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Facts
The assessee, a cooperative credit society, failed to file its return of income for AY 2015-16. The case was reopened under section 147 based on AIR information regarding cash deposits. The assessment was completed ex-parte, adding the deposits as unexplained investment. The assessee's primary contention was that the assessment was framed under an old, incorrect PAN associated with a company status, while its correct PAN identified it as an AOP.
Held
The Tribunal held that while the Bombay High Court quashed a notice under section 148 on similar facts where a wrong PAN was used, it also directed the department to assess or reassess under the correct PAN. Therefore, the Ld. CIT(A)'s order was not entirely correct in not following the Bombay High Court judgment in totality.
Key Issues
Whether reopening of assessment based on a wrong PAN and failure to file return under the correct PAN vitiates the proceedings, and whether the Ld. CIT(A) correctly handled the issue of duplicate PANs and natural justice.
Sections Cited
147, 148, 142(1), 144, 144B, 69, 271F, 271(1)(b), 271(1)(c), 46A, 44AB
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, PUNE BENCH “A”, PUNE
Before: SHRI R. K. PANDA & SHRI VINAY BHAMORE
ORDER PER VINAY BHAMORE, JM: Both the above captioned appeals filed by the Revenue are directed against the separate orders dated 23.03.2024 and 13.06.2024 passed by Ld. CIT(A)/NFAC for the assessment year 2015-16. 2. First we shall take up the quantum appeal i.e for adjudication.
3. The Revenue has raised the following grounds of appeal :-
1. On the facts and in the circumstances of the case and in law, the Ld. CIT(Appeals) erred in not appreciating the fact that the notice under section 148 for initiating proceedings of reopening has been issued only after following due procedure and granting sufficient opportunity to the assessee for presenting its say in the matter.
2. On the facts and the circumstances of the case and in law, the Ld.CIT(A) erred in holding the notice under section 148 invalid by stating that a person's income cannot be taxed twice on the basis of technicality but ignoring the fact that the notice itself issued for verification of transaction and during the whole proceedings of verification the assessee remained non complaint even after all notices were duly served upon the assessee.
3. On the facts and the circumstances of the case and in law, the Ld.CIT(A) erred in holding that the issue arise from the technical problem of duplicate PANs and ignoring the fact that onus of getting correct PAN and reporting all transactions on correct PAN is on the assessee.
4. On the facts and the circumstances of the case and in law, the Ld.CIT(A) erred in not appreciating the fact that during the assessment proceedings the assessee remained non complaint to notices issued even after same were duly served upon the assessee through speed post.
5. On the facts and the circumstances of the case and in law, the Ld.CIT(A) erred in not giving reasonable opportunity to the Assessing Officer as per Rule 46A of the income Tax Act to examine the evidence or document produced by the assessee and completed the appellate proceedings without waiting for the submission of remand report called from the AO.
6. The appellant craves leave to add, alter, amend, modify any of the grounds or raise any other grounds at the time of proceedings before the ITAT, which may be granted.”
4. Facts of the case, in brief, are that the assessee is cooperative credit society. As per information received from Directorate of Systems, CBDT, New Delhi through NMS Module of ITBA under & 1693/PUN/2024 multi-year NMS category during the financial year 2014-15 relevant to assessment year 2015-16 the assessee has made the cash deposit of Rs.6,00,000/- in the Ajara Urban Cooperative Bank Ltd., Ajara and invested in time deposits of Rs.48,00,000/- with Ichalkaranji Janta Sahakari Bank Ltd., Ichalkaranji and also deposited cash of Rs.1,86,17,033/- in Kallappanna Awarde Ichalkaranji Janta Sahakari Bank Ltd. HO, however the assessee society has not filed the return of income for the concerned period. Therefore, the case was reopened u/s 147 of the IT Act after obtaining necessary approval from the Pr.CIT, Pune-1. Accordingly, notice u/s 148 was issued and was duly delivered to the assessee through email. Subsequently, various notices u/s 142(1) were issued to the assessee, however no response/reply was filed by the assessee. Ultimately notice was sent through verification unit and it was confirmed by verification unit that the notice was served on the assessee society through speed post on 01.02.2022. The Assessing Officer further issued a show-cause notice dated 16.03.2022 to the assessee with a request to file objections if any with regard to the proposed addition of Rs.2,40,17,033/-. In absence of any reply from the assessee, the & 1693/PUN/2024 assessment was completed u/s 147 r.w.s. 144 r.w.s. 144B of the IT Act by determining total income at Rs.2,40,17,033/-. The above assessed income includes addition of Rs.2,40,17,033/- as unexplained investment u/s 69 of the IT Act. Penalty u/s 271F, 271(1)(b) and 271(1)(c) of the IT Act were also initiated.
