More than half the transactions under four of eight categories tracked under a scheme to reduce tax evasion lack a "valid" identification number issued by the Income-tax (I-T) Department.

This has reduced the department's ability to use the information collected to identify tax evaders. In 2007-08, the department captured around 1.2 million transactions amounting to Rs 384,185 crore (Rs 3,841.85 billion) in these four categories.

The data, captured under the annual information return (AIR), transactions ranging from cash deposits more than Rs 10 lakh (Rs 1 million) to sale or purchase of immovable property worth more than Rs 30 lakh (Rs 3 million). The I-T department now mandates people to declare these transactions in the annual tax return together with the Permanent Account Number (PAN) that it issues.

"There may be assessees who do not quote the PAN to evade tax scrutiny. There are also cases like land transactions by farmers who fail to quote a PAN because they do not have one," said a Central Board Direct Taxes (CBDT) official.

The latest data for assessment year 2007-08 show that only 27 per cent of transactions reported under property sales valued at Rs 30 lakh and above have valid PAN. The second lowest is cash deposits. The other two categories that are under 50 per cent mark are credit card payments and immovable property purchases worth more than Rs 30 lakh and above.

However, the percentage of valid PANs under these four categories have steadily increased since assessment year 2005-06. For AY 2005-06, only 12 per cent of transactions captured under credit card payments are valid. In two years, this number has more than tripled. Similarly, less than 20 per cent of transactions for house purchase and sales had a valid PAN.

But, even in AY 2007-08, four other categories -- mutual fund purchases worth Rs 2 lakh (Rs 200,000) and more, bonds/debentures purchases worth Rs 5 lakh (Rs 500,000) and more, payment of Rs 1 lakh (Rs 00,000) or more for acquiring shares and payment of Rs 5 lakh or more for purchasing RBI bonds -- have a 90 per cent rate of compliance.

The value of transactions has also increased manifold -- from Rs 16,79,234 crore (Rs 16,792.34 billion) worth of transactions in AY 2005-06 to Rs 54,15,035 crore (Rs 54,150.35 billion) in AY 2007-08. It is not known how many of these transactions have enabled the I-T department to pin down tax evaders and increase tax collections along with penalty and penal interest.

To enforce PAN compliance, the CBDT official said the I-T department investigates many cases every year, but is constrained by lack of manpower to look into all such cases.