The Special Investigation Team (SIT) on black money has recommended that India’s taxation treaties with other countries be redrafted, and penal provisions be introduced to attach the Indian assets of offenders who fail to bring back black money from abroad within a month of the completion of investigations.
The Supreme Court-appointed SIT, which has submitted its interim report, is learnt to have identified the major industries and practices that generate black money, and which will now be the focus of its investigation: mining and real estate industries, “entry operators” who manipulate account books to facilitate fraudulent transfers of money, the phenomenon of shell companies, and cases of underinvoicing and overinvoicing. The SC is expected to take up the SIT’s recommendations later this week.
Government sources told The Indian Express that the SIT — which is headed by retired SC Justice M B Shah and has retired SC Justice Arijit Pasayat as vice-chairman — believes that double taxation treaties and mutual assistance treaties of income-tax with other countries were “one-sided”.
The SIT is learnt to have cited the example of India’s double taxation avoidance agreement with Mauritius, where several money trails have gone cold due to lack of assistance from authorities there. India has DTAA agreements with 83 countries and limited tax treaties with 20.
The Indian Express had reported on June 4 that in the first meeting of the panel on June 3, Justice Shah had asked the Income-Tax department to provide all information on bank accounts and other assets held by Indians overseas that it had received from foreign agencies over the last 10 years.
The second major recommendation of the SIT is to amend the Prevention of Money Laundering Act (PMLA) to introduce a provision under which the Enforcement Directorate (ED) would be able to attach the properties of those who do not bring back black money within a month of the end of the investigation.
Under the PMLA, the ED currently has the power to only attach properties bought with the proceeds of crime.
The SIT was constituted in May and started work on June 3. It is assisted by heads of the IB, ED, CBI, Central Board of Direct Taxes, Narcotics Control Bureau, Directorate of Revenue Intelligence, Financial Intelligence Unit and the R&AW, besides the Revenue Secretary and Joint Secretary (Foreign Tax and Tax Research).
The committee had earlier asked all these agencies for details of cases related to the generation of black money that they were investigating.
The SIT is learnt to have found that the common pattern in the cases was that entry operators facilitated the transfer of money through dubious transactions, and shell companies put the black money into formal banking channels, which was later invested.
The SIT also wants to probe cases of underinvoicing and overinvoicing, and benefits gained by export firms through various schemes.