A ₹3.91-crore tax demand against a cook was quashed after the court found the department relied only on PAN-linked data and failed to investigate his identity-theft claim.

The petitioner, a contractual security guard and cook, received a notice under Section 148A(b) of the Income-tax Act, 1961, alleging transactions involving cash purchases of ₹24,86,63,500 and cash sales of ₹24,62,01,485 linked to his PAN for AY 2017–18.

He denied conducting the transactions, alleged misuse of his PAN, filed police and cyber-cell complaints, and sought particulars of the transactions.

The Assessing Officer treated the combined amounts as turnover, estimated income at 8%, and raised a demand of approximately ₹3.91 crore.

The petitioner challenged the assessment by writ petition; the respondents objected that he should pursue the statutory appeal.

1. Whether the petitioner should be relegated to the statutory appeal remedy, or whether the writ petition was maintainable in view of the alleged breach of natural justice, the scale of the demand, and the petitioner’s limited means.

2. Whether the assessment could stand where the petitioner denied the transactions and the Assessing Officer relied on PAN-linked information without supplying the requested material or conducting independent inquiry.

3. Whether the Assessing Officer correctly treated the purchase and sale figures as separate components of turnover.

Article 14 requires non-arbitrary State action, and Article 21 protects life and dignity, including mental health; the Court relied on Maneka Gandhi v. Union of India, (1978) 1 SCC 248, Francis Coralie Mullin v. Administrator, Union Territory of Delhi, (1981) 1 SCC 608, and Sukdeb Saha v. State of Andhra Pradesh, 2025 INSC 893.

A writ court may entertain a petition despite an alternative statutory remedy where that remedy is ineffective in the circumstances or the proceedings disclose a breach of natural justice.

An assessment based on undisclosed adverse material, without due consideration of the assessee’s response or adequate inquiry, is unsustainable.

Section 133(6) of the Income-tax Act was identified as a means by which the Assessing Officer could have sought information from the alleged vendor.

The Court also referred to the CBDT Office Memorandum dated 31 July 2017, under which a 20% deposit was the standard condition for stay of disputed demand, and to the continuing interest liability under Section 220(2).

The Court held that the appeal remedy was not effective for this petitioner: a stay could require a deposit of approximately ₹78 lakh, which he could not afford, while interest and recovery exposure continued.

On the merits, he had denied the transactions, produced complaints and bank statements, and presented a plausible account of employment as a contractual worker; the Assessing Officer had not supplied the requested transaction material or independently verified the alleged dealings with Montage Enterprises Pvt. Ltd.

The Court also found that the officer had added the purchase and sale figures together despite the Form 26AS information showing a net amount after tax collection, thereby overstating turnover.

In these circumstances, the assessment was arbitrary and procedurally unfair, and the demand had serious consequences for the petitioner’s ability to protect his rights.

It left open the respondents’ ability to initiate proceedings afresh if they find cogent material linking the petitioner to the transactions, subject to the applicable limitation period.

The writ petition was allowed on those terms.