HC Imposes ₹10,000 Cost on AO for Blind Use of Software Data

Case Details: Punjab National Bank vs. Income-tax Officer - [2025] 178 taxmann.com 584 (Gujarat) 

Judiciary and Counsel Details

• Bhargav D. Karia and D.N. Ray, JJ.
• Tej Shah for the Petitioner
• Varun K. Patel for the Respondent

Facts of the Case

The assessee was a bank. Oriental Bank of Commerce (OBC) had merged with the assessee, and the PAN of OBC had been requested to be cancelled since 2013. However, the Assessing Officer (AO) passed the assessment order against the non-existent entity under the said PAN.

The matter reached before the Gujarat High Court, where the High Court proposed the imposition of costs of Rs. 1 crore on the AO for negligent assessment action without independent verification and over-reliance on the software system.

On receipt of the notice, the AO filed an affidavit stating that the Systems were being continuously updated to address such issues and tendered an unconditional apology, seeking relief from the proposed costs.

High Court Held

The High Court held that instead of taking help from the software system, the AO was being directed by the software system as if the software system were the master of the AO. The AO was blindly following the information made available by the software system and taking action without verifying its veracity.

It may, therefore, happen that if someone enters false or wrong information in the software system, the AO would take action based on such information without verifying its correctness, resulting in multiple and protracted litigation. Furthermore, the Jurisdictional Assessing Officers were acting as a tool of the software system to initiate proceedings, rather than taking information as the sole basis, without conducting any inquiry or applying their mind.

Thus, the present case was a classic example where little verification or application of mind by the Jurisdictional Assessing Officer would not have led to this litigation, and it could have been avoided by not taking any action, particularly given the merger of one National Bank with the petitioner bank. Ultimately, the petition was disposed of with token costs of Rs. 10,000 payable by the Revenue to the Gujarat State Legal Service Authority, in place of the initially proposed Rs. 1 crore.