I-T cracks down on black money stashed abroad

Indian assets of tax evaders can be attached & confiscated against undisclosed foreign income or assets

The Income Tax (I-T) department has decided on an aggressive plan under the black money law to nab tax evaders who have undisclosed income or stashed assets abroad. 

In an internal communication, the Central Board of Direct Taxes (CBDT) told I-T officials that the spotlight should be on criminal consequences of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015. In the guidelines, it clarified that the Act allowed attaching and confiscating black money holders’ Indian assets against their undisclosed foreign income or assets under the black money law. It also said these evaders could face separate prosecution under the Prevention of Money Laundering Act (PMLA). 

A senior tax official said, “Under the Black Money Act, a wilful attempt to evade tax is a scheduled offence.” A scheduled offence is one that involves criminal activity such as narcotics, money laundering, and hawala. The CBDT clarified that black money stashed abroad was also a scheduled offence and the rules of prosecution would be the same as under the PMLA.

“The said guidelines clarify the framework on how to tackle increasing cases of undisclosed foreign income,” said another tax officer.

The move follows poor results in detecting undisclosed foreign assets and delay in concluding pending matters under the Black Money Act, which came into effect in 2015. According to the official data, only 52 cases have been identified so far. Of these, nine are from Mumbai alone. 

I-T officials said there was a lack of clarity in the existing framework, which this week’s guidelines have explained. The internal communication specified that the tax department can attach and confiscate the “proceeds of crime” equivalent in value held within the country to recover dues.

The Act does not say whether fresh declaration of undisclosed money or properties abroad would be used as evidence for prosecution under the PMLA. The guidelines clarified that offence under this Act may lead to separate consequences under the anti-money laundering Act. Even a person paying taxes and penalties on previously undeclared assets could face penal action. 

The directive also clarified the department’s stance on prosecuting criminal liability retrospectively. A person can now be prosecuted for the offence if the foreign asset was in a period prior to the commencement of the Act, which has not been declared under the compliance window. 

Further, undisclosed foreign income shall be charged to tax on its value in the previous years when it was detected. The concealment penalty would be equal to three times the amount of tax payable as against variable percentage under the I-T Act. The offence under the Act is non-compoundable and offenders cannot approach the Income Tax Settlement Commission. 

The Act ensures proper and prompt references to be made to respective foreign jurisdictions, and the guidelines say it should preferably be done within 21 days of the initiation of investigation so that the information is available to I-T officers quickly and further action can be taken after the response from the sharing country. It has also provided more power to the tax assessing officer who may initiate and pass penalty order against the person, without the joint commissioner’s approval earlier. 

The Black Money Act had provided for a one-time compliance window to declare assets held abroad and pay due taxes and penalty on the value of assets declared totalling 60 per cent. The compliance window, which was open till September 30, 2015, saw only 644 declarations, of Rs 4,164 crore, resulting in a tax collection of Rs 2,428 crore. 

The new directives have come at a time when the I-T department is probing high-profile cases of undisclosed foreign assets. Several big corporates, businessmen and film stars are under the scanner after they were named in the list exposed by the International Consortium of Investigative Journalists in 2013. The consortium released information on thousands of secret companies, trusts and funds in offshore hideaways. 

The guidelines also said that the department’s actions must be “focused and quick” to nab tax evaders.

Stepping up search

• CBDT issues guidelines and clarifies certain clauses under Black Money Act 
• I-T officers to prosecute undisclosed income cases as scheduled offences  
• Scheduled offences include narcotics, money laundering, and hawala
• I-T can attach and confiscate Indian assets of foreign black money holders 
• Separate prosecution under PMLA possible under the Act