PAN deactivation jolt for tax evaders in stock market

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.