2023 (6) TMI 1290 - HC - Income Tax

Reopening of assessment - migration to new PAN from old PAN - undisclosed time deposits - What was procedure for the cancellation of PAN that the Petitioner failed to follow? - HELD THAT - The Counsel were unable to point out any regulation, circular or a procedure that could help the assessee cancel the PAN. We also examined the record which evinced that, the Petitioner has filed their returns under the new PAN. The perusal of the notice also indicates that the Respondent No. 1 has failed to acknowledge the correspondence by the Petitioner with the Respondent No. 1. It was the duty of the Respondent No. 1 to have examined and verified the contentions of the Petitioner in respect of cancellation of the old PAN and the returns filed under the new PAN before the issuance of the impugned Order and the impugned notice. A failure of duty of Respondent No. 1 has led to filing of this Petition which in our view could be easily avoided along with its cascading effect on the Courts which are already overburdened. This is yet another in the case of Bhavna Steel v ITO-5(1)(1) 2023 (6) TMI 402 - BOMBAY HIGH COURT where the assessee has sought to cancel the old PAN and the IT department has failed to do it. The Respondents ought to prominently display the steps for cancellation of a PAN on their website apart from sending a link for cancellation in the covering letter when a PAN is provided to an assessee. In the absence of any clear answer to the query and any clear stand of the department, we are prima facie of the view that the Petition deserves to be allowed without further procrastination.

Summary

Issues Involved:
The judgment addresses the issues related to the quashing of an impugned notice under section 148 of the Income Tax Act, 1961, dated 31st March 2023 for Assessment Year 2019-20, the impugned order under section 148A(d) dated 29th March 2023, and assessment proceedings following the impugned notice.

Issue 1 - Incorrect PAN and Assessment Order:
The Petitioner, a registered co-operative credit society, applied for a new PAN after realizing a mistake in the old PAN due to an ex-parte assessment order for the year AY 2011-12. Despite requests for cancellation of the old PAN and migration to a new ward, the new PAN was incorrectly migrated to a different ward. The Petitioner filed returns under the new PAN and repeatedly requested the cancellation of the old PAN, but the Respondents failed to take action.

Issue 2 - Impugned Notice and Reopening of Assessment:
Despite correspondence and requests for cancellation of the old PAN, a show-cause notice under section 148A(b) was issued for AY 2019-20 based on a time deposit with a bank. The Petitioner provided explanations and supporting documents, but the contentions were rejected, leading to a notice under section 148 for reopening the assessment. The Petition was filed challenging the impugned notice and order.

Judgment:
The High Court found that the Respondent failed to acknowledge the Petitioner's correspondence and verify the contentions regarding the cancellation of the old PAN and returns filed under the new PAN before issuing the impugned notice and order. The Court emphasized the duty of the Respondent to examine and verify such contentions to avoid unnecessary litigation. Referring to a similar case, the Court highlighted the need for the department to display steps for PAN cancellation on their website. As a result, the Court quashed the impugned order and notice, directing the cancellation of the old PAN and reassessment under the new PAN, emphasizing the importance of following due process.

Separate Judgment:
No separate judgment was delivered by the judges in this case.