2023 (6) TMI 402 - HC - Income Tax

Reassess the income on abandoned Permanent Account Number (PAN) as issued wrongly to the Petitioner as company instead of a Partnership Firm - HELD THAT - Respondent No. 1 has failed to make averments in their reply to the Petition, with regard to the status of the wrong PAN in their records. Respondent No. 1 ought to have indicated in their reply whether or not the Petitioner has filed any return of income on the wrong PAN since issued and as to when they stopped filing return of income under the wrong PAN as they possess this information. This exercise, in our view, could have enabled the department to issue the notice to the registered email address of the assessee and sent an alert on the registered mobile number and prevented the consequences. Respondent No. 1 has admittedly failed to follow up after the 30 days time period that expired pursuant to the issuance of the notice on 31st March 2021. In our view, this whole process could have been avoided had the Respondent No. 1 taken the steps in May 2021, that he took on 25th March 2022 or at least after 27th November 2021 when notice u/s 142(1) was issued. It was the duty of the Respondent No. 1 to have verified whether the wrong PAN was registered on the e-filing portal, which was the last return of income filed under the wrong PAN and the address and telephone number registered under the wrong PAN. Lastly, having met the CA and the partner, he could have extended the time and guided the Petitioner to file written response/submission on before 31st March 2022 in the office of the ITO and accepted a copy of the same by hand delivery considered it and then passed such orders as he deemed fit after due application of mind and law. Petitioner has filed their audited returns and also claimed to have paid their taxes for the relevant AY 2015-16 2016-17 but under the correct PAN. Petitioner ought to have taken all necessary steps to cancel and or surrender the wrong PAN which they failed to do. Both parties are at fault as mentioned hereinabove.

Summary

Issues involved:
The judgment involves a challenge to a notice under section 148 of the Income-tax Act, 1961, and subsequent orders and demand notices for assessment years 2015-16 and 2016-17 based on the use of an incorrect Permanent Account Number (PAN) by a Partnership Firm.

Facts:
The Partnership Firm, engaged in trading stainless steel, had two PANs - one correct and one incorrect. The incorrect PAN was mistakenly issued as a company instead of a Partnership Firm. Despite not using the incorrect PAN for filing returns or registering on the e-filing portal, the firm received a notice under the incorrect PAN for failure to furnish returns. The firm, unable to access the e-filing portal under the incorrect PAN, sought to respond through their Chartered Accountant (CA) before the assessment proceeding's time bar expired.

Court's Analysis and Decision:
The Court noted that the Respondent failed to address key issues such as the status of the incorrect PAN in their records and the firm's filing history under the incorrect PAN. The Court criticized the Respondent for not taking steps earlier to verify the PAN status and communicate effectively with the firm. Both parties were found at fault for not canceling or surrendering the incorrect PAN despite the firm filing audited returns and paying taxes under the correct PAN.

Judgment:
The Court quashed the impugned orders and stayed the demand notices issued by the Respondent. The Respondent was directed to cancel the incorrect PAN and assess/reassess the firm for the relevant assessment years under the correct PAN after considering the firm's submissions and documents. The Court made the rule absolute in the specified terms without imposing any costs.