In absence of any requirement in law to maintain details of PAN of creditors, no adverse conclusion may be drawn for non-furnishing PAN details of such sundry creditors – High Court
In a recent judgment, High Court has held that in the absence of no prior stipulation in income tax law to maintain details of PAN of the creditors, no adverse conclusion may be drawn as to non existence of the sundry creditors solely occasioned by non-furnishing of addresses and PAN details of such sundry creditors.
ABCAUS Case Law Citation:
5037 (2026) (02) abcaus.in HC
In the instant case the Petitioner/Assessee had challenged the order passed by the Assessing Authority under Section 148A(d) of the Income Tax Act, 1961 (‘the Act’) and the consequential reassessment notice issued under Section 148 of the Act.
The petitioner was a private limited company engaged in the business of manufacture of shoes which were largely exported outside the country.
For the relevant Assessment Year, the petitioner was assessed to tax under Section 143(3) of the Act. Three years thereafter, an audit objection was raised alleging that the details of the sundry creditors of the petitioner from whom it may have purchased Raw Hide and Leather were not established inasmuch as their addresses and PAN were not disclosed.
The Assessing Officer (AO) issued a notice to the petitioner under Section 148A(b) of the Act alleging escapement of income. Objections were filed by the petitioner. However, the AO passed order under Section 148A(d) of the Act.
The Assessing Officer recorded satisfaction that income had escaped assessment at the hands of the petitioner with respect to the amount shown due to sundry creditors from whom the petitioner has purchased raw hides and skins. Consequently, the reassessment notice u/s 148 was issued.
The Hon’ble High Court observed that scheme of Section 40(A) of the Act read with Rule 6DD of the Rules framed thereunder allows a person to purchase, amongst others raw hides and skins, against payment in cash exceeding Rs.10,000/-, per person, per day.
The Hon’ble High Court opined that once the law permits such payments to be made in cash and since the law does not make any prescription of specific books of accounts to be maintained for such cash purchases made, room exists for individual assessees to arrange their affairs, according to their needs and conveniences.
The Hon’ble High Court further observed that the petitioner had maintained names and details of the sellers/creditors and the Mandi from where they operated. Those were found recorded in the books of accounts of the petitioner, during regular assessment proceedings. Correctness of these details had not been doubted (at the stage of initiation of the reassessment proceedings) by relying on any objective material. Therefore, no tentative conclusion had yet been drawn by the Assessing Officer by making any fruitful or meaningful enquiry to doubt the physical existence of the sellers of hides and skins purchased by the petitioner.
On the issue of absence of PAN of creditors, the Hon’ble High Court stated that in the context of no prior stipulation in law as may mandate the petitioner to maintain such details. Unless that duty pre-existed, no adverse conclusion may be drawn as to non existence of the sundry creditors of the petitioner, solely occasioned by non-furnishing of addresses and PAN details of such sundry creditors.
The Hon’ble High Court opined that at most, the absence of those details may led to a suspicion with the Assessing Officer. Ideally the suspicion ought to have been addressed during regular assessment proceedings. Beyond that, no enquiry by way of reassessment may arise except on cogent material clearly indicating which part of the sundry credit disclosed by the petitioner was non-genuine.
The Hon’ble High Court observed that if it is allowed to initiate the reassessment proceedings in absence of such material, it would be to allow for a fishing expedition to be undertaken by the revenue. Though reason to believe are not required to be recorded under the amended law, at the same time existence of objective material to initiate a reassessment proceeding remains equally if not more vital step in the initiation of reassessment proceedings.
Accordingly, The writ petition was allowed and the reassessment proceedings initiated against the petitioner were quashed.
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