MORE SHELL FIRMS FOUND: PAN DEACTIVATION JOLT FOR TAX EVADERS IN STOCK MARKET: 16 AUG 2017

Of the 1.1 million permanent account numbers (PAN) that the government deactivated last month, income-tax (I-T) sources say a majority were duplicates and were being used to open share-trading and demat accounts, transact on the stock markets, and operate in shell firms.

The I-T department has discovered one individual could have five to seven PAN cards, each with a slightly different spelling of the holder’s name.

According to I-T officials, such people, who have been identified as small- and medium-sized stock brokers, sub-brokers and their clients, have evaded taxes.

They could have evaded so by using one card for filing tax returns, and others for investing in financial instruments or making high-value transactions, said a senior tax official.

High-value transactions of more than Rs 50,000 and above require PAN details. During demonetisation, PAN was required to be quoted in the case of cash deposits of more than Rs 2 lakh in savings accounts.

Sources said that the tax department had used data analytics to track down evaders by collecting information such as common addresses, mobile numbers, and emails to establish the relationship among multiple PANs.

The exercise is continuing since demonetisation, at the time of which the department matched the databases of third parties such as banks and financial institutions with its own database and other details like know your customer (KYC), tax deducted at source (TDS), and payments made overseas. This is how it got a comprehensive profile of taxpayers.

A senior tax official said the department identified the link between PAN holders through their business associations, assets and associated transactions, and compliance history in the various databases.

“Through this we have clustered PAN-linked demonetisation data, using identified relationships as well as common addresses, email, and respective bank branch,” said the official.

More than 250 million PANs have been allotted so far, and of those only 52 million are used to file tax returns. This indicated that there were nearly five PAN cards per registered taxpayer, said the official, assuming all PAN holders filed returns.

This is the reason why the government is aiming to link the biometrics-based Aadhaar card with PAN so that it would be able to weed out duplications in the system. The government has made the Aadhaar mandatory for filing tax returns and financial transactions of Rs 50,000 and above, and it will become mandatory for opening bank accounts after December 2017.

Meanwhile, the Securities and Exchange Board of India is planning to identify investors through their Aadhaar numbers.

However, tax experts say that the huge mismatch between PAN holders and tax filing could also be possible due to other reasons. “PAN does not have any expiry date, unlike other identity cards. So the number of PANs includes those who died since its inception,” said a tax expert. According to him, the anomalies regarding the duplication of PANs are also because there is no database on the old PAN cards issued.

However, the new series of the PANs was devised to take care of such problems.

“As on July 27, 1.14 million PAN cards have been identified and deactivated in cases where multiple PANs were found allotted to one person,” Minister of State for Finance Santosh Kumar Gangwar told the Rajya Sabha recently.

Moreover, 1,566 PAN cards have been identified as “fake” because they were allotted to either people non-existent or in the names of persons with false identities. Sources said that the second list of PAN deactivation would soon be released by the tax department.