PAN JEWELLERY – MAKE IT COMPULSORY IRRESPECIVE OF METHOD OF PAYMENT.

[C.A. DEV KUMAR KOTHARI]

Recent Press Reports:

As per recent press reports the GOI is considering to make quoting of Permanent Account Number

(PAN) compulsory in case of certain cash transactions including for purchase of gold, bullion, jewellery, … etc.

Effective use of PAN:

Merely quoting of PAN should not be considered as compliance. Merely quoting of PAN can be a source of harassment in case PAN given by customer is wrong, duplicate or bogus or has been surrendered etc. To make proper use of PAN the following steps need to be taken:

The PAN card should contain permanent address of the PAN card holder and his main branches.

The details of PAN should be made verifiable on the website of IT department. These should be made available on the website of the government departments and should be easily accessible free of cost. By mentioning PAN one should be able to see all details of the PAN holder including his name, addresses of permanent establishment/ residence and branches, photo, signature etc.

The seller must be given a freedom to arrange for delivery of goods sold at such permanent address or any recorded branch address of PAN holder.

The PAN card holder should provide a Xerox copy of PAN card duly certified as true copy with duly certified fact that the said PAN is still in force on the date of transaction.

PAN card holder must also produce his original PAN card if required by the seller.

Press report analyzed:

http://www.business-standard.com/india/news/now-quote-pan-to-buy-gold-in-cash/433407/

Now, quote PAN to buy gold in cash

Vrishti Beniwal / New Delhi April 25, 2011, 0:35 IST

From news report	Analysis / Remarks.
Under attack for not being able to curb black money transactions, the finance ministry is planning to make quoting of the permanent account number (PAN) mandatory for more transactions.	Under attack must be the big chunk of black money in foreign banks and money and property in India with politicians and Bureaucrats. And not petty sums of money spent by individuals and others while purchasing jewellery and insurance policies. These will not be big money but a big source of harassment of people – another source of creation of black money by people who can harass public. The reason of black money is not only power to be exercised in favor of someone but major reason is the power to harass people.
The income tax (I-T) department may make quoting of PAN in documents for sale and purchase of bullion or jewellery involving cash transfer of Rs 5 lakh or more mandatory.	It should be made mandatory for all transactions (cash/ cheque/ DD/PO or credit/ exchange etc,) where transaction value is more than Rs. one lakh. The limit of Rs. five lakh is very high and will not serve purpose. This is because a buyer of jewellery of say Rs. twenty five lakh can split his purchases in five different names/ different shops and different manner.In all other cases of transaction above Rs. fifty thousand, the ID proof of buyer / seller must be made compulsory.
PAN may also be required for cash payment of Rs 1 lakh or more as life insurance premium, amid concerns that insurgents may be parking funds in high-value insurance policies.	This has already been made compulsory by way of a circular. However as expressed by the author in his article**    there must be amendment by way of amendment in rules.** http://www.taxmanagementindia.com/visitor/detail_article.asp?ArticleID=440 / Circular of CBDT dated 23.07.2009 about PAN for Insurance Premium - whether valid or exercise of power without authority?
The department is also considering changes in the limits for cash payment for foreign travel. At present, the cap is Rs 25,000, including fare, the fee of a travel agent/tour operator and purchase of foreign currency.	The requirement of PAN should be for all transactions paid by any method and not necessarily paid in cash. The limit of Rs.25000/- is very low it should be at least Rs.50000/- for each individual, particularly in view of high inflation during last few years.
“Rules are being changed with regard to PAN requirement in cash transactions to track the investment pattern of high net worth individuals. This will help curb black money,” said a finance ministry official who did not want to be named.	The people who are holding undisclosed cash or other properties are not high net worth individuals (HNI) in eye of the system of the revenue. Why attempt is only when money is spent, why the money or other undisclosed property is not being chased or attempt is not made to bring the same in productive channels and also to collect tax?
The Central Board of Direct Taxes (CBDT) may shortly notify the changes.	As discussed in the article referred above the changes need to be implemented by way of amendment of IT Rules. thttp://www.taxmanagementindia.com/visitor/detail_article.asp?ArticleID=440
“Furnishing PAN is just one leg of the transaction. Whenever PAN is captured, the trader should put it in the invoice and summarise it in the form of the annual information return. Then, the government can match the transaction with the return. The idea is to check black money, as cash transactions don’t figure in official channels,” said Amitabh Singh, tax partner, Ernst & Young.	The requirement about reporting in Annual Information Return is also to be amended. For jewellery the requirement can be made on quarterly basis.
The 10-digit PAN enables the I-T department to link all transactions of a person. It was introduced to facilitate linking of various documents, including payment of taxes, assessment, tax demand and tax arrears. It facilitates easy retrieval and matching of information related to investment, borrowing and other business activities of tax-payers collected through various sources.
From April 2010, all specified transactions without PAN attract tax. Tax higher than the prescribed rate or 20 per cent is deducted on all transactions liable to tax deducted at source (TDS) in cases where PAN is not available. The law is also applicable to non-residents in respect of payments or remittances liable to TDS.	Incidentally it may be noted that there is generally no TDS on sale of goods.  A seller selling goods like jewellery is not required to deduct or collect tax. In few specified cases in case of sale of some items the seller is required to collect tax (known as tax collected at source). At present there is no TDS or TCS in case of purchase and sale of gold or any jewellery. Therefore, the provision of section 206AA is not applicable in such cases of sale or purchase of jewellery.
The I-T department has already made it mandatory for employers to quote PANs of employees and parties from whom tax is deducted while filing TDS returns. The penalty for not quoting PAN, announced in Budget 2009, was aimed at strengthening the data base of the revenue department and increasing tax compliance.	The black money which is under massive attack (that is the money or property lying abroad or money and property lying undisclosed in India cannot be brought by making PAN compulsory.

