Seeing grey over black money

The govt is doing too little, too slow


Manoj Kumar | June 6, 2011

The government has finally made a new directorate for criminal investigation - income tax (DCI) to take forward the five-fold strategy to tackle black money.

Earlier, in February 2010, on signing the first Tax Information Exchange Agreement (TIEA) with Bermuda, our finance minister informed the visiting steering group of Organisation for Economic Cooperation and Development (OECD) that India is committed to high standards of transparency, exchange of information being an important part of this strategy.

It took the FM one year to again walk the same path in March 2011 when he called out for India's need to learn and take benefit from the best practices evolved by OECD especially in the areas of global tax reforms and sharing of information among different countries in cases of tax evasion and money laundering.

The DCI now set up will perform all functions from investigations to prosecution in relation to criminal matters having any financial implications punishable as an offence under any direct tax law, including inter-alia, (i) collect information about persons and transactions suspected to be involved in criminal activities having cross border, inter-state or international ramifications, that pose a threat to national security including source and use of funds used in criminal activities, and (ii) enter into agreements for sharing information and other cooperation with such agencies of foreign states as may be permissible under any international agreement or treaty.

The term 'criminal matters' purportedly within the ambit of the DCI would be those offences under the direct tax laws (i.e Income Tax Act, 1961, Wealth Tax Act, 1957) which are punishable with imprisonment, along with or without fine.

Any person in possession of any money, bullion, jewellery or other valuable article or and such money, bullion, jewellery or other valuable article or thing represents either wholly or partly income or property (which has not been, or would not be disclosed for the purpose of Income Tax Act, 1961 is an offence punishable with two years' rigorous imprisonment. Similarly, removal, concealment, transfer or delivery of property to thwart tax recovery or willful attempt to evade tax of more than one lac are offences punishable with rigorous imprisonments ranging from seven months to seen years.

This move also duplicates and conflicts with the jurisdiction Enforcement Directorate (ED) as to whether the subject matter of investigation which is an offence under Income Tax Act, 1961 as well as  Prevention of Money Laundering Act, 2002. Whosoever directly or indirectly attempts to indulge or knowingly assists or knowingly is a party or is actually involved in any process or activity connected with the proceeds of crime and projecting it as untainted property is guilty of offence of Money Laundering and is punishable with rigorous imprisonment between 3 to 7 years.

In yet another class of criminal offences involving black money, under the Prevention of Corruption Act, 1998 which inter-alia make the taking of gratification other than legal remuneration in respect of official act as an offence punishable with a period ranging from 6 months to 5 years, it is not clear who amongst DCI, ED or other agencies of the government would have jurisdiction. This could result in situations when different arms of the government have worked at cross purposes thus delaying and derailing the investigations and outcome.

Not very long ago the ED was pulled up by the supreme court for concealing and filing a chargesheet against Hasan Ali high-level committee formed by the government to monitor probe in sensitive cases. It therefore remains to be seen how effectively will the DCI conduct its functions to expedite the process of dealing with menace of black money.

The government needs to do more on creating appropriate legislative framework and join the global crusade against 'black money' by consistently integrating with international regimes on exchange of information in order to effectively deal with the twin issues of tax evasion and black money.

Hopefully, the DCI is not merely in response to Ramdev's demands for taking steps to seize properties of black money offenders and for recovery of black money stashed away in foreign banks. If the past is any indicator, the government has been doing too little and going too slow.



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