A recent round of income tax raids conducted by the Directorate of Income Tax (Investigation) in Gujarat has unearthed multiple Permanent Account Number (PAN) violations by several partnership firms operating across the textile and trading sectors. The raids, carried out over two days, revealed discrepancies in financial records, undeclared income, and the misuse of individual PANs for firm-level transactions.

According to senior officials involved in the investigation, many of the firms under scrutiny were found using personal PANs of partners to route business receipts and claim expenses, in clear violation of tax norms that mandate the use of the firm’s designated PAN for all financial transactions and filings.

“Multiple entities were diverting income through the personal accounts of partners to avoid tax liabilities. This practice not only violates income tax laws but also hampers transparency and accurate reporting,” an official from the Investigation Wing stated on condition of anonymity.

The preliminary findings also include instances of duplicate PAN usage, underreporting of sales, and manipulation of profit-sharing records to minimize taxable income. In certain cases, firms failed to file proper GST returns and maintained parallel books of accounts—raising concerns of deliberate evasion.

Legal experts have emphasized that under the Income Tax Act, 1961, a partnership firm is a separate taxable entity, and using personal PANs for firm-related transactions could attract penalties under Section 271FA and prosecution for willful concealment.

The firms involved have been served notices and directed to submit clarifications and revised filings. Authorities are expected to initiate further action, including assessment revisions and potential criminal proceedings, depending on the outcome of the investigation.

This crackdown signals a renewed focus by the Income Tax Department on curbing evasion practices within unincorporated business structures, particularly those operating in high-cash sectors.