Income tax Late Fees if PAN and Adhar Not linked : Circular No.7 of 2022
F.No.370142/14/2022-TPL
Government of India
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes
New Delhi, Dated the 30th of March, 2022
Sub.: Clarification with respect to relaxation of provisions of rule 114AAA of Income-tax
Rules, 1962 prescribing the manner of making Permanent Account Number (PAN) inoperative – reg.
Instances had come to the notice of the Income-tax Department that multiple permanent
account numbers (PANs) have been allotted to one person or one PAN has been allotted to more
than one person. In order to have a robust way of de-duplication of PAN data base, Finance Act,
2017 with effect from 1 st April, 2017, inserted section 139AA in the Income-tax Act, 1961 (the
Act) making it mandatory for a taxpayer who is eligible to obtain Aadhaar, to quote his Aadhaar
in the application form for PAN and return of income.
2. Sub-section (2) of section 139AA of the Act makes it mandatory for every person who
has been allotted a PAN as on 1 st July, 2017 to intimate his Aadhaar Number so that the Aadhaar
and PAN can be linked. This is required to be done on or before a notified date, failing which the
PAN shall become inoperative.
3. Accordingly, in case of failure to intimate the Aadhaar Number by the last extended
notified date i.e. 31.03.2022, the PAN allotted to the person shall be made inoperative in
accordance with the provisions of the Act. Further, the Finance Act, 2021 inserted a new section
234H in the Act to complete the process of PAN-Aadhaar linking for identifying bogus PANs.
This section provides that where a person who is required to intimate his Aadhaar under subsection (2) of secti’on 139 AA fails to do so on or before a notified date, he shall be liable to pay a fee not exceeding a sum of one thousand rupees, as may be prescribed, at the time of making
intimation under sub-section (2) of section 139AA after the said date.
4. Further, rule 114AAA of the Income-tax Rules provides that if PAN of a person has
become inoperative, he will not be able to furnish, intimate or quote his PAN and shall be liable
to all the consequences under the Act for such failure. This will have a number of it;nplications
such as:-
(i) The person shall not be able to file return using the inoperative PAN
(ii) Pending returns will not be processed
(iii) Pending refunds cannot be issued to inoperative PANs
(iv) Pending proceedings as in the case of defective returns cannot be completed once
the PAN is inoperative
(v) Tax will be required to be deducted at a higher rate as PAN becomes inoperative
4.1 In addition to the above, the tax payer might face difficulty at various other fora like
banks and other financial portals, as PAN is one of the important KYC criterion for all kinds
of financial transactions.
5. Hence, in order to have smooth application of section 234H and existing rule 114AAA,
it is clarified that the impact of sub-rule (2) of rule 114AAA i.e. where a person. whose
permanent account number has become inoperative under sub-rule (1). is required to furnish.
intimate or quote his permanent account number under the Act. it shall be deemed that he has
not furnished. intimated or quoted the permanent account number. as the case may be. in
accordance with the provisions ofthe Act. and he shall be liable for all the consequences under
the Act tor not turnishing. intimating or quoting the permanent account number. shall come
into effect from 1 st April, 2023 and the period beginning from 1st April, 2022 and ending with
31st March, 2023, shall be the period during which the said sub-rule shall not have its negative
consequences of the nature referred to in the said sub-rule or specified in paras 4 and 4.1 above.
However, the tax payer shall be liable to pay a fee in accordance with sub-rule (5A) of rule
114.
6. Hindi version to follow
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