In this representation, the Federation of Automobile Dealers Association (FADA) urges for relief under section 119(2)(b) of the Income-tax Act concerning the linkage of Aadhaar with PAN. FADA, representing over 15,000 automobile dealerships, highlights challenges faced by specific assessees and seeks remedial measures.
FADA’s representation underscores the significance of linking Aadhaar with PAN for transactions under Chapter XVII of the Income-tax Act. It outlines the legal obligations of automobile dealerships regarding tax deduction and collection, emphasizing the implications of non-compliance with PAN-Aadhaar linkage. This detailed representation by FADA elucidates the complexities surrounding Aadhaar-PAN linkage for automobile dealerships, advocating for pragmatic solutions to alleviate financial burdens and ensure regulatory compliance.
FEDERATION OF AUTOMOBILE DEALERS ASSOCIATIONS
804-805-806, Surya Kiran, 19, K G Marg
New Delhi – 110 001 (INDIA)
T +91 11 6630 4852, 2332 0093, 2332 0095
E fada@fada.in
CIN U74140DL2004NPL130324
6th April 2024
Shri Sanjay Malhotra
Revenue Secretary
Department of Revenue
Ministry Of Finance
Government of India
128 A, North Block
New Delhi
Respected Sir,
Sub: Representation u/s 119(2)(b) of the Income-tax Act, 1961 requesting relief for certain class of cases.
Reg: Linking of aadhaar number to permanent account number and provisions of Chapter XVII of the Act.
Respected Sir,
1. That present representation is being made by Federation of Automobile Dealers Association (“FADA”) founded in 1964. FADA is an apex body for automobile retail industry in India who are primarily engaged in the sale and service of two & three-wheeler, passenger cars, UVs, commercial vehicles (including buses and trucks) and tractors. FADA India represents over 15,000 automobile dealerships having over 30,000 dealership outlets including multiple associations of automobile dealers at regional, state and city levels.
2. With reference to the captioned subject, we hereby submit this representation u/s 119(2)(b) of the of Income-tax Act, 1961 (hereinafter referred to as “the Act”) for seeking appropriate order from Central Board of Direct Taxes (hereinafter referred to as the “Board”) to extend the notified date for linking permanent account number with aadhaar number for it to remain operative, or, alternatively to condone the delay for the said linking in all such cases as a special class of assessee for the period July-23 to June 2024. It is humbly submitted that by virtue of provisions of section 119(2)(b) of the Act, in order to avoid genuine hardship for a class of cases, the Board is empowered to authorize an income tax authority to provide relief under this Act after the expiry of period specified.
BACKGROUND
3. Each automobile dealer associated with FADA (hereinafter referred to as the “members of association”) conducts its business in strict compliance with provisions of all laws including the Act. It is noteworthy that the customers of members of association come from all strata of society — urban, sub-urban, rural etc.
4. As per nature of business carried by members of the association, various transactions conducted by them involve deduction/collection of tax at source under chapter XVII of the Act. Therefore, they hold Tax Deduction and Collection Account Number (“TAN”) and in accordance with the provisions of the Act, deduct/collect taxes at source.
5. Regardless of the scale of business conducted by the members of association, they are required to collect tax at source on sale of automobiles. Section 206C (1F) of the Act provides that every person who is a seller of a motor vehicle of value exceeding Rs. 10 lakhs shall at the time of receipt of consideration collect 1% of the sale consideration as income-tax.
6. Additionally, Section 206CC of the Act requires that a person paying a sum on which tax is collectible at source under Chapter XVII-BB of the Act to furnish his Permanent Account Number (“PA1V”) to the person responsible for collecting such tax. In other words, the said section, requires the customers of the members of association to furnish the PAN to them. It is pertinent to mention that failure of furnishing the PAN shall cause the tax to be collected at higher rates.
7. That Section 139A provides for the requisites related to PAN while Section 139AA(2) of the Act mandates a person who has been allotted PAN as on 01.07.2017 and is eligible to obtain aadhaar number, to intimate the aadhaar number to the Principal Director General of Income-tax (Systems) or Principal Director of Income-tax (Systems) in the form and manner specified.
8. It is pertinent to mention that proviso to the said sub-section states that in case of a failure to intimate the aadhaar number, the PAN allotted shall be made inoperative after the notified date. There have been a series of extensions to the notified date, eventually, vide Circular No. 03 of 2023 dated 28.03.2023, it was clarified that from 01.07.2023, the PANs of persons who have failed to intimate the aadhaar number in accordance with Section 139AA of the Act shall become inoperative. The said circular ultimately come to in force by amendment in the rules and culminating into revised Rule 114AAA of IT Rules, 1962.
9. The said circular read with Rule 114AAA clarified that the consequence of PAN becoming inoperative from 01.07.2023, shall mean that —
a. Where tax is deductible at source under Chapter XVII-B of the Act, in case of such a person, such tax should be deducted at a higher rate in accordance with provisions of Section 206AA of the Act; and
b. Where tax is collectible at source under Chapter XVII-BB of the Act, in case of such a person, such tax should be collected at a higher rate in accordance with provisions of Section 206CC of the Act.
10. Therefore, to sum up, PAN to be furnished to collector of tax at source i.e., the members of the association u/s 206CC of the Act ought to be an operative PAN i.e., the aadhaar linked PAN. Furnishing of an inoperative PAN shall lead to collection of tax at source at a higher rate provided u/s 206CC of the Act.
