The Kerala High Court recently delivered a significant judgment in the case of Keerampara Service Co-operative Bank Ltd. v. The Income Tax Officer, quashing Income Tax proceedings initiated under Section 148 of the Income Tax Act, 1961, based on a cancelled Permanent Account Number (PAN). Justice Ziyad Rahman A.A. ruled that the proceedings were invalid as they referenced a PAN that was no longer valid, depriving the petitioner of a fair opportunity to contest the assessment.
Background of the Case
The petitioner, Keerampara Service Co-operative Bank Ltd., is a Primary Agricultural Credit Co-operative Society under Rule 15 of the Kerala Co-operative Societies Rules. The society claimed eligibility for tax exemption under Section 80P of the Income Tax Act, provided it met the necessary conditions.
Read also:- MP High Court Denies Anticipatory Bail to Cartoonist Over Objectionable Caricature of PM Modi and RSS
Initially, the society was allotted a PAN (AAECK5393D), but it incorrectly reflected its status as a "company" instead of a "co-operative society." This error prevented the petitioner from availing the Section 80P exemption. Upon realizing the mistake, the society applied for a corrected PAN, and a new one (AAIAK3165H) was issued, accurately classifying it as an Association of Persons (AOP).
Despite the PAN correction, the Income Tax Department issued a notice under Section 148 on 30.03.2021, referencing the old (cancelled) PAN. The petitioner responded, requesting reasons for the reassessment, but no clarification was provided. The proceedings culminated in an assessment order (Ext.P7) and a demand notice (Ext.P8) under Section 156, both linked to the invalid PAN.
Read also:- Delhi HC Reserves Order on Devangana Kalita's Plea Over 2020 Riots Case Diaries
The petitioner argued that the use of a cancelled PAN hindered their ability to:
- Effectively contest the proceedings.
- File an appeal due to technical discrepancies.
Justice Ziyad Rahman A.A. noted:
"All notices and proceedings were issued solely referring to the PAN card, which stood cancelled as of the date of the proceedings. The petitioner’s contention regarding the denial of a proper opportunity cannot be ignored."
The court emphasized that while the department could rely on transactions linked to the old PAN, fresh proceedings must reference the correct PAN (AAIAK3165H) to ensure procedural fairness.
Key Takeaways
Legal Validity: Tax proceedings based on a cancelled PAN are invalid.
Fair Opportunity: Authorities must issue notices using the correct PAN to allow proper representation.
Clarification: Past transactions under the old PAN remain admissible for assessment.
The court disposed of the writ petition, quashing Ext.P7 and Ext.P8, and directed the Income Tax Officer to issue fresh notices under the correct PAN.
Case Title: Keerampara Service Co-operative Bank Ltd. v. The Income Tax Officer
Case No.: WP(C) No. 15933 of 2022
Counsel for Petitioner: Shri C.A. Jojo
Counsel for Respondents: Christopher Abraham, P.R. Ajith Kumar