Govt Steps up Black Money Crackdown

CBDT Chief Urges Officials To Follow Norms For Effectively Seeking Cross-Border Info

Tax authorities will intensify their efforts to crack down on unaccounted money stashed overseas by seeking information from their counterparts in other countries.A recent letter issued by the Central Board of Direct Taxes (CBDT) chairperson underscores the governments seriousness to curb the flow of black money.The government has taken a slew of measures in the past few years to ensure that Indian tax authorities have access to information from other countries to tackle black money and tax avoidance.It has renegotiated several tax treaties,including the one with Switzerland, to enable exchange of information.The government has entered into Tax Information Exchange Agreements (TIEAs) with tax havens like Cayman Islands, Bermuda, British Virgin Islands. And,it has tightened domestic tax provisions.The Finance Act 2012 extended the time limit for reopening cases to 16 years where income relates to an asset located outside India.Details of foreign bank accounts,immovable properties and assets outside India are also required to be filed by tax payers.The CBDT chiefs letter points out that such regulatory effort will come to naught if tax officers do not make use of the opportunities for obtaining cross-border information.In January,CBDT had issued an internal manual The Manual on Exchange of Information for tax purposes with foreign jurisdictions which provided guidelines on how to obtain information from authorities of other countries under the tax treaties,TIEAs and multinational conventions.In many cases in making the references,requests are not being properly framed and only some generalised statements are being made.This results in a situation where even if the foreign tax authorities intend to provide assistance to us, they are not able to do so, the CBDT chief s letter says.Commissioners and directors of income tax have been asked to personally monitor cases where information has been sought from overseas.CBDTs internal manual points out that tax officers are not making many requests primarily because they are not fully aware of the provisions.For instance,only 39 requests were made during financial year 2008-09 seeking information from Indias treaty partners.The number increased to 92 and 386 during FY11 and FY12,respectively.The CBDT chief also stressed on the need to reciprocate when India receives such requests from foreign tax authorities.It is important to give high priority to such requests.Only timely provision of information will ensure that we will also receive similar assistance from them, the letter says.The internal manual not only provides information on the avenues available under which information can be sought from overseas counterparts,but also provides formats which the tax officers must follow while making specific requests to foreign tax authorities,be it treaty or non-treaty countries.An entire chapter in the manual also relates to confidentiality of information received.As regards information received under TIEAs,if such information is treated as secret in the tax haven providing such information,it shall be disclosed only to relevant authorities,including courts.Even under Indias domestic tax laws,a taxpayer,barring certain exceptions,is guaranteed confidentiality of information filed in his return,points out the manual.As tax treaties over-ride domestic tax laws,if information is treated as confidential in the country providing such information,it will also be treated as confidential in India and not made public.An official attached to the ministry of finance said that while efforts are on-going to unearth black money and crack down on cases of round tripping, genuine investors into India and abroad will not be impacted.

Cases cited in CBDT manual

An Indian pharma company showed bogus marketing payments made to companies in foreign countries.The chief promoter of this company and his wife were also directors of a company located overseas to whom the payment was purported to have been made.Yet another overseas company was a shell company.Such information resulted in assessment in India of undisclosed income of more than Rs 1,500 crore.An Indian businessman owning a private jet and leading a lavish lifestyle spent several months abroad.While overseas,he spent millions of rupees using a number of credit cards held in the name of his relatives residing abroad.Information received from overseas regulatory authorities helped prove that the payments to credit cards were done from undisclosed overseas bank accounts.Authorities of one country passed on spontaneous (unrequested) information about large remittances by a company in its jurisdiction to the bank account of an Indian company in another country.Undisclosed income of more than Rs 21 crore was finally traced.TNN
Times of India, New Delhi, 29-03-2013