Misinformation about public policies spreads like wildfire on messaging applications and these days the widely used messaging platform of WhatsApp has become one of the mediums to spread fake news. On similar lines, since the past few days two WhatsApp messages regarding applicability of section 139A(5)(c) with effect from October 01, 2021 are being circulated around.

In this article, authors CA Dindayal Dhandaria and CA Naveen Kumar Dhandaria, conduct a reality check on these messages to bring out the actual truth behind it. Explains section 139A(5)(c) r.w.r 114B that it provides “all the sellers raising an invoice of Rs 2,00,000 or more should mention the 10-digit PAN number of vendor & customer on each such invoice wef 01.10.2021 onwards along with verification of such PAN as per Rule 114C.” Giving a brief background about the Rules 114B and 114C and the relevant provision of section 139A(5)(c), elucidates the provision with an illustration that how a person needs to quote his PAN in the capacity of a purchaser and a seller. Explains that the Rules 114B and 114C were inserted in the year 1998 and were amended several times upto the year 2015 and similarly no changes were made in section 139A(5)(c) as well, after January 01, 2016. States that section 139A(6) was inserted by Finance (No.2) Act, 2019 with further amendments w.e.f. 1.9.2019 by inserting sub-sections (6A) and (6B), which however, do not impact the requirement of quoting PAN as laid down in section 139(5)(c). Thus, the authors conclude “…requirement to quote PAN of both the vendor and the purchaser in the prescribed documents is prevailing since 1-1-2016 and not since 1-10-2021 as is being circulated through recent WhatsApp messages.”

“Whatsapp Messages stating that section 139A(5)(c) is applicable since 01-10-2021 - How Far Correct?”

1. SUBJECT-MATTER OF THIS ARTICLE

Since past few days,two WhatsApp messages are circulating as follows:

1. “Tax Alert

In compliance with  Section 139A(5)(c) of the Income Tax act all the sellers raising  an invoice of INRs 2,00,000/- or more should display the 10 digit PAN number (of both vendor as well as a customer)  on each such  invoice as a separate field. This is with effect from 1st October 2021.

In other words, in addition to GST number, you have to separately display your as well as your customers PAN number.”

2. “Mentioning of PAN on Invoices is compulsory from 01.10.2021

Section 139A(5)(c) read with rule 114B under Income Tax Act, 1961 has prescribed that all the sellers raising an invoice of Rs 2,00,000 or more should mention the 10-digit PAN number of vendor & customer on each such invoice wef 01.10.2021 onwards along with verification of such PAN as per Rule 114C. If Form 60 (Not having PAN) is received in lieu of PAN, then ½ yearly return is required to be filled in Form 61 as per Rule 114D. Non-compliance of it shall be liable for penalty u/s 272B of Rs 10,000/- per invoice.”

The purpose of this article is to examine how far these messages are correct and in accordance with the Income Tax law.

2. BACKGROUND

By the Direct Tax Laws (Amendment) Act, 1987, the Board was empowered, w.e.f. 1-4-1989, to make rules providing for the categories of documents pertaining to business or profession of the persons to whom the permanent account numbers (PAN) have been allotted, in which such numbers shall be quoted. After a long journey of more than a quarter of a century, Rules 114B and 114C of the Income Tax Rules, 1962 were framed in their present shapes and are in force since 1-1-2016.

3. REQUIREMENT TO QUOTE PAN

The requirement to apply for allotment of PAN is laid down by sub-section (1) of section 139A and the requirement to quote the same is laid down by sub-section (5) of section 139A.  For this article, clause (c) of section 139A(5) is relevant and the same is extracted below, for ready reference:

“(5) Every person shall –

(a) ….

(b) ….

(c) quote such number in all documents pertaining to such transaction as may be prescribed by the Board in the interests of the revenue, and entered into by him.

Provided ……

Provided further ….

(d)….”

4. RELEVANT PROVISIONS OF THE INCOME TAX ACT

Rules 114B specifies 18 transactions in respect of which PAN is required to be quoted in all documents for the purpose of clause (c) of sub-section (5) of section 139A.  For this article, eighteenth transaction is relevant and an extract from Rule 114B is reproduced below:

“114B. Every person shall quote his permanent account number in all documents pertaining to the transactions specified in the Table below, namely:—

TABLE

Sl. No.	Nature of Transaction	Value of Transaction
1 to 17	…………….
18	Sale or purchase, by any person of goods or services of any nature other than those specified at Sl. Nos. 1 to 17 of this Table, if any.	Amount exceeding two lakh rupees per transaction.

Let us understand the requirement of the 18^th item of the above table with the help of the following two case studies:

(a) Mr. A sells goods or services to B whose value exceeds two lakh rupees; and

(b) Mr. A purchases goods or services from C, whose value exceeds two lakh rupees.

