Tighter scru­tiny af­ter note ban led to in­crease in PAN reg­is­tra­tions, fil­ing of re­turns: tax­man



surveil­lance and a crack­down on black money has led to a three-fold in­crease in PAN (per­ma­nent ac­count num­ber) reg­is­tra­tions, an 18% rise in in­come tax re­turns as well as a sig­nif­i­cant in­crease in the num­ber of prop­er­ties seized by the tax depart­ment to 475.

“This is the ef­fect of de­mon­e­ti­za­tion and op­er­a­tion clean money launched in Jan­uary. Data anal­y­sis of in­for­ma­tion col­lected dur­ing the months af­ter de­mon­e­ti­za­tion has led to higher surveil­lance and a more ef­fec­tive crack­down on black money,” said a top of­fi­cial in the tax depart­ment who asked not to be named.

The depart­ment aims to bring large tax evaders to ac­count and gen­tly per­suade those mak­ing mi­nor vi­o­la­tions to com­ply with the rules.

The of­fi­cial’s com­ments come days be­fore the first an­niver­sary of last year’s in­val­i­da­tion of high-de­nom­i­na­tion cur­rency notes on 8 Novem­ber.

With al­most all the money in cir­cu­la­tion be­fore the ex­er­cise—around 86% of this was in the form of in­val­i­dated notes—com­ing back to the bank­ing sys­tem, the tax depart­ment has em­barked on an ex­er­cise to fol­low the money and track down de­fault­ers.

The Be­nami Trans­ac­tions (Pro­hi­bi­tion) Act was no­ti­fied for im­ple­men­ta­tion on 1 Novem­ber last year. Since then, show-cause no­tices have been is­sued in 520 cases. Be­nami prop- er­ties are those that are held by an owner through prox­ies. The gov­ern­ment is cel­e­brat­ing 8 Novem­ber as Anti-black Money Day.

The of­fi­cial said that out of 1.8 mil­lion of ques­tion­able cash de­posits made af­ter de­mon­e­ti­za­tion, spe­cific cases of sus­pected tax eva­sion and other non-com­pli­ance have been iden­ti­fied for scru­tiny.

These in­clude about 22,000 cases of “er­ratic be­hav­iour” of peo­ple who have ei­ther filed re­turns for the first time or have re­vised their re­turns for fi­nan­cial year 2015-16 (filed in 2016-17) to jus­tify their cash de­posits af­ter the in­val­i­da­tion of high-value bank notes.

Of the 1.8 mil­lion de­posits, around 200,000 were de­posits of more than Rs50 lakh in bank ac­counts in the days fol­low­ing de­mon­e­ti­za­tion; 70,000 of these are by in­di­vid­u­als who have not filed their tax re­turns yet.

The of­fi­cial said no­tices will be is­sued to them af­ter 7 Novem­ber—the last date for fil­ing re­turns with audit re­ports.

The of­fi­cial added that while ques­tion­naires were sent to all 1.8 mil­lion, only 1.2 mil­lion have re­sponded thus far.

The tax depart­ment is in the process of writ­ing to the 600,000 in­di­vid­u­als that have not re­sponded. If they fail to re­spond, ac­tion such as searches and sur­veys may be re­quired, the of­fi­cial said.

The tax depart­ment, this per­son pointed out, will also try and match the in­for­ma­tion in the ex­pla­na­tions pro­vided with that in tax re­turns and also with data sourced from third par­ties such as banks.

The depart­ment has two years to com­plete the scru­tiny and as­sess­ment from the year in which the re­turn is filed.

“The pri­or­ity is to en­sure com­pli­ance by those who pose large risk of rev­enue leak­age to the ex­che­quer,” said the of­fi­cial.

An ex­pert wel­comed data-based in­ves­ti­ga­tions.

“Tax com­pli­ance is def­i­nitely im­prov­ing as the data col­lected by the gov­ern­ment af­ter de­mon­e­ti­za­tion acts as a de­ter­rent. The safe­guard needed here is to en­sure that to the ex­tent pos­si­ble, this vast data is used care­fully and does not re­sult in en­quiries that are avoid­able,” said Rahul Garg, part­ner, PWC In­dia, an ac­count­ing firm.

In a state­ment is­sued in Au­gust, the tax depart­ment said that tax searches in­creased 158% since Novem­ber 2016, re­sult­ing in the dou­bling of black money seized to Rs1,469 crore from Rs712 crore in the year-ago pe­riod.

Of­fi­cial data for the past 10 years show a 154% in­crease in tax raids un­der the Modi gov­ern­ment in 2016-17 com­pared to 2006-07, lead­ing to an al­most four-fold in­crease in black money re­cov­ery.

The big­gest in­crease in ad­mis­sion of undis- closed in­come came in 2016-17 with tax pay­ers re­port­ing undis­closed in­come of Rs15,496 crore, a 38% jump from the pre­vi­ous year’s Rs11,226 crore.

A sec­ond of­fi­cial, who also spoke on the con­di­tion of anonymity, said that the im­pact of de­mon­e­ti­za­tion can be seen in the surge in PAN reg­is­tra­tions ev­ery month.

From around 2.7 mil­lion reg­is­tra­tions in Novem­ber 2016, the num­ber went up to 9.6 mil­lion in April 2017. In the past three months, an av­er­age of 6.6 mil­lion peo­ple have signed up for a PAN ev­ery month.

“The num­ber of tax re­turns filed for as­sess­ment year 2016-17 has also gone up 55.4 mil­lion, an in­crease of close to 18% (from the pre­vi­ous as­sess­ment year),” added the sec­ond of­fi­cer men­tioned above.

To be sure, this num­ber is based on the first dead­line for fil­ing tax, and the real im­pact can only be gauged by early 2018.

An­other area in which the tax depart­ment has made progress in the past year is be­nami prop­er­ties.

It has at­tached 475 prop­er­ties, worth over Rs1,600 crore, since the Be­nami Trans­ac­tions (Pro­hi­bi­tion) Act was no­ti­fied for im­ple­men­ta­tion on 1 Novem­ber 2016.

Data avail­able from the fi­nance min­istry shows that the max­i­mum be­nami prop­er­ties were seized in Gu­jarat, fol­lowed by Tamil Nadu, Ra­jasthan, Mum­bai and Bhopal. These num­bers are sig­nif­i­cant.

The Be­nami Act was first no­ti­fied in 1988, but there wasn’t a sin­gle case where prop­erty was at­tached till the act was strength­ened last Novem­ber.

The cre­ation of separate teams to dred­ge­out be­nami prop­er­ties has led to bet­ter en­force­ment of the Act, said se­nior tax of­fi­cials.

These teams are called be­nami pro­hi­bi­tion units (BPU) and there are 24 such teams across the coun­try. Each team has at least five mem­bers.


The num­ber of tax re­turns filed for as­sess­ment year 2016-17 has gone up by 55.4 mil­lion, said an in­come tax of­fi­cial

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