2025 (10) TMI 1157 - HC - Income Tax

Notices under s.148A(d) and s.148 quashed as issued on surrendered PAN; fresh proceedings allowed under new PAN

HC held that notices and order under s.148A(d) and s.148 issued on a surrendered/old PAN were invalid and quashed, since the petitioner had filed the ... Reopening notices on the old PAN - petitioner had surrendered its earlier PAN - HELD THAT:- It is not in dispute that the formal notice issued under the old surrendered PAN which was communicated to the office of the respondent way back on 14.06.2019. The return relating to the relevant Assessment Year 2019-20 was filed by the petitioner under the new PAN which was allotted to the petitioner. Inspite of this fact, the respondent had passed the order u/s 148A(d) as well as notice u/s 148 of the Act under the old PAN. It is a settled position of law that the respondent authority cannot issue notices on the old PAN which is already surrendered. In view of such fact, the impugned order u/s 148A(d) as well as notice u/s 148 are hereby quashed and set aside. However, the respondent would be at liberty to initiate fresh proceedings by issuing notice on the new PAN in accordance with the law. ISSUES PRESENTED AND CONSIDERED 1. Whether an order under Section 148A(d) and a notice under Section 148 of the Income Tax Act issued in respect of an old PAN which had been formally surrendered and replaced by a new PAN is valid. 2. Whether information sourced from Statement of Financial Transactions (SFT) reported by third-party banks that links transactions to the old surrendered PAN can validate notices issued under Sections 148A/148 against the assessee notwithstanding formal surrender of that PAN. 3. Whether the Revenue, having issued an order/notice on a surrendered PAN, is entitled to proceed with the reassessment proceedings on the basis of that notice or is required to issue fresh proceedings under the new valid PAN. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Validity of proceedings under Section 148A(d) and notice under Section 148 issued on surrendered PAN Legal framework: The Court considered the statutory scheme governing filing of returns (Section 139(1)), notices under Sections 142(1), 143(2) and 143(3), and initiation of reassessment proceedings under Sections 148A and 148 of the Income Tax Act. PAN identification is treated as the taxpayer's formal identifier for assessment purposes once surrendered and re-allotted. Precedent Treatment: The Court referred to the settled position of law (noting existing authoritative principle) that proceedings cannot be validly initiated on a PAN which has been formally surrendered and replaced. The judgment follows that established rule rather than distinguishing or overruling any authority. Interpretation and reasoning: The Court found on the record that the assessee had formally surrendered the old PAN and obtained a new PAN, and had been filing returns, and undergoing scrutiny, under the new PAN. Despite formal surrender communicated to the Revenue, the impugned order and notice were issued on the old PAN. The Court reasoned that where the assessee has officially surrendered a PAN and the Revenue has been informed, issuance of substantive quasi-judicial orders or reassessment notices on the surrendered PAN is inconsistent with the statutory identification of the taxpayer and with administrative fairness. Ratio vs. Obiter: Ratio - Notices and orders under Section 148A(d) and Section 148 issued on a PAN that had been formally surrendered and replaced are invalid. Obiter - None material to this point beyond affirming the settled law. Conclusions: The Court quashed and set aside the order under Section 148A(d) and the notice under Section 148 insofar as they were issued on the surrendered old PAN, while permitting the Revenue to initiate fresh proceedings under the correct (new) PAN. Issue 2 - Evidentiary effect of SFT data attributing transactions to the old PAN and its impact on validity of notice Legal framework: Assessment and reassessment may be triggered by information indicating escapement of income; SFTs form a part of the intelligence and information on which the Revenue may act. However, statutory and procedural validity of notices requires correct identification of the assessee. Precedent Treatment: The Court did not displace or overrule any principle that SFTs may give rise to reassessment. The Court treated the SFT evidence as relevant factual material but distinct from the legal question of whether a notice issued on a surrendered PAN is valid. Interpretation and reasoning: The Court noted the Revenue's contention that SFT data showed substantial transactions (cash deposits, withdrawals, foreign remittances) suggestive of income escapement. The Court accepted that transactions of a banking entity do not ipso facto immunize it from scrutiny. However, the Court observed that the factual source of the SFT entries (reporting banks) may have mistakenly quoted the old PAN in their returns to the Department. That possibility does not validate issuing the legal notice on a PAN already surrendered by the assessee. The correctness or provenance of the SFT entries is a substantive question for probe in the proper proceedings, but it cannot cure the procedural defect of issuing notice on an invalid/former PAN. Ratio vs. Obiter: Ratio - SFT information, even if indicating significant transactions, cannot validate a notice issued on a surrendered PAN; the procedural correctness as to PAN is independently material. Obiter - The Court observed that banking status and licensing do not confer blanket immunity from scrutiny when intelligence suggests potential escapement. Conclusions: The SFT-based information cannot cure the fundamental defect that the notice/order were addressed to a surrendered PAN; the Revenue may rely on such information but must initiate proceedings on the correct PAN. Issue 3 - Consequences and permissible remedial action where Revenue issues notice on surrendered PAN Legal framework: Principles of jurisdictional competence and valid service of notice require that proceedings be directed to the appropriately identified taxpayer; statutory provisions permit reassessment but within procedural safeguards. Where defect in identification is established, remedial measures include quashing and liberty to reissue proper notice. Precedent Treatment: The Court applied the established remedial practice of quashing invalid orders/notices while permitting fresh action without precluding the Revenue's lawful rights to investigate on correct details. Interpretation and reasoning: Having found the notices/orders invalid for being issued on a surrendered PAN, the Court held that the appropriate relief is to set aside the impugned instruments but to allow the Revenue to initiate fresh proceedings by issuing notices under the correct/new PAN in accordance with law. This preserves the Revenue's substantive investigative rights while enforcing procedural regularity and protecting assessee's legal position. Ratio vs. Obiter: Ratio - Quashing of invalid proceedings is appropriate; liberty to issue fresh valid notice on the new PAN is permitted. Obiter - None beyond procedural propriety guidance. Conclusions: The impugned order under Section 148A(d) and the notice under Section 148 were quashed and set aside; the Revenue is at liberty to initiate fresh proceedings by issuing notice on the new PAN in accordance with law. No costs were awarded.