HC Slaps Exemplary Cost of ₹1 Crore on Revenue for Passing High-Pitched Order Against Non-Existing Bank

Case Details: Punjab National Bank vs. Income-tax Officer - [2025] 173 taxmann.com 539 (Gujarat)

Judiciary and Counsel Details

• Bhargav D. Karia & D.N. Ray, JJ.
• Tej Shah, for the Petitioner.
• Nikunt K. Raval, for the Respondent.

Facts of the Case

The assessee, Oriental Bank of Commerce (OBC), was a nationalised bank. It was merged with Punjab National Bank (PNB) w.e.f. 01.04.2020. OBC regularly filed its return of income under the PAN “AAACO191M”. For the Assessment Year 2017-18, OBC filed its return of income on 28.10.2017, which was revised on 29.03.2019. The Assessing Officer (AO) passed the Assessment Order for A.Y. 2017-18 on 30.12.2019 under section 143(3).

However, the Multi-Year MNS Data revealed that the OBC purchased the time deposits other than a time deposit made through renewal of another time deposit aggregating to Rs. 393.97 Crore during the previous year 2016-17 relevant to A.Y. 2017-18, which was not offered to tax. AO issued a notice under section 148 in the name of OBC Bank, Bharuch Branch, for PAN “AAACO7436M” and passed the assessment order by making the addition of Rs. 393.97 Crore, raising the demand of Rs. 648.26 Crore.

The matter reached the Gujarat High Court.

High Court Held

The High Court held that it was apparent that AO and NFAC Centre, which passed the impugned order, did not apply their minds and did not consider the fact that OBC did not exist after 01.04.2020. It was also recorded in the assessment order that OBC was merged with PNB, and the jurisdiction of the erstwhile OBC was in New Delhi, having PAN “AAACO0191M.”

The AO, without considering such submission, proceeded to finalise the assessment on the data available on examination of the Multi-Year MNS Data by adding Rs. 393.97 Crore, raising the demand of Rs. 648.26 Crore for a non-existent OBC.

It was a case of total non-application of mind and negligence on the part of the AO. It was also apparent that the assessment proceedings had been initiated with prior permission of the higher authorities under section 151 of the Act. The Additional CIT, Range-2(1), Vadodara, also without application of mind, sanctioned the approval for issuing the notice under section 148 of the Act.

Therefore, the petition was allowed, and the Assessment order was quashed and set aside. The High Court deemed it a fit case to impose exemplary costs of Rs. 1 crore upon the AO to be paid to the assessee for passing such a high-pitched assessment order contrary to the facts available on record.