BID TO CHECK BENAMI TRANSACTIONS
Realty Transactions Evade Taxmen Using Fake PANs
Tax officials are intensifying efforts to improve the traceability of property ownership and combat the misuse of fictitious or misleading Permanent Account Numbers (PANs) in real estate transactions.
Escaping the Radar
In Mumbai and across the nation, thousands of property deals are concerningly slipping under the radar of tax authorities. Deliberate lapses in reporting, combined with the fraudulent use of PANs by buyers and sellers, have allowed many transactions to evade the scrutiny of the Income Tax (IT) department.
Officials from the investigation wing of the tax office are currently reviewing the records of property registrars to ensure compliance and accuracy. Property registrars are mandated to report purchases and sales of properties valued at ₹30 lakh or more. However, there are instances where certain parties, allegedly in collusion with some registrar officials, manage to ensure that these transactions remain unreported or are incorrectly documented with erroneous PANs. This obfuscation makes tracing these deals exceedingly difficult.
A Nationwide Push
This investigative move aligns with a broader, strategic initiative aimed at curbing benami transactions and unaccounted wealth, particularly in high-value real estate, which has historically been utilized as a conduit for laundering black money through proxies or shell entities.
Ashish Karundia, founder of the CA firm Ashish Karundia & Co., advocates for a critical reform: mandatory e-verification of PAN and Aadhaar for all parties prior to property registration. Such a measure could significantly eliminate the use of fake or incorrect PAN or Aadhaar details, enhancing traceability and ensuring that property records genuinely reflect ownership. This reform could act as a strong deterrent against tax evasion,” he stated.
Tracking Agricultural Income
Earlier this year, the IT department undertook a nationwide investigation targeting individuals and entities declaring agricultural incomes of ₹50 lakh or more without substantiating land ownership. They are also examining cases involving inflated farm income declarations, where the reported earnings were inconsistent with general trends and available public data.
Areas of Focus
Tax officials are scrutinizing property deal records in several key cities, including Varanasi, Lucknow, Kanpur, Gorakhpur, and Bhopal. The IT department has instructed its field formations to conduct inspections and surveys based on this analytical data. An official familiar with the operation referred to it as a “nudge campaign” aimed at improving compliance and promoting voluntary disclosures. Many field formations are currently undertaking over two dozen survey and inspection actions,” the official noted.
Banking Sector Scrutiny
Under Rule 114E of the IT Rules, banks are required to report high-value cash deposits and withdrawals by account holders to the tax office. Manish Dafria, managing partner of V.K. Dafria & Co., a CA firm based in Indore, revealed that, akin to property transactions, there are concerns that some smaller cooperative banks, with weaker internal controls, may not be reporting substantial cash transactions adequately.
In recent months, officials from the Intelligence and Criminal Investigation wing of the IT department have conducted outreach programs in cities such as Indore, Bhopal, Lucknow, and Jaipur, emphasizing the importance of accurate reporting. This initiative was followed by surveys at the head offices of certain cooperative banks, where discrepancies between actual cash transactions and reported figures were identified.
Such information from banks and registrars comes together in taxpayers’ Annual Information Statements. The tax department relies on matching this data with a taxpayer’s overall profile for selection for scrutiny and reassessment. Therefore, receiving accurate data from the source about all reportable transactions is crucial for the department,” Dafria concluded.
