ITAT Rajkot Remands Section 68 Addition for Fresh Examination Where Duplicate PAN Created Assessment Confusion

Case Background

Case Name: ITO Vs Porbandar Credit Cooperative Society Ltd. (ITAT Rajkot)
Assessment Year: 2016-17
Relevant Provisions: Section 68, Section 144, Section 147, Section 148, Section 250 of the Income-tax Act, 1961

Overview of the Dispute

The Income Tax Appellate Tribunal, Rajkot bench, was called upon to adjudicate a Revenue appeal for Assessment Year 2016-17 arising from an order passed by the National Faceless Appeal Centre (NFAC) dated 02.01.2025. The NFAC had deleted an addition that the Assessing Officer had made under Section 68 of the Income-tax Act, 1961 on account of unexplained cash deposits found in a savings bank account linked to a duplicate PAN of the assessee.

The assessee, Porbandar Credit Cooperative Society Ltd., is a cooperative society registered under the Gujarat Co-operative Societies Act. The matter had its origins in information received by the Revenue regarding substantial cash deposits made in a savings bank account maintained with Porbandar Commercial Co-operative Bank Ltd., Porbandar Branch.

How the Assessment Was Initiated

The Assessing Officer observed that no return of income had been filed against PAN AAAAS8104Q. Acting on information that cash deposits exceeding Rs. 2,10,00,000/- had been made in the savings bank account linked to this PAN, proceedings under Section 148 of the Act were initiated, and the assessment was ultimately framed under Section 147 read with Section 144 of the Act.

During the course of assessment proceedings, the assessee raised a critical objection: the notice had been issued in reference to PAN AAAAS8104Q, which had never been used by the assessee for filing any return of income. The assessee explained that it had been inadvertently allotted this second PAN and had consistently been filing its returns under its regular PAN, namely AAAAS2528L, right from Assessment Year 2007-08 through Assessment Year 2023-24.

The assessee further stated that:

  • Its accounts were duly audited under both the Gujarat Co-operative Societies Act and the Income-tax Act, 1961.
  • The return of income for AY 2016-17 had been filed under PAN AAAAS2528L along with audited financial statements.
  • Upon discovering the existence of the duplicate PAN AAAAS8104Q, an application for its cancellation was promptly filed on 05.12.2022, well before the initiation of reassessment proceedings under Section 147.

Notwithstanding these submissions, the Assessing Officer held that cash deposits amounting to Rs. 28,79,24,353/- in the savings bank account remained unexplained. Since the assessee was found to have not satisfactorily established the source of these deposits to the AO's satisfaction, the entire amount was added to the total income as unexplained cash credits under Section 68 of the Act.

First Appellate Stage: NFAC Deletes the Addition

Aggrieved by the assessment order, the assessee preferred an appeal before the CIT(A). The NFAC, vide its order dated 02.01.2025, deleted the addition. The relevant findings of the CIT(A) as extracted in the Tribunal's order read as under: