Failure to Afford Opportunity to Furnish Documents Violates Natural Justice: Calcutta HC sets aside Order u/s 148A(3) of IT Act Against Co-operative Bank [Read Order]

The Calcutta High Court has quashed and set aside an order passed under section 148A(3) of the Income Tax Act of 1961, as the Assessing Officer (AO) didn't allow the petitioner bank to furnish the relevant documents, including balance sheet and profit and loss accounts, despite the petitioner’s repeated willingness to provide the same.

The petition emerged from the reassessment proceedings initiated for the assessment year 2019-20. The petitioner, Bankura District Central Co-operative Bank Limited, was a co‑operative society engaged in the banking business. It had operated under an old PAN number. It later obtained a new PAN. While most banks updated the new PAN promptly, IDBI Bank did so belatedly, leading to differences in reported transactions.

Prior reassessment proceedings for AY 2020-21 had also been initiated under the old PAN. In those proceedings, the petitioner clarified the PAN change and filed returns under the new PAN.

The AO accepted this explanation and made no additions to the disputed transactions.

After which, another notice under section 148A(1) was issued on March 31, 2025, for AY 2019‑20. The petitioner responded to it on April 15, 2025, and submitted replies on May 8, 2025. This clearly indicated the willingness of the petitioner to provide additional documents as per the requirement.

On June 25, 2025, the AO passed an order under Section 148A(3), observing that the petitioner had not filed its return for AY 2019‑20 and had failed to produce its balance sheet and profit and loss account. A reassessment notice under Section 148 was issued the same day.

The petitioner challenged this order, arguing that the AO ignored its repeated willingness to furnish documents and failed to consider the earlier acceptance of its PAN clarification in AY 2020‑21. Counsel for the petitioner submitted that even if two PANs were active, the consequence would be limited to a penalty under Sections 139A(7) and 272B, not reassessment.

It was also submitted that the petitioner’s case for the assessment year 2020-21 had even earlier been decided by the same incumbent in the seat of the AO still the AO has ignored the fact that on the previous occasion the petitioner’s contention that the petitioner was filing its income tax returns in the newly obtained PAN had been accepted and no addition on such count had been made.

Revenue authorities, however, contended that the petitioner’s failure to deactivate one PAN and the non‑production of documents justified the reassessment.

Justice Om Narayan Rai observed that although the petitioner did not explicitly mention in its reply that returns were filed under the new PAN, the AO was still bound to provide an opportunity to furnish the balance sheet and profit and loss accounts, especially since the petitioner had expressed readiness to do so.

The Court held that denying such an opportunity amounted to a violation of natural justice. It emphasised that reassessment proceedings cannot be sustained when the assessee is willing to cooperate but is denied a chance to produce relevant records.

The court quashed the impugned order dated June 25, 2025 and the consequential notice under Section 148. The Court directed the petitioner to furnish all requisite documents within two weeks, and instructed the Assessing Officer to pass a fresh order strictly in accordance with law. Importantly, the Court clarified that it had not examined the merits of the reassessment, leaving all issues open for consideration by the Assessing Officer.

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