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Why is CBDT destroying the financial system?

NewsWhy is CBDT destroying the financial system?

If the CBDT can’t take physical copies of tax returns on record, they have lost their ability to distinguish the genuine from the fake. The real from the unreal.


Pune: Although millions have paid all taxes and filed returns for decades, this year, the CBDT made it impossible for them to file their returns without an Aadhaar. Many prepared their tax returns, as usual, and mailed them to the tax processing centre with a copy to their assessing officer. Instead of acknowledging their returns, the CBDT has been spamming those who filed returns manually with emails declaring that “You have been a regular filer. However we couldn’t help but notice, that you were missing this year. So here is a little reminder.”

If the CBDT can’t take physical copies of tax returns on record, they have lost their ability to distinguish the genuine from the fake. The real from the unreal. The original from the benami. The truthful from the fraudulent. It has also lost its ability to show courtesy due to those who have already paid taxes and the decency of politeness. It is sad if the CBDT has become indifferent and inhuman.

Having allotted a Permanent Account Number to 183,806,056 persons more than five years ago, to persons identified by documents other than Aadhaar, the CBDT also has history to identify those within these who have been taxpayers, those who have filed returns and those who have not undertaken financial transactions with their PAN. It is not just ridiculous and disrespectful to honest taxpayers to reject this history, but odd that this history is being wiped out.

To compound this insult with injury, the CBDT is treating as legitimate and genuine 207,493,867 PANs that are less than five years old, majority of who have no tax history and most of which were allotted to an uncertified, unverified and unaudited Aadhaar used as the proof of identity.

It is unbelievable that the CBDT has ignored that neither the UIDAI, nor any other government authority have verified, certified or audited the demographic or biometric data associated with any Aadhaar number. It has failed to take cognizance of the fact that the while the UIDAI used PAN, EPIC, passports, driving licences, ration cards as documents to issue Aadhaar, the UIDAI cannot provide any information about the primary documents used as proof of identity or address to obtain an Aadhaar, or their authenticity and validity. It has ignored that UIDAI told the Delhi and Mumbai High Courts that they cannot identify anyone uniquely with the biometrics they store, and that it is not the role of anyone in UIDAI to identify anyone. It has ignored that Justice P.B. Sawant, retired justice of the Supreme Court, had highlighted that at least 58 crore Aadhaar numbers were suspect and enabled money laundering and siphoning of subsidies and money from bank accounts. It has ignored that Aadhaar, therefore, cannot validate any PAN holder.

By forcing the linkage of Aadhaar to PAN through 139AA, the CBDT is making indistinguishable those PAN which are more than five years old and were mostly allotted based on documents other than Aadhaar as proof of identity, from those which are less than five years old and were allotted mostly using Aadhaar as a proof of identity. It is, therefore, destroying its own records with the history of those PANs which have paid taxes and those which have been filing returns every year. It is making those PANs which have tax history indistinguishable from PANs that lack this history. It is replacing PAN as the primary key for financial records with Aadhaar. It is ignoring that since Aadhaar was also issued using PAN as a proof of identity, requiring Aadhaar to ensure the validity of PAN legitimises fake PAN used to obtain Aadhaar. It is ignoring that 139AA, therefore, is the best way to legitimise millions of benami PAN.

The CBDT has ignored that its own database shows that there is a 15.7-fold increase of PANs from 2014 to 2019. This is not just unnatural, but alarming because it is a 15.7-fold increase over what was done over 40 years in just five years.

The CBDT has ignored that from its own data it is evident that the use of Aadhaar as a proof of identity has driven this phenomenal increase. 10,164,835 PANs were issued with Aadhaar as a proof of identity as against 16,298,382 that used other documents to establish identity after the PAN was declared mandatory for transactions above Rs 200,000 in December 2015. 10,665,230 PANs were issued with Aadhaar as a proof of identity in contrast to 8,021,160 PANs that were issued with other documents to establish proof of identity after demonetisation in November 2016 till March 2017. 170,703,256 PANs have been issued with Aadhaar as proof of identity, as against 26,348,645 PANs that were issued using other documents as proof of identity from March 2017, when the then Finance Minister, Arun Jaitley, introduced Section 139AA to the Income Tax Act requiring a PAN-Aadhaar linkage.

The CBDT has ignored that once an Aadhaar is linked to a PAN, or used in place of a PAN, the government replaces the PAN as the primary identifier of taxpayers with Aadhaar. This makes those allotted a PAN based on an Aadhaar indistinguishable from those whose PAN was allotted using other IDs and had a tax history. This also makes it impossible to establish the identity of the person holding a financial instrument or undertaking a financial transaction, as the Aadhaar linked to a PAN can alter the identity of the Aadhaar linked PAN holder by processes that are not controlled, certified, verified or audited by the CBDT as would be required under 139A(2). This makes benami PAN, and consequently benami transactions even more difficult, if not impossible, to trace.

The CBDT has ignored that once Aadhaar is linked to financial instruments it also enables the money transfers using Aadhaar payment systems that have volatile mapping to bank accounts and can make money transfers untraceable, facilitating money laundering. With 139AA, therefore, millions of benami PANs used for parking black money, parking bribes, siphoning subsidy from the Consolidated Fund of India, making fake insurance claims, owning or transacting assets, and creating NPAs through fake borrowing will remain untraceable. India will have replaced Panama as a tax haven. The increase in PAN numbers linked to Aadhaar creates a false sense of identification while legitimising money laundering through millions of benami PAN.

139AA and the CBDT’s forcing the use of Aadhaar in financial transactions place everyone in the country in disproportional risk. This is enough cause to question if any legitimate proportionate, legal purpose, public interest, or any national interest is served by either 139AA or the use of Aadhaar in any financial or KYC transaction.

It is shocking that the CBDT has not taken steps to end the criminalisation of the financial system in India and is instead treating genuine taxpayers as criminals.

It would be the CBDT’s responsibility, as a guardian of national interest and public interest, to free every taxpayer from disproportionate risks of Aadhaar, and take immediate steps to protect every taxpayer who has filed returns for several decades, the financial system, and the country, from the fraud of Aadhaar.

It is now necessary to set up an expert committee, drawn from persons who have no interests in Aadhaar and related technologies, monitored by the Supreme Court to recommend restoring the financial system back to safety, to investigate how the financial system of the country was misled and corrupted to such an extent and why the CBDT has ignored the destruction of the financial system.

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.

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