2024 (9) TMI 1126 - HC - Income Tax

Demand raised u/s 154 - petitioner s case that no order has been served on petitioner, no show cause notice was ever issued to petitioner and at no stage was petitioner even intimated about any action being taken by the Department suo motu u/s 154 - HELD THAT - Mr. Gupta appearing for respondents informed the Court that he has instructions from respondent no.1 Mr. Basant Kumar Arya that the demand has been uploaded by the erstwhile Deputy Commissioner of Income Tax on the portal but the Department does not have any file relating to that matter. Mr. Gupta states that his instructions are to inform the Court that respondent no.1 or the Department has no document to show that any notice was issued u/s 154 or even an order was passed under Section 154. Mr. Gupta also states that if the Court directs respondents, they shall remove the pending demand from the Income Tax Portal pertaining to petitioner. In view of the statement made by Mr. Gupta as recorded above, we have to quash and set a side the demand for Assessment Year 2013-2014 as appearing on petitioner s portal and the computation sheet under Section 154 dated 31st March 2021, which we here by do. The demand appearing on the portal shall also be removed. This has to be completed with in two weeks of this order being uploaded. We would direct the Principal Chief Commissioner of Income Tax, Mumbai (PCCIT) to have an enquiry conducted by a person not below the rank of Additional Commissioner of Income Tax to ascertain how such a demand came to be uploaded in the portal pertaining to petitioner and if there has been any negligence or lapse on the part of any officer, to take such action as the PCCIT will feel necessary against the said officer.

Summary

Issues:
Challenge to demand raised under Section 154 of the Income Tax Act, 1961 without proper communication or intimation to the petitioner. Discrepancy in the order served and reflected on the Income Tax Portal. Merger of two entities and subsequent changes in names affecting tax assessments. Lack of proper documentation and response from the Department regarding the demand. Quashing of the demand and directions for investigation into the matter.

Analysis:
The petitioner contested a demand of Rs.46,84,750/- raised under Section 154 of the Income Tax Act, 1961, alleging lack of proper service, show cause notice, or intimation regarding the order. The petitioner argued that the order was not reflected accurately on the Income Tax Portal, only showing a pending demand notice. Despite efforts under the RTI Act, the petitioner was provided with limited information, raising concerns about transparency and communication from the Department.

The judgment highlighted a merger between two entities, resulting in changes in names and potential impacts on tax assessments. The assessment history of the erstwhile entity involved scrutiny and adjustments under Section 143(3) of the Act, leading to a subsequent demand arising from a Section 154 order for Assessment Year 2013-2014. The lack of proper communication and documentation regarding this demand raised significant procedural issues.

The Court noted discrepancies in the Department's response, with no affidavit filed in reply and conflicting statements from the respondents. The Department acknowledged the lack of documentation to support the issuance of a notice or order under Section 154. Following this acknowledgment, the Court quashed the demand and directed its removal from the petitioner's portal, emphasizing the need for proper verification and communication in tax matters.

In addition to quashing the demand, the Court directed the Principal Chief Commissioner of Income Tax to conduct an inquiry into the circumstances leading to the erroneous upload of the demand. The inquiry, to be conducted by a senior official, aimed to identify any negligence or lapses within the Department and take appropriate actions against responsible officers. This directive underscored the importance of accountability and diligence in tax administration.

The judgment concluded by disposing of the petition without imposing any costs, signaling a resolution to the immediate dispute while emphasizing the broader implications of transparency, communication, and accountability in tax assessments and administrative processes.