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Season's greetings from the taxman
December, 04th 2006

Tax hounds are on the prowl. Thousands of people who have been found to have made high-value transactions worth 150% or more of their gross income during the last two years will be getting I-T department missives starting this week.

The departments directive is that these people, residents of the 60 cities in its computer-enabled network, should give written clarifications on the source of money used for the transactions since their I-T returns dont exactly show the same. If they fail to do so, further action would follow, a source said.

While those, who have mentioned PAN in high-value transaction will be the first to be checked, the smarter ones, who tried to conceal their identities by not quoting PAN, cannot escape either. Thanks to an internal search engine, through which such transactees can be trailed, the department has already identified thousands of such people and will be sending notices to them too, the source added.

We will complete the process of identifying the transactees who have not quoted PAN by month-end. The attempt will be to attribute PANs to these transactions in case they exist and match the transactions with the returns.

In case of glaring mismatch between the transaction value and the return that is, if the transaction size is 150% or more of the gross income quoted or if the returns are not filed at all, we will be asking them for an explanation. The notices to this category will be issued from the first week of January onwards, said the official.

The CBDTs search engine is equipped to trail the transactee, through cross-matching of names, addresses and other information in government databases, sources said. PAN was quoted in only 30% of transactions captured in AIR in 04-05. For such deals during 05-06 , 66% quoted PAN, according to the official. AIRs are third party information about purchase of property for over Rs 30 lakh, over Rs 2 lakh spend in a year through credit card or investment of over Rs 2 lakh in mutual funds.

He further added that the cumulative effect of these exercises, coupled with more focused and larger scrutiny of returns and traditional measures such as search and seizures would have a salutary effect on revenue. Finance minister P Chidambaram had earlier said AIR information would be used in a big way to catch evaders.
 
Following the finance ministers directive, the CBDT had set up a special committee to oversee the whole operation of using the AIR information to track evasion.

The AIR had thrown up 17,52,652 transactions carried out in 2004-05 involving 6,60,000 separate parties. It had brought to light that as many as 1,84,980 parties had undertaken high-value transactions with a permanent account number and about 4,75,019 without PAN.

Sources said these kind of transactions, which even if they do not carry PANs have details like date of birth and in some case fathers name also which can be used to fish out details from their income tax returns.

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