C/SCA/11087/2022 JUDGMENT DATED: 17/03/2025

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

R/SPECIAL CIVIL APPLICATION NO. 11087 of 2022

FOR APPROVAL AND SIGNATURE:

HONOURABLE MR. JUSTICE BHARGAV D. KARIA

and
HONOURABLE MR.JUSTICE D.N.RAY

==========================================================

Approved for Reporting Yes No

==========================================================
PUNJAB NATIONAL BANK
Versus
INCOME TAX OFFICER, WARD 1(1) & ORS.
==========================================================
Appearance:
MR TEJ SHAH(5743) for the Petitioner(s) No. 1
MR NIKUNT K RAVAL(5558) for the Respondent(s) No. 1
SERVED BY RPAD (N) for the Respondent(s) No. 2,3
==========================================================

CORAM:HONOURABLE MR. JUSTICE BHARGAV D. KARIA

and
HONOURABLE MR.JUSTICE D.N.RAY

Date : 17/03/2025
ORAL JUDGMENT

(PER : HONOURABLE MR. JUSTICE BHARGAV D. KARIA)

1. Heard learned advocate Mr. S. Krishnan for

learned advocate Mr. Tej Shah for the

petitioner and learned Senior Standing

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Counsel Mr. Nikunt Raval for the

respondent.

2. The petitioner-Punjab National Bank has

filed this petition praying for quashing

and setting aside the show cause notice

dated 28.03.2021 issued under section 148

of the Income Tax Act, 1961 [for short

‘the Act’] by respondent No.1-Income Tax

Officer, Ward No.1(1), Bharuch and the

assessment order dated 30.03.2022 passed

by respondent No.1 together with Notices

dated 31.03.2022 for levy of penalty under

section 274 read with section 271AAC(1),

272A(1)(d) and 271F of the Act.

3. Rule returnable forthwith. Learned

advocate Mr. Nikunt Raval waives service

of notice of rule for the respondent.

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4. Having regard to the controversy which is

involved in narrow compass, with the

consent of the learned advocates for the

respective parties, the matter is taken up

for hearing.

5. Brief facts of the case are as under:

5.1 The petitioner-Bank is successor

entity of erstwhile Oriental Bank of

Commerce [‘OBC’ for short] which was a

nationalized bank engaged in banking

activities on Pan-India basis having PAN

Number allotted by the respondent

“AAACO0191M”.

5.2 For the Assessment Year 2009-10,

when TDS returns of Regional

Offices/Branches of several classes tax

payers were filed by the regional offices/

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branches of the OBC, a PAN bearing number

‘AAACO7436M’ was obtained for TDS

compliances of Bharuch Branch. At the

relevant time, the said OBC Bank received

a letter dated 09.08.2012 as well as

notice of the same date under section

142(1) of the Act from respondent No.1 for

not filing return of income for Assessment

Years 2009-10 and 2010-11 which was

responded by the OBC Bank by filing

provisional receipts/TDS returns of said

branch for the relevant period stating

that only TDS returns of the said branch

have been filed under the said PAN.

5.3 The OBC thereafter, again received

communication dated 13.02.2013 from

respondent No.1 for A.Ys. 2010-11 and

2011-12 addressed to its Bharuch Branch

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stating that as per the record, return of

income for A.Y. 2009-10 and A.Y. 2010-11

were not filed.

5.4 In reply, OBC Bank, by letter

dated 23.02.2013 clarified that under PAN

“AAACO0191M”, it was duly filing returns

of income regularly and being assessed at

New Delhi and has already made a request

for cancellation of PAN “AAACO7436M”

through its head office. A specific

request was also made to respondent No.1

by the said letter surrendering the said

PAN alongwith screenshot of the correct

PAN of the OBC being AAACO0191M.

5.5 It appears that respondent No.1

again by letter dated 22.07.2013 made

inquiries for non-filing of return for

Assessment Years 2010-2011 and 2011-12 in

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the PAN “AAACO7436M” which was already

requested for cancellation by the OBC

Bank.

5.6 The OBC Bank by letter dated

30.07.2013 clarified that by letter dated

23.02.2013, a request is made to cancel

PAN “AAACO7436M” as regular assessment of

OBC Bank was undertaken at New Delhi in

its correct PAN “AAACO0191M”. Thereafter,

no further proceedings were initiated by

respondent No.1.

