Black money crackdown: Taxmen send notices to those on HSBC Geneva's list

Indians who have parked their wealth in secret accounts in Switzerland are under the Income Tax (I-T) department's lens. The tax sleuths are reportedly in a rush to hunt such offenders down, in a move that follows another probe into names and entities involved in the Paradise Papers financial data leak. 

The tax office is stepping on the pedal, after a lull of two years, to chase down those named in the list of secret Swiss accounts with HSBC Geneva, the Economic Times reported on Monday. According to the financial daily, over 50 individuals have been served notices regarding the date of the hearing of their cases over the past fortnight, in a move that will allow the I-T department to begin prosecution proceedings against the alleged account-holders and beneficiaries once their appeals are dismissed at the first stage of appeal.  

According to the financial daily, the tax sleuths got a leg up when the appellate tribunal ruled in December against individuals who had been named in a data leak as beneficiaries of overseas trusts that have accounts with a bank in a Bavarian tax haven. Further, the tribunal last month ruled in favour of the I-T department, which had pulled up individuals for allegedly stashing undisclosed wealth in the LGT Bank of Liechtenstein, the report added. The November ruling came despite a Supreme Court verdict that states that beneficiaries of trusts are not liable to pay tax if they do not receive any amount from the concerned trusts.

Citing the widely held perception among tax professionals and officers regarding the matter, the financial daily reported that the Commissioner of Income-tax (Appeals), which is the first stage of appeals, would dismiss the appeals in the HSBC cases. Subsequently, according to the report, the I-T department can then file a complaint in front of a magistrate for initiating the prosecution process.

The report added that many of the individuals named in the HSBC list have denied ever opening bank accounts with HSBC Switzerland. Further, a few of them have received tribunal verdicts that went in their favour. 

The cases pertain to 628 Indians, who figured in a list of account holders in HSBC Bank's Geneva branch that India had obtained from the French government in 2007.

The move comes days after the Enforcement Directorate (ED) got the final approval to seize a Chennai-based industrialist's Rs 1.59 crore deposits, the amount equivalent to the value of his alleged assets stashed abroad, in connection with its probe into the HSBC black money list. 

According to agency reports, the agency had first seized the deposits in June this year under the recently-introduced section 37A (1) of the Foreign Exchange Management Act (FEMA) that empowers it to seize equivalent property in India, if there is a suspicion that any forex, foreign security or any immovable property located outside India is held in contravention of the Act. This was the first action under the FEMA in the HSBC black money list.  

The funds parked by Indians in Swiss banks has been reportedly on the decline. According to agency reports from June this year, the money parked by Indians in Switzerland's banks nearly halved to 676 million Swiss francs (CHF), about Rs 4,500 crore, in 2016 to hit a record low amid a continuing clampdown on the suspected black money stashed behind their famed secrecy walls. 

In comparison, the total funds held by all foreign clients of Swiss banks rose somewhat to CHF 1.42 trillion, or about Rs 96 lakh crore, from CHF 1.41 trillion a year ago.

The total funds held by Indians directly with Swiss banks stood at CHF 664.8 million at the end of 2016, while the same held through fiduciaries was nearly CHF 11 million, according to the latest data published by the country's central banking authority, the Swiss National Bank.  

Further, Switzerland is also taking steps that will aid in India's clampdown on black money. As reported last month, a key parliamentary panel in Switzerland paved the way for India to get instant access to details on Indians with Swiss accounts after it approved an automatic information exchange pact between the two countries.

According to agency reports, the Commission for Economic Affairs and Taxes of the Council of States -- a key panel of the Swiss Parliament's Upper House -- approved the proposed pact with India, along with 40 other countries, but suggested strengthening the provisions for individual legal claims.

It had asked the Swiss government to submit to Parliament an amendment "to strengthen concrete individual legal protection and to ensure that no exchange of information can take place for individual cases where a violation of essential legal claims is likely", as per the minutes of its last meeting on November 2. As of the date of reporting, the proposal was to be submitted for approval from the upper chamber of the Swiss Parliament, the Council of States, in the winter session beginning November 27.