What Is the Role of PAN in Scrutiny Assessment in India?

PAN (Permanent Account Number) plays a central role in scrutiny assessment under the Income Tax Act. It serves as the unique identifier for tracking the taxpayer’s financial history, verifying return accuracy, and enabling targeted communication during the scrutiny process initiated by the Income Tax Department.

• Identification and Selection of Cases

• PAN allows the Income Tax Department to identify taxpayers for scrutiny based on risk parameters.

• Scrutiny cases are selected using data analytics, AIR, TDS reports, and high-value PAN-linked transactions.

• PAN-based profiling ensures accurate targeting of individuals or entities under scrutiny.

• Notices under Section 143(2) are issued to PAN holders selected for detailed examination.

• Linking Return and Financial Data

• PAN links the taxpayer’s filed ITR with Form 26AS, Annual Information Statement (AIS), and TDS details.

• Discrepancies in reported income, investments, or expenses are matched using PAN.

• All income sources—salary, capital gains, rental, business—are consolidated via PAN.

• PAN ensures that non-disclosure or misreporting is traceable in scrutiny proceedings.

• Communication and Submission of Information

• Notices, questionnaires, and orders during scrutiny are issued to the PAN-linked account.

• Taxpayers must log in to the e-Filing portal using their PAN to access and respond.

• All responses and documents submitted in e-proceedings are tagged to the PAN.

• PAN allows the Assessing Officer to maintain a centralized and digital case file.

• Verification of Related Parties and Transactions

• PAN is used to identify related parties in business, property, or financial transactions.

• It helps match records across multiple taxpayers involved in the same dealings.

• PAN-based scrutiny enables authorities to cross-verify inputs from banks, brokers, and institutions.

• Third-party details (like vendors, donors, or tenants) are verified using their PAN if available.

• Legal Outcomes and Post-Scrutiny Tracking

• All scrutiny findings, assessments, and demands are issued and recorded against the taxpayer’s PAN.

• PAN is used to track compliance with orders, payment of additional tax, or appeals.

• Any penalties or interest levied are also linked to the PAN in the system.

• Future risk profiling and audits are influenced by the scrutiny history tied to the PAN.