The Hindu Business Line : Tax experts want scope of PAN extended

DIRECT tax experts, welcoming the new system of PAN (Permanent Account Number) for checking tax evasion (it brings various financial transactions to tax), want the scope of quoting PAN in various documents expanded to all bank accounts, both old and new.

Clause (f) of Rule 114B provides for compulsory quoting of PAN in documents pertaining to opening an account with a bank.

Experts say that following the mercantile system of accounting by all taxpayers (as opposed to the cash system) should become a mandatory requirement.

According to Prof N.P. Jain, tax lawyer and visiting faculty at the West Bengal National University for Juridical Sciences, since PAN could be one of the most effective measures to check black money transactions, the scope of the relevant clause in the Act should be expanded such that it becomes a must not only for opening a new bank account but also for the old/existing bank accounts, together with a photograph of the account holder. He said this would bring the `undisclosed' bank accounts of the taxpayers, if any, out into the open.

Ms Nilima Joshi, President of Direct Taxes Professionals' Association, told Business Line here on Tuesday that compulsory quoting of PAN may be made obligatory for all categories of accounts in the bank, such as current, savings, time deposit and recurring deposit.

Mr Jain suggested that suitable amendment should be made for different types of accounts with the post office. He said the system of quoting the PAN only in documents pertaining to transactions above a specified monetary limit should also be dispensed with, as it "leads to a selective implementation of the law."

Citing the recent amendments to Rule 114B, specifying a minimum limit of Rs 50,000 for payment to a company for acquiring shares by it or to a mutual fund for purchase of units, he said this floor should be done away with, requiring all applicants of shares or units to quote their PAN in the related documents.

Ms Joshi, seeking further simplification of procedures in income tax, said there should also be mandatory submission of profit and loss account and balance sheet together with I-T return. She suggested this should be made mandatory for all taxpayers, including the salaried (in whose case, it would be full details of all investments/other assets, if any), as it would introduce greater transparency and more efficient monitoring in the tax system, benefiting both the administration and the taxpayer.

On accounting systems, Mr Jain clarified that Section 145 (1) currently provided a choice to the assessee to compute the income either on a mercantile basis or a cash basis, and prior to 1997-98 a hybrid system of accounting was also permitted. He said the available option of two systems of accounting was a deterrent to crosschecking of various transactions of taxpayers. The cash system is also a tool to defer tax liability, he said.