5.7 By Notification dated 04.03.2020,

in the Official Gazette of India, OBC Bank

stood amalgamated with the petitioner-

Punjab National Bank [‘PNB’ for short]

w.e.f. 1st April,2020. Accordingly, the

OBC Bank ceased to exist, and returns of

income were filed by the petitioner-PNB

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under its PAN “AAACP0165G” being part of

PNB.

5.8 It is the case of the petitioner

that after lapse of Eight years after a

specific request for cancellation of PAN

“AAACO7436M” being made before the

respondent No.1 and a year after OBC Bank

ceased to exist, respondent No.1 issued

the impugned Notice dated 28.03.2021 under

section 148 of the Act in name of OBC Bank

at Bharuch Branch seeking to reopen

assessment for A.Y. 2017-18 under PAN

“AAACO7436M”.

5.9 It is the case of the petitioner-

PNB Bank that a notice dated 28.03.2021 as

well as subsequent notices issued by

respondent No.1 on ITBA portal linked with

PAN “AAACO7436M” could not be assessed or

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received by the petitioner since the

portal relating to PAN “AAACO7436M” could

not have been legally assessed by the

petitioner-PNB.

5.10 The respondent No.1 again by

notice dated 23.08.2021 issued under

section 142(1) of the Act referring to PAN

“AAACO7436M” asked the OBC Bank, Bharuch

Branch to show cause as to any return of

income for A.Y. 2017-18 was not filed. A

reference was also made to purchase of

time deposits aggregating Rs. 393.97 Crore

during Financial Year 2016-17 and

documentary evidence were called for. It

is the case of the petitioner that such

notice was never received.

5.11 Thereafter, respondent No.2,

Additional Joint/Deputy/Assistant

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Commissioner of Income Tax, National E-

Assessment Centre, Delhi, issued notices

dated 10.12.2021, 06.01.2022 and

25.01.2022 posted on the ITBA Portal page

of the unused PAN “AAACO7436M” and

therefore, never served upon the

petitioner-PNB raising similar queries as

to non-filing of return of income for A.Y.

2017-18 by the OBC Bank.

5.12 The petitioner thereafter

notice dated 11.02.2022 was physically

served by Speed Post by respondent No.1

to the Bharuch Branch of the PNB which was

erstwhile branch of the OBC. The said

notice was received by PNB, Bharuch Branch

on 17.02.2022 which required a compliance

on 18.02.2022.

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5.13 The petitioner therefore, by

reply dated 18.02.2022 to the notice dated

11.02.2022 explained in detail that with

effect from 01.04.2020, OBC had been

amalgamated with the PNB and therefore,

the petitioner-PNB would be handling the

assessment proceedings. It was also

pointed out that the OBC Bank was a

nationalized bank and had been filing

regular returns of income under PAN

“AAACO0191M” and was regularly assessed

under the said PAN at New Delhi. It was

also submitted that for A.Y. 2017-18, the

OBC Bank had filed return of income on

28.10.2017 which had been revised on

29.03.2019 and Assessment Order dated

30.12.2019 under section 143(3) of the Act

was also passed by the Income Tax

Department and there is no pending

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proceedings on the ITBA portal page of the

OBC Bank under PAN “AAACO0191M” and

therefore, it was requested that the

proceedings initiated by the impugned

notice dated 28.03.2021 is required to be

dropped as the same would be invalid and

void. The petitioner also submitted a copy

of the assessment order dated 30.12.2019

for A.Y. 2017-18 passed in case of OBC

Bank as well as copy of the

acknowledgement of the revised return

filed on 29.03.2019 for the A.Y 2017-18.

It is also the case of the petitioner that

the officers of the petitioner-PNB visited

office of respondent No.1 on 18.02.2022

with reply to the notice dated 11.02.2022.

However, the same was refused to be

accepted by the respondent No.1 and it was

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advised to post such reply online to the

National Faceless Assessment Centre.

However, the same was not possible due to

wrong PAN being quoted in the notice as

well as the impossibility of a non-

existent OBC for filing return of income.

It is the case of the petitioner that

inspite of the above facts being disclosed

to the respondent No.1, notice dated

20.02.2022 requiring compliance on

07.03.2022 was sent on 04.03.2022 which

was received by the Bharuch Branch of the

petitioner-PNB by speed post only on

08.03.2022. Respondent No.1 thereafter,

issued show-cause notice dated 20.03.2022

again in name of the OBC-an amalgamated

entity at Bharuch address with PAN

“AAA07436M” wherein, respondent No.1 is

claimed to have initiated proceedings

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under section 148 of the Act after prior

approval of Principal CIT.

