The income tax department must verify information before assessments, not merely rely on software, to prevent erroneous high tax demands on non-existent entities.

ORDER :

BHARGAV D. KARIA, J.

1. Heard learned advocate Mr. S. Krishnan for learned advocate Mr. Tej Shah for the petitioner and learned Senior Standing Counsel Mr. Varun K. Patel for the respondents.

2. This Court passed an order on 17^th March, 2025 whereby the following conclusion is arrived at:

“12. In view of the foregoing reasons, the petition succeeds and is accordingly allowed. The impugned Assessment order is hereby quashed and set aside. At this juncture, in the facts of the case it is apparent that the respondents, oblivious of the facts submitted by the petitioner- PNB, has proceeded to pass impugned assessment order resulting into high-pitch assessment of Rs. 393.97 Crore attracting the tax demand of Rs. 648.26 Crore and such high-pitch assessment order could not have been passed against a non-existing OBC under PAN “AAACO7436M” which was already requested to be cancelled since 2013 and hence, and for no fault on part of the petitioner, the impugned order is passed on account of total non- application of mind and negligence on part of the respondent No.1. We therefore deem it to be a fit case to impose exemplary cost of Rs. 1 Crore upon the respondent to be paid to the petitioner-Bank for passing such high pitched assessment order contrary to the facts available on record.

13. After the judgement was dictated in the open Court, whereby, we deemed it fit to impose exemplary cost of Rs. 1 Crore upon the respondents while signing the present judgement, we felt that an opportunity should be granted to the respondents to show cause as to why such cost should not be imposed.

14. We are conscious of the fact that quantum of the cost proposed to be imposed by us is a small fraction of the quantum of the high-pitched assessment and consequent demand raised upon the petitioner-PNB.

15. In view of the above, let this matter be listed for further hearing on 04.04.2025 granting an opportunity to the respondent to show cause as to why the cost of Rs. 1 Crore should not be imposed.”

3. Pursuant to the aforesaid order, an affidavit-in-reply is filed on behalf of the respondent nos.2 and 3 affirmed on 29.04.2025 pursuant to the oral directions of this Court issued on 22.04.2025 to place on record the response to various queries raised regarding the software system programme of the department on the basis of inputs to be provided by the Director General of India Tax (Systems), New Delhi with regard to the data syncing, availability of information to the Assessing Officers in the field and also the status of functionality/mechanism to identify duplicate Permanent Account Number (PAN) and alerting the Assessing Officers and also measures and initiatives being taken to identify duplicate PANs by the Systems to make such duplicate PANs inactive.

4. In the aforesaid affidavit-in-reply received from DGIT(Systems), it is stated as under:

“3. With regard to the issue of data syncing and availability of the information to the Assessing Officers in the field, it is submitted that the following queries were raised with the DGIT(Systems), New Delhi, for which the replies are received as follows:

(i) Whether any event like legal heir registration on the event of death of an assessee is auto displayed/displayed to the JAO on both ITBA and Insight portal once the request submitted through the e-filing portal is approved by the concerned Authority? Is any alert sent to the JAO through ITBA, e-

mail or SMS in this regard?

Reply:

a. In the event of death of an assessee, the registration of Representative Assessee (Legal Heir) of the deceased can be done on the e-filing portal by the Legal Heir. Once approved, an email is sent to the representative assessee who had made the application in the e- filing portal. Further, after approval, the registration of the legal heir can be viewed by the Jurisdictional Assessing Officer (JAO) on the CPC 2.0/ B.O portal. No alert (SMS / email) is sent to the JAO intimating such registration.

b. In cases where refund is to be issued