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Alerts:

Direct Tax Alert - CBDT issues instructions for handling non-PAN cases as potential cases for issue of notice under section 148 of the Income-tax Act, 1961

31 March 2021

Background

The Central Board of Direct Taxes (CBDT) has issued Instruction No. F. No. 225/40/2021/ITA-II dated 4 March 20211 for selection of cases for issue of reassessment notice under section 148 of the Income-tax Act, 1961 (IT Act). This instruction is not applicable to the Central charges and International Taxation charges. Subsequently, an FAQ sheet was issued addressing various queries of the Tax Officer.

Recently, the CBDT has issued another instruction2 for handling of non-PAN cases.

We, at BDO in India, have analysed and summarised the said instruction and provided our comments on its impact hereunder:

Which cases are covered?

‘Potential cases’ where only name and address of the taxpayer is available (i.e. non-PAN cases) and where the:

  • Reports of Directorate of Income-tax (Investigation);
  • Reports of Directorate of Intelligence and Criminal Investigation; and
  • cases of Non-Filer Management System and other cases

as flagged by the Directorate of Income-tax (Systems) as per risk profiling for consideration of issue of notice under section 148 of the IT Act.

How will such cases be handled?

  • Such non-PAN potential cases to be pushed by Systems to respective Principal Chief Commissioner of Income-tax / Principal Commissioner of Income-tax based on the address.
  • The provisions of the IT Act provide that manual notice without Document Identification Number (DIN) can be issued in exceptional cases3, subject to following the prescribed procedure (viz. recording reasons in writing and with prior written approval of the Chief Commissioner/ Director General of Income-tax etc.).
  • The Jurisdictional Tax Officer shall immediately after issuing notice under section 148 of the IT Act, collect the basic parameters needed for allotment of PAN from the taxpayer, reporting entities or any other sources. Further, in cases where the basic parameters are gathered, the Jurisdictional Tax Officer shall take up the matter with the Directorate of Income-tax (Systems) for allotment of PAN as per the instructions issued from time to time.
  • All such manually issued communication shall be uploaded on the System (with DIN if possible) at the earliest.   

BDO comments

Post issue of the Instruction dated 4 March 2021, the CBDT had issued another Instruction No. F. No. 225/40/2021/ITA-II dated 15 March 20214 applicable for international tax charge. The criteria laid down for ‘Potential Cases’ in both these instructions are same. While the current instruction refers to Instruction 4 March 2021, it needs to be seen whether support of this instruction can be taken by the Tax Officer for cases falling under the international tax charge? Or will the CBDT issue another instruction which will be applicable to Instruction dated 15 March 2021?

Further, it is pertinent to note that Circular No. 19/2019 dated 14 August 2019 provides that all the communication from the tax department should contain DIN. In the absence of DIN, such communication should be treated as void. It appears that this Instruction is issued with a view to avoid protracted litigation on the ground that the notice is void in the absence of DIN.


2Instruction (F.No.225/40/2021/ITA-II), dated 26 March 2021

3Para 3 of Circular No. 19/2019 dated 14 August 2019. As per this para, in following cases DIN may not be issued:

  • When there are technical difficulties in generating / allocating / quoting the DIN and issuance of communication electronically; or
  • When communication regarding enquiry, verification, etc. is required to be issued by tax authority, who is outside the office for discharging his official duties; or
  • Where due to delay in PAN migration, PAN is lying with non-jurisdictional Tax Officer; or
  • When PAN of the taxpayer is not available and where a proceeding under the IT Act (other than verification under section 131 or section 133 of the IT Act) is sought to be initiated; or
  • When the functionality to issue communication is not available in the system