The Income-Tax department will levy penalty on companies that fail to quote the Permanent Account Number of individuals whose tax they deduct at source, from the next financial year.

The department has been encouraged to take this decision after it streamlined the process of issuing PAN cards to Income Tax assesses by outsourcing it to Unit Trust of India-ISL from July, 2003.

Officials said the department would begin the process of issuing notices to companies and other organisations if they failed to quote PAN of individuals whose tax they were deducting at source from April 2004. They said no law was required to begin the process, as the Income Tax Act, 1961 already had a provision to this effect.

However, they said, while Section 271C of the Act gave the department the power to impose such a penalty as equal to the amount of tax deducted, the same had not been invoked so far. This was because it was quite easy for a company or organisation to claim that PAN had not been issued.