1.54 lakh accounts in J&K Bank with no PAN, tax probe flags ‘systemic failure’

An Income Tax probe has found that 1.54 lakh accounts were opened with J&K Bank between 2021 and 2024 without any PAN details linked to them. And, deposits in such accounts with transactions touching Rs 15 lakh or more in a financial year totalled Rs 4.88 lakh crore, records investigated by The Indian Express show. So much so that in its final report submitted late last year, the I-T Department said the probe’s findings point to a “systemic failure” and a “significant red flag”, warning that the unlinked accounts, with their substantial transaction volumes, present “a staggering potential avenue for tax evasion”. Most of the accounts under the I-T scanner were Savings Bank accounts, opened merely by filling Form 60, a “declaration form” used by people without PAN cards. The IT probe found that these non-PAN-linked accounts included: 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. Also Read | ‘Fake loans, unauthorised transactions’ unearthed at bank in J-K, case filed 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. ExplainedUnder watchThe J&K Bank accounts not linked to PAN form less than 1 per cent of the bank’s over-2 crore accounts base. But the range of such accounts, from corporate entities to those linked to government schemes, has brought them under the tax scanner. 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”. Strengthened framework: J&K Bank Responding to queries from The Indian Express on the I-T probe, J&K Bank's Group Compliance Officer said: "The matter arose from a data dump submitted during an exercise undertaken during the election process, following which the information was examined by the Income Tax Department and was subsequently subjected to RBI and governmental scrutiny. "The bank has comprehensively addressed the observations by strengthening its PAN/KYC and AML (anti money laundering)/CFT (Counter Financing of Terrorism) framework. While acceptance of Form 60 is a legally permitted mechanism under the Income-tax rules for eligible customers, the Bank has significantly enhanced monitoring by mandating PAN for certain identified categories of accounts, automating threshold-based surveillance and ensuring STR (Suspicious Transaction Reports) reporting, wherever warranted, in full compliance with RBI, and statutory guidelines. "The RBI reviewed the matter during a supervisory meeting with the Bank's senior management and advised further strengthening of the existing framework. The Bank promptly implemented the required enhancements, reinforced its internal controls and submitted a comprehensive compliance report to the RBI. "The Bank has strengthened its PAN compliance framework through technology-driven controls, making PAN mandatory for identified categories of accounts and by automating the monitoring of existing accounts crossing prescribed thresholds. The Bank has instituted a mechanism of periodic quarterly review by the Chief Data Officer to ensure availability of PAN details in respect of accounts where PAN has been made mandatory, which is placed before the Audit Committee of the Board. "The Bank's policy is to ensure regulatory compliance while protecting customer interests. Accordingly, rather than closing accounts, customers are provided adequate opportunity to submit PAN. Where PAN is not furnished despite due notice, debit operations are restricted till submission and validation of PAN. "The revised framework provides for continuous system-based monitoring, automatic identification of threshold-triggered accounts, time-bound PAN compliance through customer notifications, and regulatory restrictions only in cases of continued non-compliance, with immediate restoration upon PAN validation. The exercise has further strengthened the Bank's governance and compliance framework."