Thanks to demonetisation, the taxman has a wealth of information on potential tax evaders. After all, if 18 lakh bank accounts have seen around R4.2 lakh crore of cash deposited in them between November 8 and December 31 last year, chances are a significant part of it will not match with the income tax assessments of the individuals/companies to whom these accounts belong. Naturally, once the owners of these accounts reply to the queries raised by the taxman, they will continue to be under scrutiny, but the scope for considerable tax evasion is built into a system where, while there are 112 crore Aadhaar numbers issued—there will soon be one for every citizen—but there are only 25 crore Permanent Account Numbers (PAN) and an even smaller number of taxpayers. And with 143 crore bank accounts—that’s far greater than the bankable population—but only a small fraction of them are linked to an Aadhaar number, the potential for tax evasion is even larger.
As a result of this, though the taxman collects data on certain types of high-profile expenditure like sales of cars, gold, overseas travel, payment of debit/credit cards, purchase of mutual funds and shares etc, it is difficult to link this with either a PAN or a bank account. So, let’s say the taxman gets data from car showrooms or jewellers on a person spending R2.9 lakh in cash—if the person does not have a PAN, the information is of little use to the taxman since there is no way of knowing whether the person should be paying taxes or whether this is one of the multiple transactions being split to avoid attention; if the amount is given by cheque, but the bank account is not linked to a PAN, the data is equally useless. If, on the other hand, all PAN are linked to Aadhaar numbers, the taxman can ask providers of information to report Aadhaar numbers of spenders and use this to build up a profile—the moment a certain Aadhaar number reports an expenditure above a certain amount, an alarm should get triggered if there is no PAN linked to this or if the expenditure is not in keeping with the income declared. Once all bank accounts are linked to Aadhaar numbers and PAN, the taxman can use this triangulation to identify tax evaders. To coin an acronym, Bank Account-Aadhaar-PAN will be the BAAP of tax evasion.