Income Tax Dept warns public against cash dealings of Rs 2 lakh or more saying that the receiver of the amount will have to cough up an equal amount as penalty.

I-T to probe use of fake PAN cards in market trading

The Income Tax (I-T) department will seek details of trading worth several thousand crores on commodity and equity exchanges, which were carried out a few years ago using fake PAN (Permanent Account Number) cards.

A preliminary probe carried out by the Multi Commodity Exchange (MCX) between 2012 and 2015 found several fake PANs had been used, sources following the case told BusinessLine.

According to sources, trading volumes worth more than ₹15,000 crore may have been generated using fake PANs.

Both SEBI and erstwhile commodity regulator FMC had in a 2007 circular mandated unique client code (UCC) for entering any trade on exchange platforms. A UCC cannot be generated without giving PAN details. The exchanges made it compulsory for brokers to give the PAN details of clients for trading. However, for many years they did not cross-verify the details.

MCX started imposing heavy penalties on brokers who delayed submitting PAN details for know-your-client verification, but some of them protested that many others had submitted fake PANs but had been let off.

Sometime between 2012 and 2015, the MCX conducted a probe headed by its former regulatory official Narendra Ahlawat, and found that PAN details submitted by several brokers were either inaccurate or fake. The matter was taken to an internal committee. All the exchanges now have a system in place to cross-verify PAN details with the I-T database, but that came into place only two years ago.

“Not much of regulatory action has happened as the FMC and SEBI were about to be merged after the NSEL scam. A few brokers who had fake PAN cards surrendered their membership. But the file containing trading volumes and details of fake PAN cards still remains with the exchanges. The I-T department is eager to get it and has initiated the process,” the sources said.

Email queries sent to the MCX, the NCDEX and the NSE did not receive any response.

The MCX sent across a few regulatory circulars on how cross-verification of PAN card with the I-T database and mobile number was mandatory for exchanges, but did not reply to specific questions. The BSE said it had received a list of duplicated as well as invalid PANs from the I-T in 2016, and based on it, the exchange had barred trading on those cards.

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