11. In compliance with the provisions of Section 206C of the Act, the members of association collect tax on every sale of motor vehicle exceeding the value of Rs. 10 lakhs. Thereafter, in light of Section 206CC of the Act, the buyer i.e., the person from whom tax is being collected, furnishes his PAN. At this juncture, the members of the association enquire into the operative-ness of the PAN while receiving the consideration i.e., if their aadhaar numbers are linked to their PAN. By and large, most of the customers had linked their aadhaar numbers to their PAN before 01.07.2023. However, certain customers (hereinafter referred to as “specific class of assessees”), that largely belonged to the rural sector, were unaware of the timeline to link the aadhaar number with the PAN and made default under the provisions of the Act.
12. On encountering with such specific class of assessees, during the period between 01.07.2023 to 31.03.2024, the members of association provided assistance in the process of linking of the aadhaar number with the PAN and ensured that the process of linking is completed at the time of receipt of sales consideration towards sale of motor vehicle. Moreso, for record purposes, they kept the copy of receipt of fees paid towards delay in linking PAN with Aadhaar. Herein, it is imperative to understand that although at the time of collecting the tax at source, the procedural aspects for linking the PAN with aadhaar were duly completed, the same reflected onto the portal after couple of days.
13. Despite all attempts to ensure linking of aadhaar to PAN, for varied reasons, like different spellings of the name of the individual in both the documents, the aadhaar number could not be linked to PAN for certain class of customers on the date of collection of tax at source.
14. The said fact surfaced to the attention of the members of association when an intimation was received by them u/s 200A/ 206CB of the Act wherein a huge sum of demand was raised by the department for non-furnishing of an operative PAN at the time of collection of tax at source. The said demand shall cause significant financial hardship to the members of association merely on account of trivial technical issue despite substantial compliance of law through submission of PANs of all such customers in TDS/TCS returns filed by the respective Assessees/ members. Copies of some of the intimations issued are annexed herewith as Annexure — A.
15. Likewise, number of transactions executed by the members of association involve deduction of tax at source by them. Like Section 206CC of the Act, section 206AA of the Act requires furnishing of PAN by the person entitled to receive any sum or income on which tax is deductible to the person responsible for deducting such tax, failing which, tax shall be deducted at a higher rate.
16. That, PAN to be furnished to deductor of tax at source i.e., the members of the association u/s 206AA of the Act ought to be an operative PAN i.e., the aadhaar number of such a person should be linked to his PAN. Furnishing of an inoperative PAN shall lead to deduction of tax at source at a higher rate provided u/s 206AA of the Act.
17. That, similar to the transactions on which tax was collected at source, the effort of linking the PAN with aadhaar number was made for certain persons (“specific class of assessees”) whose tax was deducted at source by the members of association. However, the demand was raised requiring the tax to be deducted at a higher rate of tax as though no PAN was furnished, whereas the fact of the matter is that PAN has become operative at later stage.
SUBMISSIONS
18. At the outset, it is most humbly submitted that even though the linking of aadhaar number to PAN did not reflect immediately at the time of collection/ deduction of tax at source, But, majority of the aadhaar numbers were now linked to the PAN. Illustrative evidences in support of the same are annexed herewith as Annexure – B .
19. The members of association have always been tax compliant and have honestly discharged all the obligations as per the law. Thus, they ensured that the transaction undertaken by them are with persons who have complied with the law and linked their PAN to the aadhaar number. As and when it was found that the compliance has not been made, the members of the association, took responsibility to link the PAN of the specific class of assessees to their aadhaar and ensured that the late fees is paid towards the same. A few sample receipts thereof have been annexed herewith as Annexure – C.
20. The demand raised by the department is a huge sum of money that shall have a huge impact on the business of the members of association. Herein, it is pertinent to note that Majority of the PANs of the specific class of assessees with whom the transactions have been undertaken are now operative and assessable under the Act, thus, it can be assessed that there is no loss of revenue to the department and tax on every such transaction has been duly paid. Further, the late fees for linking the aadhaar number with PAN has also been paid duly and in accordance with the provisions of the Act.
21. The relevant period for which the representation is being made, is the first year in which the linking of PAN and aadhaar number was made mandatory. Thus, in light thereof, there were some operational guidelines that were to be made and implemented.
22. The intent of legislation under Chapter XVII of the Act is not to collect taxes, rather, it is to monitor and track transactions. It is noteworthy that all members of the association, without any failure, maintains complete KYC of the buyers, which may be provided to the respective officers, as and when required.
23. As most of the PANs have already been furnished and are operative, the inadvertent act done by the members of the association caused no harm to the revenue in any manner and may kindly be considered for providing relief.
24. In light of the aforementioned submissions, the demand raised by the department is unwarranted and therefore, members of the association are hereby praying before your good office for appropriate and efficacy remedy.
PRAYER
1. The notified date for linking the PAN with aadhaar may kindly be extended to 30.06.2024 for the identified transactions undertaken by the members of association with specific class of assessees;
2. Additionally, consider giving the retrospective effect of the Aadhaar linkage with PAN, thereby alleviating the undue financial burden on taxpayers;
3. In the meanwhile, the tax demands raised against the members of the association on account of this issue should not be enforced.
It is humbly submitted that we are available in person to explain the issue, if need be.
Thanking You.
Yours Faithfully,
For, Federation of Automobile Dealers Associations
Sai Giridhar
Secretary
Mobile: 98295 55000
