APMC Exemption Allowed Despite Wrong PAN Status | ITAT

Case Details: Agricultural Produce Marketing Committee vs. Income-tax Officer [2026] 185 taxmann.com 406 (Bangalore-Trib.)

Judiciary and Counsel Details

• Prashant Maharishi, Vice President & Sounadararajan K., Judicial Member
• Ravishankar, Adv. for the Appellant.
• Balusamy N., JCIT & Raghu, ITO for the Respondent.

Facts of the Case

The assessee was an Agricultural Produce Marketing Committee constituted under the relevant State legislation and regulated by the Department of Agriculture, Government of Karnataka. The income of the assessee comprised market fees and cess collected from agricultural produce transactions, which were claimed to be exempt under section 10(26AAB).

During the obtaining of the Permanent Account Number, the status of the assessee was erroneously recorded as a trust. Due to this incorrect classification, the assessee was unable to file a return in the appropriate form, as ITR-7 applicable to trusts did not provide for claiming exemption under section 10(26AAB).

Assessing Officer (AO) initiated reassessment proceedings under section 147 based on information regarding substantial cash deposits in bank accounts. Since no return was filed, the assessment was completed under section 147, read with section 144, treating the assessee as a trust and determining taxable income.

Aggrieved-assessee filed an appeal to the CIT(A), wherein the CIT(A) dismissed the appeal, and the matter reached the Bangalore Tribunal.

ITAT Held

The Tribunal held that the mere possession of a different PAN, reflecting the assessee’s status as a “trust,” did not warrant the denial of benefits or the taxation of its income. Subsequently, the assessee was granted a PAN, indicating its classification as a local authority from 2022.

Therefore, an error in obtaining or allotting the PAN should not result in taxation, particularly when the Income Tax Act provides for complete exemption of the assessee’s income under Section 10(26AAB). Based on the foregoing facts, the Tribunal concluded that the assessee was eligible for a deduction under Section 10(26AAB), rendering the assessee’s income exempt.

Consequently, the Assessment Orders on merits were set aside, and the AO was instructed to grant exemption on the entirety of the assessee’s income and to determine the total income for all relevant Assessment Years as Nil.

List of Cases Referred to

• Vijay Kumar v. ITO [Writ Petition No. 18395 of 2025, dated 24-11-2025] (para 17)
• Tarish Investment and Trading Company (P.) Ltd v. Union of India [2025] 179 taxmann.com 198 (Karnataka) (para 17)
• Mohammed Yaseen v. ITO [2025] 175 taxmann.com 280 (Karnataka) (para 17)
• Vikas Gupta v. Union of India [2022] 142 taxmann.com 253/289 Taxman 443/448 ITR 1 (Allahabad) (para 18)
• ITO v. Mangla Gupta [2026] 183 taxmann.com 121/309 Taxman 171 (SC) (para 19)
• Kusum Healthcare (P.) Ltd. v. Dy. CIT [2025] 173 taxmann.com 58/304 Taxman 471 (Delhi) (para 20).