ADMISSION AND VERIFICATION OF IDENTITY IN ELECTRONIC RECORDS

Verification of identity is also a problem for consumers, who want to be assured that the persons with whom they do business are who they claim to be . As a result, companies engaged in electronic commerce are developing "digital certificates" or "digital IDs" that can be used to verify a person's identity over the Internet. "Digital certificates" are issued by a trusted intermediary who verifies the identity of a person and performs appropriate background checks, depending on the level of assurance to be granted. The simplest level verifies that an e-mail message was sent from an indicated address. The next level verifies the digital ID holder through online identity verification against a consumer database. The highest level requires that the holder personally appear before a notary public to have a digital ID application notarized. Once a person's identity has been verified, the certificate is created using public key encryption techniques, which makes it independently verifiable by the recipient and Immune from tampering it.

Under clause (a), (b) (c) (d) subsection 2 of section 114 of Income tax Ordinance 2001 has make it obligatory on every person and company regarding providing evidence of the records, "...A return of income (a) shall be in the prescribed form; (b) shall state the information required by the form, including a declaration of the records kept by the taxpayer; (c) in the case of a person carrying on a business, shall include an income statement, balance sheet, and any other document as may be prescribed for the tax year; and (d) shall be signed by the person or the person's representative."

The validation of the details of any business transaction requires an ability to follow a similar audit trail as that which exists for conventional commerce. The following elements must therefore be present- access to the basic records related to a transaction must be available; and the integrity of those records must be authenticated. Taxpayers are required to keep accurate books and records, which are subject to examination by the income tax authorities in order to verify the income and expenses reported on the taxpayer's return. "...Although many taxpayers rely on computerized record keeping systems to a large extent, many transactions still originate as paper records which can be used to verify the accuracy of the electronic records. However, for taxpayers engaged in the sale of electronic goods or services, no paper records are likely to be created because customer orders are placed and fulfilled electronically and therefore the only record that exists of these transactions could be an electronic one. As all users of computers know, this creates the possibility for tax evasion and fraud because computerized records can be altered without a trace."

The "digital notarization" systems have been developed which are intended to make it possible to verify that electronic documents and records have not been altered. Public key encryption also permits a taxpayer to encrypt his financial records to prevent their examination on audit. It would seem that this should be treated no differently from failing to keep or destroying paper records. Even taxpayers engaged in the sale of physical, as opposed to electronic, goods may soon receive orders and issue invoices electronically. Electronic "documents" must be verifiable in order to minimize the potential for tax evasion.

THE CONCEALMENT OF THE ELECTRONC TRANSACTION LEGAL ISSUES FOR TAXATING AUTHORITIES

These are many factors which can lead to evasion the collection of the e-commerce taxation. The section starting from 108 to 112 has enunciated in income tax ordinance of 2001 are related with the anti avoidance measure that could be adopted by the commissioner for the purposes avoidance of the taxes. In spite of fact that the anti avoidance provisions are available for curbing the avoidance of the taxes but the legislate provision are not sufficient to meet the complexities of e-commerce transaction owning to following factors.

Thus far we have examined the Internet's impact on existing taxation frameworks on the assumption that any transactions conducted over the Internet would be to some degree either self-reported or within the investigative and enforcement powers of revenue authorities. This however is not always the case. In fact, the special characteristics of the Internet, i.e. its lack of central control, combined with its international reach make it very difficult, if not impossible, to regulate the vast amounts of money that are expected to travel through it. The Internet is used for tax avoidance and other criminal shifting of income.

The web server could be located any where, irrespective of fact that transaction has been taken place, the remote web server location provide easy room for the concealment of the identity of the transaction.

There is very ineffective construction of section 108 of income tax ordinance regarding the question of transaction which has realised in an arm's length transaction."...The Commissioner may, in respect of any transaction between persons who are associates, distribute, apportion or allocate income, deductions or tax credits between the persons as is necessary to reflect the income that the persons would have realised in an arm's length transaction."

The strict construction statute with intrinsic aid of appropriate phrases conveys exact meanings that can lead to exact interpretation of statute according to intention of legislatures. The transaction has been conducted by e-commerce means requires substitution of texts which could embody the scientific mechanism into statutory provisions.

The Sub-section 3 of section 111 of the income tax Ordinance related with the anti avoidance policy, the authority has been vested on the commissioner to question the satisfactory account of the expenditure of the account of other resources. "...and the person offers no explanation about the nature and source of the amount credited or the investment, money, valuable article, or funds from which the expenditure was made or the explanation offered by the person is not, in the Commissioner's opinion, satisfactory, the amount credited, value of the investment, money, value of the article, or amount of expenditure shall be included in the person's income chargeable to tax under head "Income from [Other Sources"] to the extent it is not adequately explained."

Hiding Identification of the parties to a transaction, in particular the taxpayer The taxpayer can hide the identity of parties by tampering the database the website, where it has been uploaded.

Where the declared value of any investment, valuable article or expenditure of a person is less than the cost of the investment or valuable article, or the amount of the expenditure, the Commissioner may, having regard to all the circumstances, include the difference in the person's income chargeable to tax under the head "Income from [Other Sources"] in the tax year in which the difference is discovered

The deletion of the database is possible within fraction of the moment, which could provide enough opportunity for the tax payer to tamper with the record of the transaction in remote server and evade imposition of taxation.

CYBER BANKING

Look here the power has been restricted under the section 94 of C of Cr.P.C. (Act V of 1898) for getting access to banking records, "...Provided that no such officer shall issue any order requiring the production of any document or other thing which is in the custody of bank or banker as defined in Banker' Evidence Act, 1891(XVII of 1891), and relates or might disclose any information which relates to the bank account of any person except..."

The first and lesser problem relating to the regulation of Internet commerce for tax purposes is the uncertainty of whether current laws will even apply to financial transfers on the Internet. By requiring very specific documentation of every transaction the government can attempt to extend the regulations that apply to paper based banking into "cyber banking". Nevertheless, it appears that this legislation will primarily be targeted at technology such as automatic teller machines and wire transfers, but will not contemplate newer banking applications such as the Internet. For example, the requirements that consumers receive receipts and periodic statements reflecting electronic transfers of money do not make sense when applied to stored-value cards that operate independently of a bank account. Stored value cards will likely replace cash to a significant degree as we move towards an increasingly paperless society.