Immovable property deals without PAN on income tax radar

Empowered CIB to play lead role in recovering tax evaded.

Third-party information related to high-value transactions in immovable properties would be one of the focus areas of the Income Tax (I-T) Department this year, for tracking tax evasion and generating additional tax revenues.

A senior Income Tax Department official told Business Standard that tax evasion in the high-value deals where permanent account number (PAN) records were not available had been a huge untapped area.

“Areas such as sale and purchase of immovable properties and fixed deposits by agriculturists can easily be tracked to identify and recover tax due,” he added.

The official said the Central Information Branch (CIB) of the department, which collects third-party information from sources other than the annual information return (AIR) on these transactions, is going to play a critical role.

The AIR and CIB data would be merged and available in a composite form for taking action. The CIB has now been empowered to collect, verify and take action on the basis of information gathered. “This will expedite action in the cases where credible information on tax evasion would come from the third parties,” said the official.

The department is also dwelling on the idea of making PAN mandatory in the immovable property transactions. This may be done initially in the urban areas.

With its focus on third-party information, the department also plans to look at the mismatch between the income and company profile of directors in the cases where there would be stark differences in the I-T returns and company details filed electronically to the ministry of corporate affairs.

The department plans to match the income-tax details filed in the I-T returns of the directors with their investments in the companies floated by them for tracking tax evasion.

It has been noticed in some cases that the income of directors in the previous years shown in the I-T returns didn’t match with their investments in companies.

With an increase in electronic filing of income-tax and corporate returns, it is now easy to match the records.

“If somebody has shown that his income in the previous years had been around Rs 2.5 lakh and he puts in Rs 50 lakh as share capital in his company, then obviously there is a mismatch which needs to be checked,” said an official associated with this exercise.

The ministry of corporate affairs has registered more than 300,000 companies online since its implementation in 2006. Details about the directors, including the capital utilised in formation of the companies, are available on the ministry’s website.

In the past few years, the ministry has made substantial progress in stabilising the process of electronic filing of company details and returns to bring in transparency and making company data easily accessible.