PAN-India Fraud: Scamsters targets Women, Farmers and Dead People

A Mumbai-based homemaker and senior citizen had to take her case to the Income-tax Appellate Tribunal (ITAT) over alleged PAN misuse after a tax official determined that she sold immovable property worth Rs.1.3 crore in 2010-11 and classified the proceeds as income.

The woman, who is illiterate and a cancer patient, failed to respond to IT notices. At a recent hearing before the ITAT, her counsel claimed that her PAN was abused in the property registration.

The tribunal highlighted that the IT officer had not done an independent investigation, such as obtaining information from the property’s registrar and buyer. It instructed the Income tax department to obtain the entire information from the registrar and provide the woman with a fair hearing.

This was not an isolated case. Cases of PAN misuse have been recorded throughout India, including Usha Soni in Betul, MP, who received an IT notice of Rs.7.5 crore a decade after her death, and Nand Lal, a small shopkeeper in Rajasthan, who filed a police complaint after obtaining an IT notice of Rs.12.2 crore. PAN fraudsters frequently target the deceased, senior citizens, farmers, and students.

“Misuse of the PAN by unscrupulous elements can result in a number of problems, including massive demands imposed on an individual due to additions to his or her income during assessment for transactions that do not pertain to the PAN holder. While one’s PAN must be kept strictly confidential, the truth is that details are freely exchanged for a variety of reasons,” stated chartered accountant Ketan Vajani.

“Individuals should refrain from sharing their PAN information/ PAN card where it is not mandated by the guidelines of government or is in the public domain,” the Central Board of Direct Taxes (CBDT) stated in an email response to a query.

The current PAN database contains more than 70 crores. The link with Aadhaar was implemented primarily to prevent/stop the misuse of PAN. However, in cases when PAN is suspected of being misused, a report should be filed with the police.

In light of the ITAT order, a tax professional stated, “The issue of the IT department relying solely on information filed by other agencies and commencing an action against taxpayers is a severe issue that requires the department to reassess its approach. It has now become necessary for every taxpayer to review his or her annual information statement (AIS) every few weeks.”

AIS provides a wide range of information collected from reporting companies (banks and property registrars), including bank interest, dividends, securities purchase and sale activities, and immovable property.

When someone discovers an incorrect entry in the AIS, it is best to offer feedback to the AIS system quickly and point out the error. If the error is not corrected, the need to file an FIR with the police arises.

CBDT responded that once the reporting entity certifies the transaction unless the PAN holder reports the matter to the police and the case is examined, the IT department cannot take any further action.

It also said that a PAN is not deactivated in the case of the holder’s death, allowing the IT department to commence or complete any ongoing IT actions. However, the family members/legal heirs of such a PAN bearer must notify the jurisdictional assessing officer (whose contact information is available on the e-portal), together with copies of the PAN card and death certificate, after which the officer will record the death event against the PAN.