In a stern warning to those not paying taxes, the Income Tax Department today said it is sending letters to 35,170 PAN holders in the first phase for not filing returns and will take appropriate follow up action.

There are over 12 lakh PAN ( Permanent Account Number) holders who had not filed income tax returns, the Department said, adding it has set up a nodal cell to monitor such cases.

"In the first batch, letters are being sent to 35,170 PAN holders by the Directorate of Intelligence and Criminal Investigation...there will be online monitoring system to ensure follow-up action and track return filing and tax payment of the target segment", it said.

The high priority cases for action have been identified on the basis of specific 148 codes of information available in Annual Information Returns (AIRs), Central Information Branch (CIB) data and TDS/TCS returns. The exercise also takes into account the Cash Transaction Reports (CTS) of Financial Intelligence Unit (FIU)-India.

The Department said that it has identified "target segment of 12,19,832 non-filers linked to more than 4.7 crore information records. Rule base algorithms have been used to identify high priority cases for follow-up and monitoring".

The letters which have been sent to 35,170 PAN holders contain summary of information about financial transactions along with customised response sheet with a view to know why the person has not filed the income tax return.

Revenue Secretary Sumit Bose earlier in December had warned that there was no advantage of suppressing the true income or avoiding payment of income tax as "sooner or later, the information available with the Income Tax Department will lead the department to the doors of such persons."

Finance Minister P Chidambaram had underlined the need for a non-intrusive tax administration to enable the taxpayer to file return and pay appropriate taxes, the release said, appealing to tax payers to disclose their true income and pay taxes accordingly within the current financial year.