Non-Participation in Income Tax Proceedings Due to PAN Mismatch from Trust to Society Conversion: Madras HC Grants Fresh Hearing [Read Order]

The petitioner filed three writ petitions challenging assessment orders for the assessment years 2015-16 and 2018-19, and a penalty order passed under Section 271(1)(c) of the Income Tax Act. The petitioner argued that they were unaware of the proceedings because the notices were issued under their old PAN number, which had been used when they were registered as a trust. After their conversion into a society, a new PAN number was allotted, and they had been filing returns under the new PAN. Due to this mismatch, they did not receive the notices and could not respond.

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The petitioner's counsel argued that although the return for AY 2018–19 was filed late, it was accepted by the department after a condonation of delay. For AY 2015–16, they had not filed a return under the old PAN but claimed that they had been consistently using the new PAN as a society. They also submitted that they had later filed revision petitions under Section 264 of the Income Tax Act, which were rejected on the ground that they had failed to respond during the assessment proceedings.

The income tax department’s counsel argued that the proceedings were valid since all the financial transactions in question had been made under the old PAN. They submitted that the petitioner did not produce any documents before the assessing officer to prove that they had been filing returns under the new PAN.

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The single-judge bench comprising Justice Krishnan Ramasamy observed that the petitioner should not be denied the chance to present their case simply because they failed to respond during the assessment stage. The court accepted that the change in the entity’s legal status and PAN might have led to genuine confusion. The court further observed that denying the petitioner relief under Section 264 on procedural grounds would be unjust, particularly in the context of an entity that had undergone structural changes.

The court set aside the assessment orders dated 25.03.2023 and 28.03.2023, the revision orders dated 24.09.2024, and the penalty order dated 12.03.2025. It directed the petitioner to pay a cost of Rs. 10,000 to a government naturopathy medical college and allowed the petitioner four weeks to file a reply with supporting documents. The assessing officer was directed to grant a personal hearing and pass fresh orders in accordance with law. The writ petitions were allowed.

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