Based upon literal interpretation and taking clue from the highlighted word “his” appearing in rule 114B, it can be stated that Mr. A is required to quote his PAN in all documents pertaining to the transaction stated in case study (a) above.  He is not required to quote PAN of any other person because the meaning of the word “his” covers him alone and cannot be extended to implicate other persons. However, as per 18^th entry of the Table, Mr. A is required to quote PAN in transactions relating to his purchase also i.e. the transaction stated in case study (b) above.  Mr. A is supposed to prepare documents pertaining to transactions covered in case study (a) and not so in case study (b).  The documents pertaining to transactions covered in case study (b) are required to be prepared by Mr. C. 

From the above discussions, the following two questions arise:

(a) How Mr. A can quote PAN of Mr. B in transactions covered in case study (a) and further that how can he quote his PAN in transactions covered in case study (b); and

(b) How Mr. B can quote his PAN in transactions covered in case study (a) and further that how can Mr. C quote PAN of Mr. A in transactions covered in case study (b).

For answers to the above questions, reference may be made to the provisions of sub-section (6) of section 139A and Rule 114C(2).

Section 139A(6) reads as under:

“(6) Every person receiving any document relating to a transaction prescribed under clause (c) of sub-section (5) shall ensure that the Permanent Account Number or the General Index Register Number or the Aadhaar number, as the case may be, has been duly quoted in the document.”

The above-stated sub-section (6) requires a person receiving any document (i.e. the purchaser of goods or services), prescribed under section 139A(5)(c) to ensure that, inter alia,  his PAN is quoted therein.  In case study (a) above, Mr. B would be such person and in case study (b) above, Mr. A would be such person.

It is important to note that section 139A(6) uses the word “ensure”.  The purchaser must ensure that his PAN is quoted in the document.

From this, the rationale of two questions raised hereinbefore is validated. 

Rules 114C(2) reads as under:

“(2) Any person, being a person raising bills referred to at Sl. No. 5 or 6 or 18 of rule 114B, who, in relation to a transaction specified in the said Sl. No., has issued any document shall ensure after verification that permanent account number has been correctly furnished and the same shall be mentioned in such document, or as the case may be, a declaration in Form 60 has been duly furnished with complete particulars.”

The above Rule requires a person raising bills, (i.e. the seller of goods or services), to ensure after verification that PAN of other person has been correctly furnished  to him by such other person and further that the said PAN has been mentioned in such document.  In case study (a) above, Mr. A would be such person and in case study (b) above, Mr. C would be such person.

5. TAKEAWAY FROM THE ABOVE LEGAL PROVISIONS

• The combined effect of the provisions of section 139A(5)(c), 139A(6), Rule 114B and 114C(2) is that, in every transaction of purchase and/or sale of goods and/or services exceeding two lakh rupees in value, the PAN of both the parties involved are required to be quoted.   
• The requirement of quoting PAN is applicable in case of all documents pertaining to the prescribed transactions. The law has specified the transactions to which this requirement is applicable but has not specified the documents in which PAN is required to be quoted.  A document pertaining to a transaction of purchase and sale of goods may, either or more, be a Cash Memo, Credit Memo, Tax Invoice, Retail Invoice, Chalan, Delivery Note, Goods Received Note.  It’s not possible to give an exhaustive list of such documents. 

6. HAQEEQAT KYA HAI?

India TV broadcasts a TV show titled as “Virus ka Viral Such” in which it carries out “Reality Check” of videos, news, WhatsApp messages, etc. which are circulated in media and gives its finding whether such videos, news, etc. are fake or not. On similar lines, we attempt to carry out a “Reality check” of the two WhatsApp messages quoted in the beginning of this Article. 

Rules 114B and 114C were inserted by the IT (Sixteenth Amendment) Rules, 1998 w.e.f. 1-11-1998 and were amended several times thereafter.  These rules were substituted by the IT (Twenty-second Amendment) Rules, 2015 w.e.f. 1-1-2016 and thereafter, there has been no amendment in Rule 114B.  However, in rule 114C, sub-rule (3) was inserted by I.T. (First Amendment) Rules, 2017 w.e.f. 6-1-2017 which related to Form No. 60 and is not relevant for this article.

No change has been made in section 139A(5)(c) on or after 1-1-2016.

In  Section 139A(6), the Finance (No.2) Act, 2019 inserted the requirement of quoting Aadhar Number as an alternative to PAN and this Act further inserted sub-sections (6A) and (6B) in section 139A, w.e.f. 1.9.2019.  The amendment to section 139A(6) and insertion of sub-sections (6A) and (6B) do not affect the requirement of quoting PAN as laid down in section 139(5)(c).

So, it is concluded that the requirement to quote PAN of both the vendor and the purchaser in the prescribed documents is prevailing since 1-1-2016 and not since 1-10-2021 as is being circulated through recent WhatsApp messages.

 

In lighter vein   To simplify the law, in addition to PAN or GIR no. or Aadhar no., GSTIN, and Address,  the vendors and customers should be required to quote voter ID numbers, ration card numbers, driving licence numbers, Ayusman card numbers, Health card numbers, bank account numbers, NRC serial numbers, GPRS location, etc. of themselves and of their family members, in all documents.