ITAT Surat Remands Rs. 3.24 Crore Bank Credit Addition for Fresh Adjudication Amidst Dual PAN Confusion

The Surat Bench of the Income Tax Appellate Tribunal (ITAT) has recently delivered a pivotal ruling concerning the procedural intricacies of reassessment proceedings when an assessee inadvertently holds multiple Permanent Account Numbers (PAN). In the matter of Prakash Ramjibhai Nanda Vs ITO, the tribunal set aside an appellate order that had confirmed a massive addition of Rs. 3,24,06,697/-. The ITAT directed the Assessing Officer (AO) to conduct a thorough factual verification regarding the assessee's bank deposits, the alleged surrender of a duplicate PAN, and whether the disputed transactions had already been accounted for as business turnover under the primary PAN.

This judicial summary delves into the facts of the case, the procedural history, the arguments presented by both the revenue and the assessee, and the final observations made by the ITAT Surat.

Genesis of the Dispute

The controversy originated from the income tax return filed by the assessee for the Assessment Year (AY) 2014-15. As per the records, the assessee submitted the return of income on 06.10.2014, declaring a total income of Rs. 25,34,660/-. This filing was executed utilizing the PAN AARPN1955G.

Subsequently, the Income Tax Department received specific intelligence indicating that the assessee had executed certain financial transactions that warranted scrutiny. The information highlighted a cash deposit amounting to Rs. 10,50,000/- in an HDFC Bank account, alongside commission income of Rs. 3580 earned during the financial year under consideration.

Based on this intelligence, the AO initiated inquiries. A query letter was dispatched on 25.02.2019. When this communication reportedly went unanswered by the assessee, the AO proceeded to invoke the reassessment provisions embedded in Section 147 of the Income Tax Act 1961. Following the mandatory recording of reasons and securing the requisite administrative approvals, a formal notice under Section 148 of the Income Tax Act 1961 was issued to the assessee on 29.03.2019.

The Dual PAN Conundrum and Reassessment Proceedings

The crux of the complication lay in the existence of a second PAN. The reassessment proceedings, and the subsequent addition, were processed under a different PAN, specifically ABYPN3360K.

Upon receiving the reassessment notice, the assessee responded by clarifying the dual PAN situation. The assessee explicitly stated that two PANs had been obtained inadvertently. Crucially, the assessee maintained that no financial transactions were ever executed using the secondary PAN (ABYPN3360K). Furthermore, the assessee informed the tax authorities that a formal application had already been submitted to surrender the duplicate PAN.