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SIT given black money list, asked to act on it

The government on Wednesday handed over the details of 627 accounts held by Indians in HSBC’s Geneva branch to the Supreme Court, which asked a special investigation team (SIT) to take action on it.

The Centre had already given the list to the SIT on June 27. Though the investigation in these cases is still being conducted by tax officials, the tax department will now have to report to the SIT, not the finance ministry, with all information.

The disclosure of names to the court, after initial reluctance due to confidentiality clauses in international tax treaties, has, however, become a cause of embarrassment for the government. After strongly pushing for automatic exchange of information to curb black money, India could not sign a pact on this at a meeting of the Organisation for Economic Co-operation and Development (OECD) in Berlin on Wednesday, for fear of violating the clause if the SIT insisted on complete disclosures. The multilateral pact requires signatories to maintain confidentiality of information till charges are framed against an evader.

“India did not sign the agreement today because there was no clarity on what the SIT would recommend to the Supreme Court with regard to disclosures. We wanted to be one of the first ones to sign it. Our representative there has said India remains committed to it and might sign at a later date,” a government official told Business Standard. Another concern for India is the Foreign Account Tax Compliance Act, the US anti-tax evasion law.

The inter-governmental agreement has to be signed by December 31 so that remittances from the US to India aren’t subjected to 30 per cent withholding tax.

The SIT will provide a status report on the matter to the Supreme Court by November-end. The court will hear the case on December 3, leaving insufficient time to secure Cabinet approval through regular procedure. As such, the process might be circumvented. “We had requested the court to clarify that India could sign new treaties with confidentiality clauses, but everything is part of SIT’s work now. If the SIT’s report is positive, we will adopt a special procedure to fast-track the process for Cabinet approval,” said the official quoted earlier.

On Wednesday, the Centre provided the over the details of the 627 accounts to the court in three sealed envelopes. One envelope contained details of the Indian government’s correspondence with its French counterpart. The second contained the 627 names with codes which would open sheets of data, which require further probe. The third had a status report on the action taken by the government in this regard so far.

Though the bench headed by Chief Justice H L Dattu had, on Tuesday, said it would examine the data and send those for investigation by the Central Bureau of Investigation or other agencies, on Wednesday, it decided to send the envelopes to the SIT, comprising two retired Supreme Court judges.

“We don’t want to open these (the envelopes) and embarrass anyone,” Dattu said after receiving the envelopes from Attorney General Mukul Rohtagi. “We will send the entire list to the SIT and allow it to proceed in accordance with the law, and ask it to give us status reports.”

Rohtagi said as more than half of the 627 accounts belonged to Indian residents who had money abroad, the investigation should focus on those. The data belong to the period up to July 2006.

The attorney general said the government had no problem with investigation by any entity or agency, adding, “We have no intention of hiding anything.” However, he added no move should impede efforts to get more information from foreign sources. The world was moving towards the age of “automatic exchange of information” and any huge deposit in any country would alert others, Rohtagi said, adding the US had a strict law on “withholding” tax in such cases and Indian exporters should not suffer because of these new developments.

Ram Jethmalani, who had filed the public interest litigation on the matter three years ago, told the court the citation of court double-taxation treaties and confidentiality clauses were a “fraud”.

Aam Aadmi Party leader Arvind Kejriwal’s move to intervene in the case, with a set of names given to him from “whistle blowers”, was postponed to the next hearing on the case.


Oct 27: Govt reveals names of seven persons, including Dabur promoter Pradip Burman, and an entity, Timblo Pvt Ltd
Oct 28: The SC asks govt to reveal all names
Oct 29: Govt gives 627 names in sealed envelopes to the SC; the apex court hands it over to the SIT
Oct 29: India fails to sign a pact on automatic exchange of information at OECD meeting in Berlin

Things to come
Nov-end: SIT is to give status report; the finance ministry will look for a confidentiality clause in tax treaties
Dec 3: SC will hear the matter; to consider SIT status report
Dec 31: Deadline for India-US to sign Foreign Account Tax Compliance Act


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