A major PAN card misuse scam likely unfolding across India; many cases already reported
Jun 18, 2024
Synopsis
PAN numbers of deceased people, illiterate people, people who do not frequently use the number, etc., are being misused to carry out property transactions. The cases only come to light after I-T department notices.
According to the report (by Lubna Kably), a senior citizen and homemaker from Mumbai had to escalate her case to the Income-tax Appellate Tribunal (ITAT) due to alleged misuse of her PAN. A tax officer claimed she had sold a property worth Rs 1.3 crore in 2010-11, treating it as her income. Being illiterate and a cancer patient, she could not respond to the I-T notices. At a recent ITAT hearing, her counsel argued that her PAN had been misused in the property registration. The tribunal observed that the tax officer had not conducted an independent investigation, such as obtaining details from the property registrar and the buyer. Consequently, it ordered the I-T department to gather complete information from the registrar and ensure the woman receives a fair hearing.
This incident is not unique. Across India, there have been multiple reports of PAN misuse. For instance, Usha Soni from Betul, Madhya Pradesh, received an I-T notice for Rs 7.5 crore a decade after her death. Similarly, Nand Lal, a small shopkeeper in Rajasthan, filed a police complaint after receiving an I-T notice for Rs 12.2 crore. Fraudsters often target vulnerable groups such as the deceased, senior citizens, farmers, and students.
The ToI report quoted Ketan Vajani, chartered accountant, as saying, "Misuse of the PAN by unscrupulous elements can cause lots of difficulties, including huge demands being raised on an individual due to additions to his/her income during assessment for transactions that do not pertain to the PAN holder. While the highest secrecy must be maintained of one's PAN, the reality is that details are freely shared for various purposes."
The Central Board of Direct Taxes (CBDT) told the newspaper in a mailed response that "individuals should restrain from sharing their PAN information/PAN card where it is not mandated by the government's guidelines or is in public domain.
"The PAN database at present is more than 70 crores. Linking with Aadhaar was brought in largely to prevent/stop misuse of PAN. However, if there are cases of suspected misuse of PAN, it is advised that a complaint may be filed with the police," it added.
Ameet Patel, tax partner at Manohar Chowdhry & Associates, said in view of the ITAT order: "The issue of the I-T department relying completely on information filed by various agencies and initiating action against the taxpayers is a serious issue and needs a lot of rethinking by the department. It has now come to a stage that every taxpayer has to necessarily check his/her annual information statement (AIS) every few weeks."
The Annual Information Statement (AIS) provides comprehensive data from reporting entities like banks and property registrars. This includes details on bank interest, dividends, and transactions related to the purchase and sale of securities or immovable properties.
According to Patel, as soon as a wrong entry is found the AIS, feedback in the AIS system should be provided immediately and the mistake pointed out. If the mistake is not rectified, the need to file an FIR with police arises, he further said.
Vajani told ToI that a police complaint could also act as a shield if, during assessment, additions are made for transactions that do not belong to the PAN holder.
"It would be a taxpayer friendly move for the I-T department to provide a tab on its website to report any misuse," he added.
The CBDT explained that when a reporting entity confirms a transaction, the I-T department cannot take action unless the PAN holder reports the issue to the police and it is investigated. Additionally, a PAN is not deactivated upon the holder's death to allow the I-T department to initiate or complete any pending proceedings. Family members or legal heirs must inform the jurisdictional assessing officer of the death (details available on the e-portal) and provide copies of the PAN card and death certificate. The officer will then mark the death against the PAN.
According to Patel, the system has scope for an obvious improvement: Whenever a death certificate is issued, an automatic intimation should go to I-T department, following which that particular PAN number can be marked as having belonged to a dead person, which would make it easy to stop any big future transactions against that number.
[The Economic Times]