5. The assessee preferred first appeal before Ld. CIT(A) against the above assessment order. After considering the reply of the assessee, Ld. CIT(A)/NFAC allowed the appeal filed by the assessee by observing as under :- “6. The appellant is a credit co-operative society. This case was re- opened on the basis of AIR information about cash deposits during the previous year and on the basis of non filing of return of income. The AO completed the assessment assessing the amount as per AIR information as the income of the appellant for the year. The appellant claims that the assessment was framed under its old PAN which shows its status as a company, whereas the appellant is a co-operative society/AOP. The appellant claims that it has been filing its return of income regularly since AY 2010-11 in its new PAN is AABAA6974H and that a return was filed under PAN: AABAA6974H for AY 2015-16 also. 6.1 The appellant has filed ITR-V of its Return of Income for AY 2015-16 filed on 22.09.2015 under the PAN: AABAA6974H. Therefore there cannot be a doubt that the appellant has been issued with a new PAN. It is also seen from the PAN number that in the new PAN, the status is correctly shown as AOP. 6.2 This is essentially an issue arising from the technical problem of duplicate PANs. It goes without saying that a person’s income cannot be taxed twice on the basis of mere technicality related to computer system of the Department. This is the ratio of the judgment of Bombay High Court in Vodafone Idea Ltd v. Deputy Commissioner of Income-tax (TDS) [2019] 106 taxmann.com 22 (Bombay). If at all & 1693/PUN/2024 there is any escapement of income, the same has to be considered under the correct PAN. 6.3 I find that on identical facts the jurisdictional High Court of Bombay in Bhavna Steel vs Income Tax officer [2023] I52 taxman.com 218 (Bombay) struck down the notice issued u/s 148. The head notes of the decision in reproduced below: “Where petitioner firm, having two PAN issued in its name, one in the status of a company, filed its audited returns and paid taxes on correct PAN, but since he had not taken any steps to cancel or surrender wrong, PAN, no respondent had fulfilled the duties diligently by indicating in their reply to petition whether or not petitioner had filed any return of income on wrong PAN since issued, impugned notice under section 148 was to be quashed and respondent was to be directed to cancel wrong pan in accordance with law and reassess the petitioner if required”. 6.4 Reopening of assessment on the basis of wrong presumption that return of income has not been filed vitiates proceedings u/s 147. Ground 1 is allowed. 6.5 Since I have held that issue notice u/s 148 is invalid rendering the assessment order itself invalid, I am not adjudicating any other grounds separately.
In the result, appeal is treated as allowed.”
It is this order against which the Revenue is in appeal before this Tribunal.
7. Ld. DR appearing from side of the Revenue submitted before us that the order passed by Ld. CIT(A)/NFAC is unjustified. Ld. DR submitted that ample opportunity was provided to the assessee to furnish reply to the notices issued by the assessing officer but the assessee chose not to reply to any of the notices. It was further submitted by Ld. DR that the service of notice was made through & 1693/PUN/2024 verification unit & it has certified with the help of speed post delivery status that the notice was duly served upon the assessee. Accordingly it was contended by Ld. DR that Ld. CIT(A)/NFAC erred in accepting the contention of the assessee that principles of natural justice has been violated in passing ex-parte assessment order.
Ld. DR further submitted that Ld. CIT(A)/NFAC erred in accepting documents submitted by the assessee in contravention of Rule 46A of the IT Act since without waiting for remand report called from the AO the appellate order was passed.
