The Hindu Business Line : Tax experts want wider scope for quoting PAN to check evasion

Mr Narayan Jain, Chairman of Taxation Sub-Committee, DTPA, said PAN could be a very effective tool for taxing various financial transactions, which are till now beyond the reach of the I-T Department.

Kolkata , Dec. 4

THE Direct Taxes Professionals' Association (DTPA) has suggested the expansion of the scope of quoting the Permanent Account Number (PAN) number (for all assessees), and mandatory submission of Statement of Affairs together with I-T returns to check tax evasion.

The DTPA, with a membership of over 1,000, submitted a pre-Budget (2006-07) memorandum to the Union Finance Minister, Mr P. Chidambaram, on Friday. It has stated in the memo that quoting of the PAN number should be made mandatory for not only opening new bank accounts, but also for existing accounts, along with a photograph of the account holder.

Talking to Business Line, Mr Narayan Jain, Tax Advocate and Chairman of Taxation Sub-Committee, DTPA, said PAN could be a very effective tool for taxing various financial transactions, which are till now beyond the reach of the I-T Department.

He said that as per the existing provisions of section 139A(5)© of the Income-Tax Act, PAN is required to be quoted in all documents pertaining to such transactions (prescribed by the Central Board of Direct Taxes/CBDT in the interests of revenue.)

Rule 114B of I-T Rules, 1962 prescribes such specific documents, and clause (f) of Rule 114B provides for compulsory quoting of PAN in documents used for opening a bank account.

Mr Jain suggested that filing of statement of affairs (Annual Tax Information under section 285BA of the Act) for all types of non-business assessees should also be made mandatory. This would usher greater transparency and efficient monitoring into the tax system, benefiting both tax administrators and taxpayers. Under such a system, a taxpayer can explain his investments or source of income in the long run. He pointed out that the scheme of deduction for premiums paid for key-man's insurance policies is highly prone to misuse. In some cases, the DTPA has called for suitable amendments in laws. Thus once the policy is assigned in favour of the individual (the key-man himself), it becomes a normal policy, and the maturity proceeds get exempted under section 10(10D) in the hands of the key-man.

Mr Jain said the policy is now assigned at a nominal surrender value in favour of the key-man, enabling the company or the employer to avoid tax liability, which would have arisen at the time of its maturity.

Mr Jain commended the Government for its focus on the speedy finalisation of assessments, the disposal of tax appeals and the rectification of petitions. He said it is now necessary to review the time-limit to furnish belated returns under section 139(4) for completion of assessments.

As there is ample scope to fine-tune these time-limits, the present period of six years for reopening of assessments (u/s 147) may be reduced to four years, he said. It is felt that the period of four years should be computed from the end of the relevant fiscal and not from the end of the assessment year.

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