India has two economies - official and Black economy

According to the Annual Information Return (AIR) filed with the government, high-value transactions amounted to more than Rs 55.7 lakh crore in 2007-08, almost double the Rs 27 lakh crore for the previous year. But about 30% or roughly 1 million of the 3.3 million transactions were without PAN being cited.

The department regards many of the high-value transactions as suspicious. The proportion of cases where PAN is not cited is highest in property sales of a declared value of Rs 30 lakh or more. Barely one in four such sellers has provided PAN.

Similarly, almost two-thirds of those who have cash deposits of Rs 10 lakh or more in savings bank accounts have not provided a PAN to the bank. Over half the credit card transactions of Rs 2 lakh or more have no PAN tagged to them.

Even more shockingly, of the 3,100 transactions of Rs 5 lakh or more in RBI bonds, aggregating to Rs 3.52 lakh crore, about 10% were carried out without mentioning any PAN.

But PAN not being provided is not the only reason the department is suspicious. It is also because in thousands of cases where a PAN has been provided, it is unable to trace the transaction back to the beneficiary.

In some cases this is because the PAN provided has turned out to be fake. In others, there are two or more PANs being used by the same person. In one such case, when the I-T department investigated further it found that the lady holding the two PANs had an income of over Rs 40 crore but had disclosed no income in her return for that year.

Another interesting case is that of a prominent US-based bank. The data provided by the bank on credit cards it had issued showed that just four PANs accounted for thousands of crores of rupees of transactions. On being confronted with this, sources said, the bank explained it away as a case of faulty data entry.

The department's suspicions are further strengthened by the fact that the Rs 3.12 crore collected through income and corporate taxes in 2007-08 does not quite square with such a large volume of high-value transactions.

A thorough investigation and linking of the transactions to the actual beneficiary could make the treasury richer, it feels. However, the scale on which the investigations are needed is simply beyond its capacity given the manpower available, department sources confessed. This has been conveyed to the government.

The AIRs are routinely reported to the I-T department for further investigation. The components include cash deposits of Rs 10 lakh and above in savings bank accounts, purchase and sale of immovable property above Rs 30 lakh, purchase of bonds and debentures, share transactions of Rs 5 lakh and above and credit card expenditure of Rs 2 lakh or more.

All information in the AIRs is supposed to be assessed and analysed in I-T investigations and matched with the I-T return of assessees against the PAN numbers mentioned in these high value transactions.

source - economictimes