Ld. DR ultimately submitted that Ld. CIT(A)/NFAC erred in not completely following the judgement passed by Hon’ble Bombay High Court in the case of Bhavna Steel Vs ITO (2023) 152 Taxmann.com 218 Bombay. It was contended that in the above case law relied on by Ld. CIT(A)/NFAC Hon’ble court has also directed to assess or reassess the assessee if required after considering the submissions & documents of the assessee. It was therefore contended by Ld. DR that in the instant case this aspect was not considered by Ld. CIT(A)/NFAC, since the verification of the fact that the impugned deposits/ transactions in the impugned & 1693/PUN/2024 bank accounts were considered by the assessee in his regular books of accounts or not. Accordingly in the light of judgment passed by Hon’ble Bombay High Court in the case of Bhavna Steel vs. ITO (supra) it was requested to set-aside the order passed by Ld. CIT(A)/NFAC & further requested to remand the matter back to the file of the assessing officer to pass assessment order afresh on the correct PAN of the assessee society. After considering the information supplied by Directorate of Systems, CBDT, New Delhi 10. On the other hand, Ld. AR appearing from side of the assessee society supported the order passed by Ld. CIT(A)/NFAC and requested to confirm the same. Ld. AR also submitted that earlier the assessee society was allotted PAN number AADCA1779J which was in the status of ‘company’ and subsequently a new PAN number AABAA6974H was obtained which was in the status of ‘AOP’. Ld. AR further submitted that from assessment year 2010-11 the assessee society is using new PAN number AABAA6974H which is in the status of ‘AOP’ and has stopped using the old PAN number AADCA1779J which was in the status of ‘company’. Ld. AR also submitted that the books & 1693/PUN/2024 of accounts are regularly maintained and audited u/s 44AB of the IT Act and the return of income is also being furnished under the new PAN. Ld. AR submitted that due to ignorance the old PAN number could not be changed in some of the bank accounts and therefore the transactions entered into with those bank accounts were reported on the old PAN which was not in use. Ld. AR contended that the transactions reported by Directorate of Systems, CBDT, New Delhi were duly recorded in the books of accounts maintained by the assessee society. Accordingly, it was requested by Ld. AR that the order passed by Ld. CIT(A)/NFAC may kindly be confirmed and appeal filed by the Department may also be dismissed.
We have heard Ld. Counsels from both the sides and perused the material available on record including the copy of case laws furnished by both the parties. In this regard, we find that admittedly in some of the bank accounts the old PAN number was mentioned and on the basis of information received from Directorate of Systems, CBDT, New Delhi the case on old PAN number was reopened u/s 147 to assess the income escaped from assessment which was entered in the bank accounts informed by & 1693/PUN/2024 the Directorate of Systems, CBDT, New Delhi since no return of income was filed by the assessee on the old PAN. We further find Ld. CIT(A)/NFAC by relying on the judgement of Hon’ble Bombay High Court in the case of Bhavna Steel vs. ITO (supra) has allowed the appeal of the assessee by holding that :- “reopening of assessment on the basis of wrong presumption that the return of income has not been filed vitiate proceedings u/s 147.”
In this regard, we find that it is true that Hon’ble Bombay High Court has quashed the notice u/s 148 of the IT Act, however at the same time Hon’ble Court also gave direction to the Department to assess or reassess the assessee under the correct PAN number. Accordingly, we find force in the arguments of Ld. Departmental Representative that the order passed by Ld. CIT(A)/NFAC is not correct to the extent of not following the judgement passed by Hon’ble Bombay High Court in totality. Accordingly, we deem it appropriate to set-aside the order passed by Ld. CIT(A)/NFAC and remand the matter back to the file of the Assessing Officer to pass assessment order afresh i.e. de novo and as per fact and law on the new PAN- AABAA6974H of the & 1693/PUN/2024 assessee and also to verify the fact that the impugned transactions reported by Directorate of Systems, CBDT, New Delhi have already been incorporated in the books of accounts maintained by the assessee for the period under consideration. Thus, the grounds of appeal
raised by the Revenue are partly allowed.
13. In the result, the appeal filed by the Revenue in is allowed for statistical purposes.
Now, we shall take up appeal in involving issue of penalty u/s 271(1)(c) of the IT Act for adjudication. : 15. In this appeal, the Revenue has challenged the order passed by Ld. CIT(A)/NFAC wherein he deleted the penalty u/s 271(1)(c) of the IT Act. Since we have already set-aside the order passed by the Ld. CIT(A)/NFAC in quantum case and remanded the matter back to the file of Assessing Officer to pass de novo assessment order, and the penalty being consequential in nature, therefore, we deem it appropriate to set-aside the order passed by Ld. CIT(A)/NFAC in penalty case and remand the issue of penalty