Income Tax Assessment Made Under Old ‘Firm’ PAN instead of New ‘Company’ PAN: ITAT directs CIT(A) to verify Transactions in Books of Accounts [Read Order]

The Income Tax Appellate Tribunal (ITAT), Hyderabad recently held that income tax assessments wrongly made under an old ‘Firm’ Permanent Account Number (PAN) owned by an assessee instead of their new and actual ‘Company’ PAN was required to be reassessed.

The Tribunal directed the Commissioner of Income Tax (Appeals) [ CIT(A) ] to verify whether the import transactions have already been recorded in the company’s regular books of accounts as per the Income Tax Act, 1961.

The assessee, Lova Impex Private Limited, Hyderabad, is engaged in importing and exporting cashew nuts, coffee beans, and UPVC profiles. Incorporated in 2001, the company was initially allotted a PAN Number classified under the ‘firm’ category and filed income tax returns for assessment years 2001-02 to 2006-07 under this. It was later informed by tax authorities that this PAN was erroneously allotted since the entity is a private limited company under the Companies Act, 1956 and not a firm.

Consequently, Lova Impex Private Limited surrendered the old PAN and secured a new PAN Number in the correct status as ‘company’, subsequently filing all returns as a company from the assessment year 2007-08 onwards.

Based on information from the Directorate General of Foreign Trade (DGFT), it emerged that Lova Impex made significant imports during the financial year 2015-16 using the old PAN still linked to their Import Export Code (IEC) due to oversight in updating records. This led the Assessing Officer (AO) to issue notice under Section 148A of the Income Tax Act, 1961.

During assessment proceedings for the year 2016-17, the AO identified outstanding tax demands for the years 2015-16 and 2017-18, arising from reported imports under the old PAN Number. The Department subsequently passed ex-parte assessment orders under Section 147 read with Section 144, making additions based on unaccounted transactions from DGFT data.

The assessee appealed against the assessment orders, but there was a 585-day delay due to lack of access to the departmental portal and consultant’s ill-health. This delay led the CIT(A) to dismiss the appeal in limine for late filing.

The assessee represented by C Suresh, argued that the PAN mismatch arose due to inadvertent errors and that transactions under the old PAN were already reported in the company’s regular books under the new PAN.

It was emphasized that the delay in filing appeals was out of the appellant company’s control and not intended for benefit, requesting condonation of delay and remand for detailed verification of imported goods transactions to avoid duplicate tax liability.

The Revenue, represented by Dr. Sachin Kumar, defended the decision of the CIT(A), arguing that such significant delay did not constitute reasonable grounds for condonation. It was contested whether the transactions reported under the old PAN had actually been included in the appellant’s books and supported remanding the matter to the AO for factual verification of import records and compliance with legal provisions.

The Bench consisting of Vice President, Vijay Pal Rao and Accountant Member, Manjunatha G, directed the AO to verify whether transactions reported under the old PAN are reflected in the company’s official accounts under the new PAN, as per the Income Tax Act, 1961.

The Tribunal also set aside penalties imposed under Section 271B and Section 271(1)(c) of the Income Tax Act, 1961, remanding penalty related matters for reconsideration based on the outcome of verification.

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