5.14 It is the case of the

petitioner that in response to the notice

dated 20.03.2022, again the officers of

the petitioner-Bank, Bharuch Branch

visited the office of respondent No.1

asking for details in respect of adverse

inference which was sought to be raised.

However, the same was refused by

respondent No.1.

5.15 It appears that respondent No.1,

without considering written submissions

and the reply filed by the petitioner,

passed impugned assessment order

determining the taxable income of

Rs. 393.97 Crore raising a demand of

Rs. 648.26 Crore in name of erstwhile OBC,

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Bharuch Branch inspite of informing by the

petitioner that the OBC has already been

merged with the petitioner-PNB w.e.f.

01.04.2020 and the PAN being AAACO7436M”

was already cancelled in the Year 2013.

6. Learned advocate Mr. S.Krishnan for the

petitioner submitted that the impugned

order is a classic example of non-

application of mind on behalf of the

respondent-Assessing Officer as inspite of

making submissions by the petitioner-Bank

which is duly recorded in the assessment

order but the same was not considered and

ignored for making high-pitched assessment

on an entity which does not exist and the

PAN number which does not exist for more

than Eight years.

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6.1 It was submitted that the

impugned assessment order is therefore,

liable to be quashed and set aside being

passed on a non-existing entity ‘OBC’

and the non-existing PAN Number being

“AAACO7436M” which was already requested

to be cancelled by the erstwhile OBC

Bank in the Year 2013.

6.2 It was further submitted that

the impugned assessment order dated

30.03.2022 is based upon the non-filing

of return in response to the notice

under section 148 however, when the

petitioner-Bank, in no uncertain and

clear language, explained to respondent

No.1 that PAN “AAACO7436M” was already

surrendered and cancelled in the Year

2013 which pertained to OBC Bank,

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Bharuch Branch and was obtained for

filing TDS return at the relevant time

coupled with the fact that OBC Bank had

already been merged with PNB w.e.f.

01.04.2020 and therefore, no assessment

could be made in the name of OBC Bank in

PAN being AAACO7436M. It was submitted

that however, respondent No.1 has passed

impugned order under section 69 of the

Act without application of mind and

without considering the facts emerging

from the record and therefore, impugned

order is liable to be quashed and set

aside with exemplary cost.

7. Per contra, learned Senior Standing

Counsel Mr. Nikunt Raval submitted that

pursuant to the order passed by this Court

on 11.03.2025, he has taken instructions

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from respondent No.1 that the respondent

No.1 shall not enforce the demand as the

order was passed in name of pre-merged

entity.

7.1 Learned Counsel Mr. Raval has

referred to and relied upon the following

averments made in the affidavit-in-reply

filed on behalf of the respondent No.1:

“7. With respect to the contentions

raised in Para 3, it is
submitted as under:

(a) That the notice u/s.148 of the Act

has been served on
the address mentioned in PAN database.

(b) It is submitted that as per the

Income Tax Act, 1961, a case can be re-
opened under certain time-limit and the
case of the assessee fell under the

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said criteria, thus, the notice issued

and served is not bad in law.

(c) It is submitted that with regard to

the assessee’s claim that it has
submitted written request to the
Department for cancellation of said
PAN, it is submitted that the assessee
has claimed to have submitted the said
application 8 years ago and copy of the
same has not been produced during the
course of assessment, Further, the
assessee’s claim itself is of
contradictory in nature as the relevant
financial transaction took place during
FY 2016-17, which does not fall beyond
5 years from the date of issuance of
notice u/s.148 of the Act. Also, the
assessee has claimed in its writ
petition that it has submitted
application for surrender/cancellation
of PAN in 2012, then howcome, the
assessee continued to use the same PAN
during the FY2016-17. Hence, assessee’s
claim is not found to be correct.

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(d) It is submitted that the case of

the assessee was reopened and notice
under section 148 dated 31.03.2021 was
issued after obtaining prior approval
of the Additional Commissioner of
Income Tax, Range2(1), Vadodara. The
information regarding prior approval of
the Additional Commissioner of Income
Tax, Range-2(1), Vadodara, is
enumerated on the ibid notice.

