Kerala High Court Quashes Proceedings U/S 148 Of Income Tax Act Initiated Against Cancelled PAN Number

Justice Ziyad Rahman A.A. observed that the transactions pertain to the relevant assessment year were carried out based on the PAN card that was then in existence, which was later cancelled. By the time the proceedings of assessment were initiated by issuing a notice under Section 148, the assessee was issued with a new PAN card, wherein, the status of the assessee was shown as the AOP (Association of Persons).

The assessee/petitioner is a co-operative society engaged in the business of providing credit services to its members. As per Rule 15 of the Kerala Co-operative Societies Rules, the assessee has been classified as a Primary Agricultural Credit Co-operative Society.

According to the society, they are entitled to exemption under Section 80P of the Income Tax Act, subject to compliance with the conditions applicable therein.

Initially, the assessee was allotted with a PAN number, and transactions of the assessee were being carried out using the said PAN. However, it was later realized that the PAN allotted to the assessee by the Department was showing the status of the assessee as a company and not as a cooperative society.

As a consequence of the same, the assessee was unable to claim exemption under Section 80P of the Income Tax Act, which the assessee was otherwise eligible for.

Therefore, on realizing the said mistake, application was submitted before the assessing officer, for allotment of a fresh PAN number showing the status of the assessee as a co-operative society.

Then acting upon the same, a fresh PAN card was issued. Later, notice under Section 148 of the Income Tax Act, 1961 was issued to the assessee by referring to the cancelled PAN card. Ultimately the said proceedings culminated in assessment order.

According to the assessee, as all the notices and the assessment were made with specific reference to the PAN card, which was cancelled, the assessee could not effectively contest the matter, and they were also prevented from pursuing the appellate remedy.

According to the department, the assessee cannot claim the benefit of Section 80P, as they failed to furnish the returns in respect of the relevant financial year.

The bench noted that the specific contention of the assessee is that they could not effectively contest the matter due to various technical reasons due to discrepancies that arose consequent to the transactions that are carried out in PAN card which was cancelled and was issued without showing the actual status of the assessee as a co-operative society. Even though they attempted to file an appeal against the assessment order, the same could not be uploaded.

The bench stated that it is a fact that all the notices and proceedings were issued by solely referring to the PAN card, which stood cancelled as of the date of the search notices/proceedings.

The contention of the assessee regarding the denial of a proper opportunity to contest the matter effectively cannot be ignored, added the bench.

In view of the above, the bench allowed the petition and directed the department to issue fresh notice to the assessee.

The bench clarified that even though the notices are to be issued by showing the present PAN card, nothing would preclude the assessing authority from relying on the transactions that are already carried out in the cancelled PAN card, as at the relevant time that was the PAN card in existence.

Case Title: Keerampara Service Co-operative Bank Ltd. v. The Income Tax Officer

Case Number: WP(C) NO. 15933 OF 2022

Citation: 2025 LiveLaw (Ker) 389

Counsel for Petitioner/ Assessee: C.A. Jojo

Counsel for Respondent/ Department: Christopher Abraham and P.R. Ajith Kumar

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