Tax evasion

these are not valid reasons for not filing income tax returns.

issuing of a pan card has nothing to do with the criminal case. No cirminal background is asked or investigate before issuing pan card.

So Sir,

What you are saying is that in this case, when there are no salary slips

1) income tax needs to be paid?

2)can the govt question source of funds for loan payments

3)if this is tax evasion, what is the penalty?

It is no matter whether the person is criminal or a thief,  On the eye of income tax act,  any person whose income during a FY is more than taxaable limit (viz. Rs.160000/- for AY 2010-11) he has to file return of income.  However so manay deduction, exemptions, rebaltes are available.  A person may not pay tax after availbing the exemption, deduction etc.  But he has to file the return for a particular AY  if taxaable income is more than the bais limit.