(e) It is submitted that the notices u/

s.142(1) of the Act was issued on
23.08.2021, 11.02.2022 and 28.02.2022.
It is pertinent to mention that in all
the notices under section 142(1) of the
Act, a point was mentioned very clearly
which reads as “The above mentioned
evidence/information is to be furnished
online electronically in ‘E-proceeding’
facility through your account in ‘e-
filing’ website of Income Tax
Department.” However, no reply has been
submitted by assessee during the course
of assessment by the way mentioned
above.

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(f) It is submitted that during the

course of assessment proceeding, show-
cause notice was issued to the assessee
on 20.03.2022 stating that the Assessee
has neither filed return of income in
response to the notice usl48 of the Act
nor submitted any documents evidence
called for electronically in
‘proceeding’ facility through
assessee’s account in ‘e-filing’
website of the Income Tax Department.
The Assessee was requested to furnish
its reply alongwith details documentary
evidences and clarification, if any,
online on or before 24.03.2022.
However, the assessee neither filed any
reply nor filed any explanation through
e-proceedings in response to the above
notice, thus, it was clear that the
assessee had nothing to say in the
matter.

(g) It is submitted that the assessee

has failed to prove with documentary
evidences during the course of
assessment proceedings that the

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investment/amount under question has

been assessed on the PAN for which
aseessee has claimed that assessment
proceeding for A.Y.2017-18 relevant to
FY 2016-17 has been completed which
left this office with no other option,
but to add the same as
income for the relevant assessment
year.

(h) It is submitted that the Assessee

has claimed that the show cause notice
dated 20.03.2022 was served on 24
03.2022 requesting reply on the same
day. In this connection, it is
submitted that the notice was served
through speed post and it is not just
that the assessee has not been given
time to submit it’s reply as the
assessment order in this case was
passed on 30.03.2022, which was still 6
days after the service of above
show-cause notice.

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(i) It is submitted that the Assessee

has claimed that section 69 of the Act
stands triggerd only when the condition
precedent therein, i.e. factum of
investment made not recorded in books
of account, is proved. In this
connection, it is submitted that the
assessee has failed to
prove that the investment made during
the relevant FY 2016-17 has been
recorded and accordingly assessed for
AY2017-18. In view of above, the said
investment remain
unexplained and attracts section 69
correctly.

(j) It is submitted that assessment

order has been passed under section 147
read with section 144 after making
addition of Rs.3,93,97,96,000/on
account of unexplained investment of
the assessee u/s.69 of the I.T.
Act.

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(k) It is submitted that with regard to

the assessee’s claim that the show
cause notice states that notice u/s.148
was issued after prior approval of
Pr.CIT, it is submitted that the notice
u/s.148 was issued with prior approval
of Jt.CIT, Range-2(1), Vadodara which
is clearly mentioned on notice u/s.148
of the Act dated 28.03.2021. The
mention of Pr.CIT on show-cause notice
is merely a typing mistake and nothing
else as both of them are approving
authorities for issuing of notice
u/s.148 of the Act
depending upon the assessment years.

(l) It is submitted that the assessee

has claimed that the
impugned order dated 30.03.2022 creates
a pejorative demand of Rs.648.26
crores, which is a huge sum of money
that could de-stabilize the
Petitioner’s business operations. In
this connection, it is submitted that
the assessment proceeding has been
completed taking into consideration the

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total income of the assessee and the

demand raised is the natural outcome of
the same.

(m) It is submitted that the assessee

has claimed that penalties under
various provisions stand initiated,
which would lead to multiple
proceedings, which makes the present
proceedings efficacious, as it would
prevent multiplicity of litigation. In
this connection, it is submitted that
penalty proceedings are initiated on
the basis of nature of additions and
natural outcome of assessment
proceedings.

(n) It is submitted that in conclusion,

it is emphasized that proceedings u/s.
147 of the Act for A.Y.2017-18 in the
case of the assessee is valid in the
light of the facts and the established
law. The procedural requirements such
as proper recording of reasons,
obtaining approval from specified
higher authority, issuing of notices

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within limitation date and forwarding

of reasons have been met. In addition,
the matters raised by the assessee have
been dealt with in an elaborate manner
above.”

7.2 Referring to the above averments,

it was submitted that respondent No.1 has

justified in passing the impugned

assessment order as the same was passed

after obtaining the prior approval of the

Additional Commissioner of Income Tax,

Range-2(1), Vadodara, which was already

disclosed in the notice issued by

respondent No.1. It was further pointed

out that with regard to the claim of the

petitioner that PAN number was cancelled

in the Year 2012, there is no answer by

the petitioner that the said PAN continued

to be used during the Financial Year 2016-

17.

