Case Law Details

Case Name : IY TEE CEE Trading Company Vs ACIT (Kerala High Court)
Appeal Number : WP(C).No. 20314 of 2020(L)
Date of Judgement/Order : 08/10/2020
Related Assessment Year : 2017-18
Courts : All High Courts (6127) Kerala High Court (344)

IY TEE CEE Trading Company Vs ACIT (Kerala High Court)

The issue under consideration is whether the petitioner firm had correctly accounted for the deposits made in its account during demonetization?

In the present case, the petitioner is a partnership firm was issued a PAN, which reflected its status as a company. The petitioner applied for and was issued a fresh PAN showing its status as a firm. during the demonetization period, the petitioner firm had made certain deposits in its bank account, owing to the incorrect PAN that was available in the bank account. Hence, this was reported by the bank to the Income Tax Department. Accordingy, ITD initiated the assessment proceedings u/s 142(1) against the petitioner, by asking it to file returns in response to the said notice. Further, the petitioner in attempting to file an appeal against this assessment order, but the online portal refuses to accept an appeal which is filed in the PAN of the petitioner which shows its status as a firm, whereas the PAN recorded in the system of the Department, based on the orders of the assessing authority, shows the petitioner as a company.

HC states that, the AO’s order states that the claims made by the petitioner could not be accepted in view of the same not being substantiated with proper evidence and due to paucity of time. While it may be a fact that the assessing authority was limited by time constraints, in view of the statutory provisions mandating the completion of assessments within a particular time, the same cannot be cited as a reason for abdicating his role as an adjudicating authority in tax assessment. In other words, the assessee cannot be prejudiced on account of the delay occasioned by the department in passing assessment orders, and the hasty manner in which an assessment order is passed without considering the material produced by an assessee, cannot be justified on the ground that the time limit for finalising assessment was nearing expiry. Inasmuch as HC do not find a proper consideration of the materials produced by the petitioner assessee, HC quash order and direct the respondent to redo the assessment in relation to the petitioner by considering the materials produced by the petitioner to justify his contentions on merit, and referring to the said material while passing final orders of assessment for the assessment year in question.

FULL TEXT OF THE HIGH COURT ORDER /JUDGEMENT

The petitioner, which is stated to be a partnership firm, had applied for, and was issued a PAN, which reflected its status as a company. The petitioner being a firm could not have been issued with the PAN showing its status as a company. But the petitioner firm did not notice this discrepancy till much later, in the year 2005. Immediately thereafter, it applied for and was issued a fresh PAN showing its status as a firm.

2. During the financial year 2016-17 and during the demonetization period, the petitioner firm had made certain deposits in its bank account, a portion of which comprised demonetized notes. Owing to the incorrect PAN that was available in the bank account, the cash deposit made in the account of the petitioner firm was reported by the bank to the Income Tax Department under the wrong PAN that showed the petitioner as a company. It is apparently based on this, that the respondent initiated the assessment proceedings under Section 142(1) against the petitioner, by asking it to file returns in response to the said notice. Although the said returns were filed under the current PAN applicable to the firm, the respondent appears to have issued a fresh notice to the petitioner reiterating its earlier demand. It is the case of the petitioner that while it had explained the discrepancy in the PAN, and had reiterated the said submission in the reply to the pre-assessment notice, the respondent proceeded to finalise the assessment ignoring the objections and explanations given by the petitioner. In the writ petition, the petitioner while impugning Ext.P6 assessment order, also points out the difficulty faced by the petitioner in attempting to file an appeal against Ext.P6 assessment order, inasmuch as the appeal can now be filed only online, and the web portal of the Income Tax Department refuses to accept an appeal which is filed in the PAN of the petitioner which shows its status as a firm, whereas the PAN recorded in the system of the Department, based on the orders of the assessing authority, shows the petitioner as a company.

2. I have heard the learned counsel for the petitioner and the learned Standing Counsel for the respondent.

3. On a consideration of the facts and circumstances of the case and the submissions made across the Bar and, in particular, on a perusal of Ext.P6 assessment order that is impugned in this writ petition, I find that this is a case where the basic issue that comes up for consideration is as to whether the petitioner firm had correctly accounted for the deposits made in its account. The assessing officer in Ext.P6 order states that the claims made by the petitioner could not be accepted in view of the same not being substantiated with proper evidence and due to paucity of time. While it may be a fact that the assessing authority was limited by time constraints, in view of the statutory provisions mandating the completion of assessments within a particular time, the same cannot be cited as a reason for abdicating his role as an adjudicating authority in tax assessment. In other words, the assessee cannot be prejudiced on account of the delay occasioned by the department in passing assessment orders, and the hasty manner in which an assessment order is passed without considering the material produced by an assessee, cannot be justified on the ground that the time limit for finalising assessment was nearing expiry. Inasmuch as I do not find a proper consideration of the materials produced by the petitioner assessee in Ext.P6 order, I quash Ext.P6 order and direct the respondent to redo the assessment in relation to the petitioner by considering the materials produced by the petitioner to justify his contentions on merit, and referring to the said material while passing final orders of assessment for the assessment year in question. The respondent shall finalise the assessment of the petitioner for the assessment year in question within four months from the date of receipt of a copy of this judgment, after hearing the petitioner and considering the materials produced by the petitioner as aforementioned.

The writ petition is disposed accordingly.

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