How CBDT Fails To Protect Bonafide Taxpayers and Uses Coercion through 139AA
This year, like many other taxpayers, I filed the physical copy of my returns by mail to the income-tax (I-T) authorities, with a copy to my assessing officer. For several weeks now, I have emails, as do many other taxpayers, with the subject line “Missed you this time. You can still file your income tax return. (Ignore if Filed).” The message asserts that “You have been a regular filer. However we could not help but notice that you were missing this year. So here is a little reminder.”
 
It is sad, if the I-T department has become a robot. 
 
Robots are not human. They cannot read the letters sent to them. They cannot take physical copies of tax returns on record. They cannot distinguish the genuine from the fake. The real from the unreal. The original from the benami. The truthful from the fraudulent.
 
This year the I-T department asked for a 16-digit number Aadhaar, whose demographic and biometric data is neither certified by anyone, nor has it been verified or audited by anyone and that which cannot be used as the basis on which to identify a taxpayer.
 
They decided that the permanent account number (PAN) issued by them was not enough to distinguish  genuine taxpayers, those who had been filing tax returns for years, from fraudulent ones. This is so, even though the income tax department does recognise that I have been a regular filer and that they have been emailing me certificates for paying my tax!
 
From the Income Tax website data there is a 15.7-fold increase in PAN from 2014 to 2019. This is not just unnatural, but alarming because it amounts to a 15.7-fold increase over what was done during 40 years in just five years. 
 
The use of Aadhaar as proof of identity has driven this phenomenal increase. From the data obtained from the Central Board of Direct Taxes (CBDT) under the Right to Information (RTI) Act,it is evident that 10,164,835 (over 10.1 million)PANs were issued with Aadhaar as proof of identity as against 16,298,382 (16.3 million)that used other documents to establish identity after the PAN was declared mandatory for transactions above Rs2 lakh in December 2015. 
 
The number of PANs issued with Aadhaar as proof of identity between demonetisation in November 2016 till March 2017 was 10,665,230 (10.6 million) in contrast to 8,021,160 (8.02 million PANs issued with other documents to establish identity. 
 
From March 2017, when the then finance minister, Arun Jaitley, introduced Section 139AA to the Income-Tax Act requiring a PAN-Aadhaar linkage, 17.07 crore PANs have been issued with Aadhaar as the proof of identity as against 26.3 million PANs issuedusing other documents as proof of identity. 
 
Most of the PANs issued using Aadhaar have no history of having filed any tax returns. They have not been certified, verified or audited by anyone to confirm that they belong to real individuals. These PANs do not establish genuineness of individuals or taxpayers.
 
By linking Aadhaar to PAN the I-T department is making genuine taxpayers indistinguishable from the benami taxpayers who obtained a PAN solely based on Aadhaar. If a fake PAN was used to create an Aadhaar, linking it back to the PAN does not make the PAN verified or genuine. 
 
There is no certified, verified or audited information that the Aadhaar brings to add any value to the PAN database. In fact, it treats the genuine taxpayers, who have been filing regular taxes, as frauds and those with no certified and verified data as valid and genuine. 
 
It is shocking that despite being alerted about this, the CBDT has failed to end the Aadhaar-PAN linkage, stop the use of Aadhaar for financial transactions, and to initiate inquiry into the massive fraud been perpetrated on the financial system and the people of India. 
 
Since the CBDT has not shut down the Aadhaar linkage, despite writing to them from 2018, I have written an open letter to CBDT in the hope that others too will be encouraged to do the same and lead to a change for the better.
 
 
(Dr Anupam Saraph is a Future Designer, Professor of Systems and Decision Sciences and an internationally renowned expert in governance of complex systems. He can be reached @anupamsaraph on Twitter.
Comments
m.prabhu.shankar
4 years ago
Excellent Article. Thank you Dr Anupam Saraph
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