From government to private: In 3 years, 1.54 lakh J&K Bank accounts were not linked to PAN

• 32,498 Government-linked accounts with credits of Rs 4,68,508 crore, including accounts of Self Help Group (SHG) and Cluster Level Federation (CLF) members.
• 1.25 lakh private accounts with total credits of Rs 36,789 crore.
• 10,464 private accounts with credits of Rs 50 lakh or more in a financial year — of these, 566 belonged to 510 individuals with PAN cards but these details were not furnished to the Bank while opening the accounts.

Asked about the probe, J&K Bank told The Indian Express (see page 2) that it subsequently called for a “supervisory meeting” with the RBI and submitted a “comprehensive compliance” report. It said PAN linking has now been made mandatory for a majority of categories of accounts, including current accounts.

The probe began with the Srinagar-based bank handing over a data dump to Income Tax authorities, during the 2024 Assembly elections, and later widened into a full-fledged “open inquiry” with the permission of the Reserve Bank of India.

A key finding: “account holders were setting up multifarious bank accounts in the names of individuals and entities without any PAN linked with them”; “large transactions were made through the bank which were not recorded or highlighted to the Income Tax Department”.

In all, 68 such bank accounts, opened between 2004 and 2013, were traced, several of them belonging to textile companies located in the valley. Substantial transactions were carried out in these unlinked accounts without being reported to the I-T Department, the probe report states.

Once the scope of the probe was widened, the J&K Bank admitted it had not flagged the problem of large transactions on unlinked accounts opened only through Form 60, and that it was charging 20% TDS on interest for these unlinked accounts, against 10% for PAN-linked account holders.

The probe found that unlinked accounts had also been opened for availing Government schemes, including J&K Bank Bima Bachat Khata, Prime Minister’s Employment Generation Programme (PMEGP), National Urban Livelihood Mission (NULM), Subsidy Reserve Fund Account (SRFA) and J&K’s Spurring Entrepreneurship Initiative scheme.

For instance, cumulative credits of Rs 1.55 crore were recorded in SBNCCs (Savings Accounts for NCC Cadets), the probe found.

The probe also analysed the top 30 non-PAN linked private accounts for which PAN numbers were traced by the I-T Department, comparing them with declarations in Income Tax Returns (ITRs). In 11 cases, including owners of cement stores, gas stations, fabric stores and a hospital, it found credits in the J&K Bank to be higher than what had been declared in ITRs.

A glaring example was that of an account-holder with credits of Rs 4.05 crore in a non-PAN linked account in 2023-24, but a gross income of Rs 3.22 lakh shown in the ITR for that year. There was also an infrastructure company that deposited Rs 57.88 crore in its J&K Bank account in the same year but showed gross receipts of only Rs 38.49 crore in its ITR.

The I-T Department noted that “such a practice helps the assessee conceal his/ her assets from the Income Tax scanner as no PAN has been linked to such accounts and it is suspected that this is causing huge loss of revenue to the exchequer. This tax evasion tactic has been possible only because such Non PAN linked accounts were allowed to be opened by the J&K Bank”.

The I-T Department recommended that if a specified threshold of quantum of deposits in a non-PAN account is breached, Suspicious Transaction Reports (STRs) should be filed with the Department and findings shared with the RBI. These and other recommendations, it noted, will promote greater accountability and transparency, as well as “enforcement of tax compliance, prevention of money laundering & terror financing and ensuring the integrity and stability of the financial stability of India”.