Arrested in March 2011, Pune-based stud farm owner and alleged hawala operator Hasan Ali Khan faces charges of money laundering and tax evasion. The Income Tax department has asked him to pay a whopping Rs 1.16 lakh crore. But, less than a week before it demits office, the UPA government at the Centre has finally acknowledged that its tax evasion cases against Khan “may not be sustainable”.
Confidential finance ministry documents accessed by The Indian Express say that the government has little hope of winning any of the Income Tax cases or appeals pending before various authorities against Khan. After protracted exchanges with various foreign governments and banks, including UBS Zurich, where Khan was supposed to have illegally parked $ 8 billion, the finance ministry has come to the conclusion that most of the tax cases against him may not stand judicial scrutiny.
The case dates back to May 5, 2007, when searches were conducted at various properties owned by Khan. A laptop recovered during the searches contained scanned copies of documents stating that Ali had accounts in UBS Zurich, with deposits in excess of US$ 8 billion.
The Enforcement Directorate (ED) also provided a copy of Khan’s notarised statement which indicated that he had opened an account in UBS Singapore, in 1982 with an opening deposit of US$ 1.5 million. The account was allegedly opened on the recommendation of arms dealer Adnan Khashoggi, who was also involved in the Bofors case.
However, in its response to the letters sent by the Indian government, UBS said that while Khan held three accounts in the bank for some time in 2001, there was a transaction of only about US$ 60,700 in one of the accounts. The bank also claimed that all the other documents seized in the raids, including the one that indicated a deposit of US$ 8 billion, were false and fabricated.
In order to rule out foul play, the government took the unusual step of sending the letters and documents received from the UBS management to the Swiss authorities for “independent confirmation” and verification. In December last year, the Swiss government informed the Indian government that the letters sent by UBS were “true and authenticated”.
This information, sources said, has changed the entire case. Similarly, Malaysian authorities have also informed the government that a company which was reported to be owned by Khan, as per the documents seized during the searches, “doesn’t exist”. It is learnt that information has also been sought from many other countries under the double taxation avoidance agreements.
In most cases, the proceedings against Khan, his wife Rheema Hasan Ali Khan and his associate Kashinath Tapuriah are pending adjudication before the Income Tax Appellate Tribunal (ITAT).
As per the assessment orders passed by the Income Tax department for 2001-02 to 2010-11, Khan owes about Rs 37,000 crore as tax on concealed income. Add to this the interest (Rs 16,000 crore), penalty under Section 271 (1)(c) of the Income Tax Act (Rs 53,000 crore) and interest levied under Section 220 (2) of the Income Tax Act (Rs 10,000 crore) and the total sum that he is expected to pay is Rs 1.16 lakh crore.
Khan’s wife has also been asked to pay Rs 97.33 crore, while a company which he owns — R M Investment & Trading Company Private Limited — has been directed to pay Rs 651.32 crore as unpaid tax, penalty and interest.
Searches were also conducted at Tapuriah’s premises in Kolkata since the seized documents showed transfer of funds from UBS Zurich to Tapuriah’s wife Chandrika. The Income Tax department has asked Chandrika to pay Rs 47,000 crore, while Tapuriah has been told to pay over Rs 1,000 crore.
In an opinion given last October, Attorney General G E Vahanvati had cautioned the government against proceeding against UBS AG under the Income Tax Act without “adequate material”. He had said that “factual aspects need to be resolved” before launching prosecution proceedings against the bank for allegedly helping Khan in filing false Income Tax returns and falsification of accounts.
“At the outset, it needs to be stated that this would be an important prosecution where huge sums of money are said to be stashed abroad. Therefore, every care must be taken to see that there is adequate material on the basis of which prosecution is launched so that the prosecution succeeds,” Vahanvati had said.