Jewellery and black money:

It is commonly known that lot of jewellery and bullion is purchased by people who earn income in cash that too without requirement to disclose the same rather when it is impossible to disclose the same for ethical reasons.

Many are unable to disclose the same because the money is ill gotten – these are spending large amounts in jewellery. Some people are earning extra money by working extra and overtime their income is hard earned income and not ill-gotten money. The defect is only that they have not paid income tax on some of their income.

The people who falls in this class are – high spenders who are politicians and bureaucrats senior and junior government employees in position to have extra income by way of bribes. These are buyers in millions and crores. As per market grapevine, in cases of jewellery shops many times the AO make additions to income of the jewelers because the buyer of jewellery was not available or traceable on the address given by the buyer to the jeweler. The jeweler has already disclosed income by way of sale, therefore there is no justification in such additions and such additions are generally deleted as they are supported by stock with the seller. The Income-tax department must trace the person who purchased the jewellery, made payment in cash and gave wrong address to the jewellery shop keeper.

In low and medium spender class spending in cash are people who work extra on part time basis without disclosure of a part of income. The money so earned is not ill gotten money; it is simply irregular because legal obligation to pay income-tax has not been complied with.

Harassment should not be target:

The requirement to quote PAN is reasonable when transaction value is high. However, it should not be a source of harassment. The seller of goods can rely on PAN furnished by the buyer. If the buyer gives a wrong PAN, then what the seller can do? To avoid harassment of sellers or other persons who   collect information from buyers it is desirable that the following requirements should also be made compulsory:

Under attack for not being able to curb black money transactions, the finance ministry is planning to make quoting of the permanent account number (PAN) mandatory for more transactions.

The income tax (I-T) department may make quoting of PAN in documents for sale and purchase of bullion or jewellery involving cash transfer of Rs 5 lakh or more mandatory.

PAN may also be required for cash payment of Rs 1 lakh or more as life insurance premium, amid concerns that insurgents may be parking funds in high-value insurance policies.

The department is also considering changes in the limits for cash payment for foreign travel. At present, the cap is Rs 25,000, including fare, the fee of a travel agent/tour operator and purchase of foreign currency.

“Rules are being changed with regard to PAN requirement in cash transactions to track the investment pattern of high net worth individuals. This will help curb black money,” said a finance ministry official who did not want to be named.

The Central Board of Direct Taxes (CBDT) may shortly notify the changes.

