ITAT: PAN Mismatch Can’t Justify Tax on Fully Disclosed Investments

The assessee company filed its income tax return for AY 2012-13, duly disclosing mutual fund investments in its financials. However, some investments were mistakenly made using an old and inactive PAN. Despite the PAN mismatch, all transactions were carried out through the same bank account and were accurately reflected in the company’s books and returns.

The Assessing Officer (AO), treating the assessee as a non-filer based on the old PAN, reopened the assessment under Section 148. He added Rs. 14,03,321 under Section 69B, alleging that these mutual fund investments were unexplained and undisclosed. The assessee made repeated requests for the recorded reasons for reopening, but they were never furnished. The CIT(A) confirmed the reopening and upheld the addition.

Issue Raised: Whether the reopening under Section 148 and the addition under Section 69B were valid when all investments were disclosed under the correct PAN, and no reasons for reopening were shared with the assessee.

ITAT’s Decision: The assessee’s appeal was granted by the ITAT, mainly because the Assessing Officer neglected to provide the documented justifications for reopening the assessment in spite of repeated requests. The reassessment was deemed procedurally invalid due to this omission; thus, the Section 148 reopening was quashed.

The Tribunal, while deciding the case on merits, observed that all mutual fund investments were duly disclosed in the assessee’s ITR and financial statements, with transactions routed through a single bank account. The AO had mistakenly treated internal switch-outs within mutual funds as fresh investments. The presence of an old, inactive PAN used by mistake did not indicate concealment or unexplained income. Accordingly, the addition under Section 69B was deleted, and the AO was directed to rectify the PAN mismatch while advising the assessee to avoid such discrepancies in the future.

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