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7.3 It was further pointed out that

the petitioner has failed to file any

reply or justification for use of PAN

“AAAC07436M” which already cancelled in

the Year 2012-13 during the Financial Year

2016-17 and therefore, respondent No.1 was

justified in considering the transactions

carried out in the said PAN for the

purpose of assessment for making addition

of Rs. 393.97 Crore on account of the

unexplained investment of the assessee

under section 69 of the Act.

8. Having heard learned advocate for the

respective parties and considering the

facts of the case, the following facts are

not in dispute:

(i) The Oriental Bank of Commerce has been

merged with the petitioner-Punjab National

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Bank w.e.f. 01.04.2020;

(ii) The OBC Bank was a nationalized

bank and was regularly filing return of

income in PAN “AAACO191M” and was

regularly assessed at New Delhi;

(iii) For the Assessment Year 2017-18,

the OBC Bank has filed return of income on

28.10.2017 which was revised on 29.03.2019

and Assessment Order for A.Y. 2017-18 was

passed on 30.12.2019 under section 143(3)

of the Act by the Assessing Officer at New

Delhi;

(iv) It is also not in dispute that PAN

Number “AAACO7436M” was obtained by

Bharuch Branch of the erstwhile OBC for

filing TDS return and was subsequently

requested for cancellation in the Year

2013;

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(v) It also appears on perusal of the

impugned assessment order that the same is

passed in name of OBC Bank, Bharuch Branch

for PAN “AAACO7436M” for A.Y. 2017-18 on

the basis of the Multi Year MNS Data which

revealed that the OBC Bank has purchased

the time deposits other than a time

deposit made through renewal of another

time deposits aggregating to Rs. 393.97

Crore during the previous year 2016-17

relevant to A.Y. 2017-18 which was not

offered to tax, however, when it was

submitted to the respondent No.1 by the

petitioner-PNB which is duly recorded in

the assessment order (Page 117 of the

paper-book) that the OBC was merged with

PNB and the jurisdiction of the erstwhile

OBC was in New Delhi having PAN

“AAACO0191M”, but the Assessing Officer,

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without considering such submission,

proceeded to finalize the assessment on

the data available on examination of the

Multi Year MNS Data by making addition of

Rs. 393.97 Crore raising demand of

Rs. 648.26 Crore on a non-existing OBC for

A.Y. 2017-18 by the impugned assessment

order passed under section 147 read with

section 144 of the Act.

9. From the undisputed facts stated here-in-

above, it is apparent that respondent No.1

as well as NFAC Center who has passed the

impugned order is without application of

mind and without considering the fact that

the OBC in whose name impugned assessment

order is passed, does not exist after

01.04.2020 and therefore, no assessment

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order could have been passed in the name

of the OBC having PAN Number “AAACO7436M”.

10. Respondent No.1 has, without taking into

consideration the return of income filed

by the OBC for A.Y. 2017-18, passed the

assessment order dated 30.12.2019 under

section 143(3) of the Act for the said

year and has not even bothered to find as

to whether the amount of Rs. 393.97 Crore

relating to the purchase of time deposits

have been duly accounted for or reflected

in the return of income of the OBC Bank or

not and simply on the basis of the Multi

Year MNS Data, accepting the same as a

gospel truth, has proceeded to pass

impugned assessment order by making high

pitch assessment making addition of

Rs. 393.97 Crore brushing aside the

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submissions made by the petitioner-PNB. On

the basis of the Multi Year MNS data which

is an abstract phenomenon unknown to

anyone nor disclosed in the assessment

order as to what type of Multi Year MNS

Data is made available to the Assessing

Officer, the Assessing Officer has

proceeded to make addition without making

any inquiry ignoring the factual

submission made by the petitioner-PNB to

the effect that the OBC Bank does not

exist after 01.04.2020 and therefore,

there could not have been any assessment

order being passed in the name of the said

Bank having PAN “AAACO7436M”.

11. It is also apparent from the record that

the impugned assessment proceedings have

been initiated with prior permission of

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the higher authorities under section 151

of the Act. It appears that the Additional

CIT, Range-2(1), Vadodra, also without

application of mind, has sanctioned the

approval for issuance of the notice under

section 148 of the Act.

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

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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

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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.

(BHARGAV D. KARIA, J)

(D.N.RAY,J)
JYOTI V. JANI

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