Justice Manharlal Bhikhalal Shah is one of India’s most eminent and experienced judicial personalities. Even at the advanced age of 78 years, he strongly believes in hard work, fast work and doing his job without fear or favour. Having devoted 52 years of his life to the Bar and Bench, out of which he has been a judge for 20 years and shouldered various judicial responsibilities since his retirement a decade ago. As he himself said when he was appointed as the chairman of the Special Investigation Team (SIT) looking into the black money issue in May this year, “I have never bothered about personalities and nobody has dared to touch me during all my two decades as a judge. My record is as good as that. Do not worry about it”.
Along with his old school values and moral uprightness, Justice M. B. Shah has another trait – he is outspoken and never hesitates to tell the truth. On Wednesday, he uttered a devastating truth. Within a few hours of being formally handed over the mysterious and explosive “sealed envelope” containing the names of 627 Indian account holders in HSBC bank branches in Geneva, that even Supreme Court Chief Justice H. L. Dattu had decided not to open, Justice Shah had examined the contents and come to this conclusion: “The list is the same as before. It was known to us.
I don’t think there is anything significant in the report”. In other words, the exact same material that had been submitted by the Centre to the SIT a year ago by the previous government was submitted to the Supreme Court on Wednesday morning by the present government. The only thing new was probably the envelope and folder. Also, the accompanying papers consisted of two other documents, namely, the government’s correspondence with French government and an updated status report. After all the drama, suspense and hype of the preceding 24 hours the only significance of the tension surrounding the handing over of the documents was that the role of the central government had been curtailed and the SIT will be incharge of of further investigations in the black money case, under the direct supervision of the apex court.
In August, Justice Shah and the other two judges appointed to SIT had already submitted their first preliminary report on the probe, and by December they intend to complete the process of verifying the names on the list and initiating action against anyone found prima facie guilty. An important point to note about the “List of 267” is that it is what lawyers familiar with the case are calling a “combined list”. It is not a list of only those suspected of having stashed away black money in HBSC Bank, Geneva. It contains the names of bank accounts opened by 267 Indians. Many of those bank accounts could be entirely legitimate and not secret or undisclosed. As Justice Shah himself has said, some accounts may be legal and some may be illegal. “If it is legal, we cannot do anything, If it is illegal or unaccounted money then we can take action”. In fact, some experts say the key issue is the “manner in which the amount of money in the bank accounts had been deposited”. What has to be looked into is whether the deposits are genuine, whether they were declared to the authorities, whether taxes have duly been paid on the amounts, and whether they were transferred abroad through proper channels. These are painstakingly difficult processes. It will involve meticulously examining each account and every transaction in the minutest micro detail. Apart from Justice Shah, SIT also comprises another former Supreme Court judge Arijit Pasayat as Vice-Chairman. They have the assistance of several senior officials and high-ranking experts ranging from the Revenue Secretary, Directors of CBI, IB, RAW and ED, the CBDT Chairman and an RBI Deputy Governor.
Those expecting sensational exposures and fast-breaking developments will have to wait for quite awhile more. These 627 names are, as informed sources put it, “a few fish on one small pond”. There are not just 600-odd Indians with foreign bank accounts but probably 6,000 or maybe even 60,000. Nobody really knows. But the moot point is that many of such bank accounts are genuine and legitimate business and personal accounts, with money and deposits fully disclosed to the income tax authorities, with taxes paid and properly accounted for. The crucial question officials and high-ranking experts ranging from the Revenue Secretary, Directors of CBI, IB, RAW and ED, the CBDT Chairman and an RBI Deputy Governor.
Those expecting sensational exposures and fast-breaking developments will have to wait for quite awhile more. These 627 names are, as informed sources put it, “a few fish on one small pond”. There are not just 600-odd Indians with foreign bank accounts but probably 6,000 or maybe even 60,000. Nobody really knows. But the moot point is that many of such bank accounts are genuine and legitimate business and personal accounts, with money and deposits fully disclosed to the income tax authorities, with taxes paid and properly accounted for. The crucial question is whether the government is justified in fearing that forcible and premature disclosure of even these 600-odd names would jeopardize bilateral tax treaties with individual foreign countries where dubious bank accounts are suspected to exist. any new questions are now beginning to raise their heads. If some countries stop co-operating from now on, what will be the consequences and implications ? Are the latest developments a sign of progress in the quest for restoring the black money lying abroad and bringing the biggest culprits to book ? Or, is there some clever conspiracy at play to bring the entire search for black money to a halt ? But that is another story.
In the midst of the controversy over disclosure of the names of holders of black money abroad, finance minister Arun Jaitley has urged tax administrators to concentrate on booking black money within the country. A massive media campaign is to be launched, particularly in the vernacular press, to promote a tax compliance culture across the country. The timing of the this initiative is clearly intended to ward off growing questions about whether the Government, in its zeal to unearth black money abroad may have unwittingly taken its eye off the ball in the crusade against illegal wealth generation at home. There has been scepticism among a section of the public over the BJP’s ability to fulfil its election promise of unearthing overseas money of Indian tax-payers and bringing large sums back to India. The general feeling is the promise is unlikely to be met in the near future. Making his announcement, the Finance Minister stressed that he was aware that tax avoidance within the country was much larger and should be tracked down. For this purpose, the tax administration is taking the help of technology platforms and tallying the income and tax statements of tax payers. Besides, other sources are to be tapped to sniff out tax avoidance cases and recover tax dues. Ministry officials made a detailed presentation and gave hints of the contours of new strategies which could be adopted to augment revenue collections and capture tax dues. One such innovation is that even Advance Tax Payments by top tax payers would be monitored and flagged for later comparison with total tax paid after final assessments. There could also be follow-up measures on the actionable list of top 200 tax deductors generated by the CPC-TDS system, where shortfall in TDS (Tax Deduction at Source) this Financial Year (FY) has been found to be as much as 10% more than the previous financial year.
Besides, there will be follow-up of Nonfilers Monitoring System (NMS) cases. There may be calling of returns in those cases where in last three years actual Income Tax returns exceeded INR 10 lakhs or SAT payments exceeded INR 1 lakh but fresh returns were not filed for the current FY. Appropriate action may be taken to deter default or deferment of payment of TDS and Self Assessment Tax. It is in this regard that an extensive multimedia awareness campaign would be undertaken to encourage voluntary compliance of tax laws. The Finance Minister instructed senior officers of the Income Tax Department to keep a particularly sharp eye on specific sectors where the domestic black money is known to be most prevalent. He said a substantial increase in recovery of black money and taxes due is vital to enable the Department to achieve its tax collection target in the current year. Arun Jaitley also held a special review meeting of top-ranking officials, including the Principal Chief Commissioners, Principal Directors General, Chief Commissioners and Directors General of Income Tax in the last week of October in order to assess and analyse the achievements of the Budget Targets for Revenue Collections for Financial Year 2014-15.
While there is no official estimate of the quantum of tax avoidance within the country, expert committees on black money have in the past admitted to widespread and voluminous incidence of tax avoidance. Unofficial estimates, however, put the black economy, fuelled by money on which no tax has been paid, to be as large as 50 percent of national income. At part of this is generated in the informal sectors of the economy when products are manufactured in small and microlevel establishments and sold without any sales or excise duty being paid at all. Similarly there is a huge informal Services sector where no service tax is paid on transactions thereby qualifying as black money.