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Increased surveillance and a crackdown on black money led to a three-fold rise in PAN (permanent account number) registrations and an 18% rise in income tax returns, according to Livemint reports. This also led to a significant increase in the number of properties seized by the tax department to 475. “This is the effect of demonetisation and operation clean money launched in January. Data analysis of information collected during the months after demonetisation has led to higher surveillance and a more effective crackdown on black money,” a top official in the tax department told Livemint. The comments came days before the first anniversary of last year’s announcement to revoke legal tender status to Rs 500 and Rs 1,000 currency notes on November 8. In an effort to identify the defaulters, the tax department has embarked on an exercise to follow the money and track down defaulters. The official told Livemint that out of 1.8 million worth of questionable cash deposits made after demonetisation, specific cases of suspected tax evasion and other non-compliance have been identified for scrutiny. The department has two years to complete the scrutiny and assessment of these cases from the year in which the return is filed. 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 to justify their cash deposits post demonetisation. According to the Livemint report, of the 1.8 million deposits, around 200,000 were deposits of more than Rs 50 lakh in bank accounts soon after demonetisation. 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 tax department, the official said, 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 priority is to ensure compliance by those who pose large risk of revenue leakage to the exchequer,” said the official to Livemint. Furthermore, according to Livemint reports, Rahul Garg, partner, PwC India, said that tax compliance has improved after demonetisation. “Tax compliance is definitely improving as the data collected by the government after demonetisation 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." A second official, who also spoke on the condition of anonymity, told Livemint that the impact of demonetisation 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 the 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. Furthermore, 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. Data available from the finance ministry shows that the maximum benami properties were seized in Gujarat, followed by Tamil Nadu, Rajasthan, Mumbai and Bhopal. 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.