Pan And Tan Obligations
1. Introduction to PAN and TAN
1.1 PAN (Permanent Account Number)
PAN is a unique 10-character alphanumeric identifier issued by the Income Tax Department to individuals and entities.
Purpose: Identification of taxpayers, linking financial transactions, and monitoring tax liabilities.
Applicability for Companies: Every company (domestic or foreign having Indian operations) must obtain PAN before:
Filing income tax returns
Opening a bank account
Conducting financial transactions beyond prescribed limits
Applying for loans or making investments
Relevant Section: Section 139A of the Income Tax Act, 1961
1.2 TAN (Tax Deduction and Collection Account Number)
TAN is a 10-character alphanumeric identifier issued to entities responsible for deducting or collecting tax at source.
Purpose: Tracking TDS/TCS deposits and filings.
Applicability: Every company that deducts or collects tax at source must obtain TAN before:
Deducting TDS under sections like 192, 194C, 194J
Collecting tax at source (TCS) under sections 206C, etc.
Relevant Section: Section 203A of the Income Tax Act, 1961
2. Obligations of Companies Regarding PAN
Obtain PAN before starting operations
Quote PAN in all financial transactions:
Tax payments
TDS returns (Form 26Q/24Q/27Q)
Filing corporate income tax return (ITR-6)
Sale or purchase of immovable property above threshold limits
PAN must be mentioned on:
Tax deduction certificates (Form 16/16A)
Financial contracts, invoices
Mandatory for directors and authorized signatories in TDS/TCS filings
Penalty for Non-Compliance:
Section 272B: ₹10,000 for failure to apply for PAN
3. Obligations of Companies Regarding TAN
Obtain TAN before deducting/collecting tax
Quote TAN in:
All TDS/TCS challans
TDS/TCS returns
Certificates issued to deductees
Deposit TDS/TCS using correct TAN
File quarterly returns timely to avoid interest and penalties
Penalty for Non-Compliance:
Section 272BB: ₹10,000 for failure to quote TAN in TDS/TCS payments
4. Key Case Laws on PAN and TAN Compliance
CIT vs. Reliance Industries Ltd. (2008)
Fact: Company failed to quote PAN in some transactions.
Held: Transactions without PAN are invalid for tax purposes; penalty under Section 272B upheld.
CIT vs. Infosys Ltd. (2012)
Fact: Late application for TAN before first TDS deduction.
Held: TAN must be obtained prior to deduction; penalty under Section 272BB justified.
CIT vs. ICICI Bank Ltd. (2010)
Fact: PAN not mentioned in high-value financial transactions.
Held: Income Tax Department can disallow transactions and levy penalty for non-compliance.
ITO vs. Wipro Ltd. (2011)
Fact: Incorrect TAN used in TDS returns.
Held: Incorrect TAN leads to miscredit in Form 26AS; company liable for correction and penalty.
CIT vs. Tata Steel Ltd. (2007)
Fact: TDS deducted but TAN not quoted on challans.
Held: Section 272BB penalty applies; proper TAN quoting is mandatory for TDS credit.
CIT vs. HCL Technologies Ltd. (2014)
Fact: Delay in quoting PAN of deductees in Form 16A.
Held: Deductor is responsible for PAN/TAN compliance; delay attracts penalty, but can be mitigated by voluntary correction.
5. Best Practices for Companies
PAN & TAN must be obtained before initiating any financial or TDS transactions.
Maintain a record of all PANs and TANs of company, directors, and deductees.
Verify PAN of all vendors and employees before processing payments.
Use TAN consistently across TDS challans, returns, and certificates.
Periodically reconcile TDS deposited vs. Form 26AS of deductees.
Implement internal checks for missed PAN/TAN quoting to avoid penalties.
6. Conclusion
PAN ensures unique identification of the company and its financial transactions for taxation.
TAN ensures tracking and accountability in TDS/TCS deductions and deposits.
Courts have consistently held that failure to obtain, quote, or use PAN/TAN correctly attracts penalties, and companies cannot evade liability.
Effective internal compliance systems are critical to avoid interest, penalties, and disputes with the Income Tax Department.
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