.

Sd/- (JYOTI MULIMANI) JUDGE TKN,MRP List No.: 3 Sl No.: 1

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