“Furnishing PAN is just one leg of the transaction. Whenever PAN is captured, the trader should put it in the invoice and summarise it in the form of the annual information return. Then, the government can match the transaction with the return. The idea is to check black money, as cash transactions don’t figure in official channels,” said Amitabh Singh, tax partner, Ernst & Young.

The 10-digit PAN enables the I-T department to link all transactions of a person. It was introduced to facilitate linking of various documents, including payment of taxes, assessment, tax demand and tax arrears. It facilitates easy retrieval and matching of information related to investment, borrowing and other business activities of tax-payers collected through various sources.

From April 2010, all specified transactions without PAN attract tax. Tax higher than the prescribed rate or 20 per cent is deducted on all transactions liable to tax deducted at source (TDS) in cases where PAN is not available. The law is also applicable to non-residents in respect of payments or remittances liable to TDS.

The I-T department has already made it mandatory for employers to quote PANs of employees and parties from whom tax is deducted while filing TDS returns. The penalty for not quoting PAN, announced in Budget 2009, was aimed at strengthening the data base of the revenue department and increasing tax compliance.

DIRECT TAXES

25/04/2011

Now, quote PAN to buy gold in cash
Under attack for not being able to curb black money transactions, the finance ministry is planning to make quoting of the permanent account number (PAN) mandatory for more transactions. The income tax (I-T) department may make quoting of PAN in documents for sale and purchase of bullion or jewellery involving cash transfer of Rs 5 lakh or more mandatory. PAN may also be required for cash payment of Rs 1 lakh or more as life insurance premium, amid concerns that insurgents may be parking funds in high-value insurance policies. The department is also considering changes in the limits for cash payment for foreign travel. At present, the cap is Rs 25,000, including fare, the fee of a travel agent/tour operator and purchase of foreign currency. “Rules are being changed with regard to PAN requirement in cash transactions to track the investment pattern of high net worth individuals. This will help curb black money,” said a finance ministry official who did not want to be named. The Central Board of Direct Taxes (CBDT) may shortly notify the changes.

Source : http://www.business-standard.com/india/news/now-quote-pan-to-buy-gold-in-cash/433407/

http://www.business-standard.com/india/news/now-quote-pan-to-buy-gold-in-cash/433407/

Now, quote PAN to buy gold in cash

Vrishti Beniwal / New Delhi April 25, 2011, 0:35 IST

Under attack for not being able to curb black money transactions, the finance ministry is planning to make quoting of the permanent account number (PAN) mandatory for more transactions.

The income tax (I-T) department may make quoting of PAN in documents for sale and purchase of bullion or jewellery involving cash transfer of Rs 5 lakh or more mandatory.

PAN may also be required for cash payment of Rs 1 lakh or more as life insurance premium, amid concerns that insurgents may be parking funds in high-value insurance policies.

The department is also considering changes in the limits for cash payment for foreign travel. At present, the cap is Rs 25,000, including fare, the fee of a travel agent/tour operator and purchase of foreign currency.

“Rules are being changed with regard to PAN requirement in cash transactions to track the investment pattern of high net worth individuals. This will help curb black money,” said a finance ministry official who did not want to be named.

The Central Board of Direct Taxes (CBDT) may shortly notify the changes.

“Furnishing PAN is just one leg of the transaction. Whenever PAN is captured, the trader should put it in the invoice and summarise it in the form of the annual information return. Then, the government can match the transaction with the return. The idea is to check black money, as cash transactions don’t figure in official channels,” said Amitabh Singh, tax partner, Ernst & Young.

The 10-digit PAN enables the I-T department to link all transactions of a person. It was introduced to facilitate linking of various documents, including payment of taxes, assessment, tax demand and tax arrears. It facilitates easy retrieval and matching of information related to investment, borrowing and other business activities of tax-payers collected through various sources.

From April 2010, all specified transactions without PAN attract tax. Tax higher than the prescribed rate or 20 per cent is deducted on all transactions liable to tax deducted at source (TDS) in cases where PAN is not available. The law is also applicable to non-residents in respect of payments or remittances liable to TDS.

The I-T department has already made it mandatory for employers to quote PANs of employees and parties from whom tax is deducted while filing TDS returns. The penalty for not quoting PAN, announced in Budget 2009, was aimed at strengthening the data base of the revenue department and increasing tax compliance.