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Demonetisation and Beyond: How Modi Government Took on the task of Cleansing Black Money

black money

When the Demonetisation exercise took place, among its many objectives some goals were dedicated towards achieving a clean financial system. Increasing the tax compliance, cleansing the financial system, unearthing black money, digitising the Indian economy are the tasks that demonetisation aimed for. All these efforts were put in place under the Modi government, much before the demonetisation decision was taken. Nevertheless, demonetisation has strengthened these efforts further as it provided the much needed reliable data to the administration. In addition to this, the government has acted swiftly whenever the evidence of tax evasion emerged, such as in the case of Panama paper leaks.

Let us see how it played out through some comparative data available.

Actions against domestic tax evasion

Search and Seizure Actions

  • During the period from April 1, 2014 to March 31, 2018, the Income-tax Department (ITD) conducted searches in 2726 groups, seizing undisclosed assets worth over Rs. 3,900 crores. The groups searched admitted undisclosed income of more than Rs. 52,800 crores. There is a 25% rise in the number of search actions and 28% rise in total assets seized by the ITD, during the period from FYs 2014-15 to 2017-18 as compared to FY 2010-11 to 2013-14.

  • During FY 2018-19 (up to September 2018), 341 search actions have been conducted, in which undisclosed assets valued at Rs. 680 crores have been seized. Admission of undisclosed income stands at 6241 crores.

Survey Actions

  • During the period, April 1, 2014 to March 31, 2018, surveys were conducted in 35,530 cases resulting in detection of undisclosed income of Rs. 45,848 crores. There is more than 100% rise in number of survey actions during the period from FY 2014-15 to 2017-18, as compared to FY2010-11 to 2013- 14.

  • Further, during FY 2018-19 (till September, 2018), in 2093 survey actions, undisclosed income of Rs 1,623 crores has been detected.

The Income Declaration Scheme, 2016

  • The Government brought in the Income Declaration Scheme (IDS) in the Budget 2016 to provide opportunity to Indian persons to declare their undisclosed income during 1st June 2016 to 30th September, 2016 and pay 45% tax, surcharge and penalty on such undisclosed income declared.
  • About 71,726 declarations disclosing undisclosed income of Rs. 67,382 crores were made under this scheme.

Pradhan Mantri Garib Kalyan Yojana, 2016 (PMGKY)

  • The scheme of PMGKY allowed a person to declare undisclosed cash by paying tax, surcharge and penalty totalling up to 50% of the sum so declared. Besides, 25% of the undisclosed income would have to be mandatorily deposited in Pradhan Mantri Garib Kalyan Deposit Scheme for 4 years, bearing zero interest. The scheme was open till March 31, 2017.
  • 21000 persons disclosed Rs 4900 crores under the PMGKY. A total of Rs 2451 crores was collected as taxes under the scheme.


Actions under the Prohibition of Benami Properties Transactions Act, 1988

Due to intensive efforts undertaken by the Department, as on September 30, 2018, provisional attachments have been made in more than 1700 cases of properties under the Prohibition of Benami Properties Transactions Act, 1988. These include plots of land, flats, shops, jewellery, luxury vehicles, deposits in bank accounts, fixed deposits etc.

  • The value of properties under attachment is more than 5000 crores, including immovable properties of more than Rs. 3800 crores.
  • The provisional attachments of benami properties, amounting to more than Rs. 390 crores have been confirmed by the Adjudicating Authority.
Actions against holders of undisclosed foreign assets and income

HSBC Cases:

  • Information regarding certain Indians holding bank accounts in HSBC bank in Switzerland was obtained from the Government of France under the Double Taxation Avoidance Convention (DTAC) between India and France. 3
  • As a result of systematic investigations, undisclosed income of about Rs. 8448 crores has been brought to tax on account of deposits made in unreported foreign bank accounts.
  • Tax demand of about Rs. 5447 crores has been raised. Concealment penalty of about Rs. 1290 crore has been levied in 164 cases.
  • So far, 199 prosecution complaints have been filed in 84 cases.

ICIJ Cases:

  • Sustained investigations conducted in the cases revealed by International Consortium of Investigative Journalists (ICIJ) have led to detection of more than Rs. 11,010 crores of credits in the undisclosed foreign accounts so far.
  • 75 prosecution complaints have been filed before criminal courts in 34 cases.

Panama Papers:

  • The Government constituted a Multi-Agency Group (MAG) on April 4, 2016, inter alia, for facilitating co-ordinated and speedy investigation in the cases of Indian persons allegedly having undisclosed foreign assets and whose names are reportedly included in Panama Papers leaks.
  • The Group consists of the officers of Investigation Division of the Central Board of Direct Taxes (CBDT), Foreign Tax & Tax Research Division of CBDT, Enforcement Directorate (ED), Financial Intelligence Unit (FIU) and Reserve Bank of India and its Convenor is Chairman, CBDT.
  • The Panama papers contained details of 426 persons.
  • Investigations have revealed that out of 426 cases, 356 cases are non-actionable and 70 cases are actionable cases.
  • Search & seizure actions have been conducted in 55 cases and surveys in 12 cases.
  • Criminal prosecution complaints have been filed in 19 cases.
  • Notices under section 10 of the Black Money Act issued in 45 cases. Undisclosed foreign investments detected amount to 1542 crores (approx).

Paradise Papers:

On November 6, 2017 and on subsequent dates the International Consortium of Investigative Journalists (ICIJ), a Washington based organization and their collaborating newspapers across the world, released details of offshore entities set up by two law firms M/s Appleby and Asiaciti spread across 19 no tax/low tax /foreign jurisdictions. On 6/11/2017, the Multi Agency Group (MAG) was reconstituted with Chairman CBDT as convener for investigating the Paradise Papers along with Panama Paper Leaks. The Paradise Papers database was released on the website of ICIJ late evening on 17.11.2017. On the same day a meeting of MAG was held to sensitise the member agencies.

  • A total of 494 unique persons are under investigation. The list of persons has been prepared after the analysis and has been disseminated to respective DsGIT (Inv) for further investigation.
  • As an outcome of investigations, 255 cases have been found to be nonactionable. Out of the actionable cases, search and seizure actions have been conducted 17 cases and in 27 cases, notices under Black Money Act, 2015 have been issued.
  • In one case, prosecution proceedings have been initiated.
  • As an outcome of investigations, undisclosed credits of Rs 14.96 crores have been detected.
Actions under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015:
  • Recognizing the limitations of the Income-tax Act, 1961 in dealing with black money stashed abroad, the Government enacted a comprehensive and a more stringent new law namely the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 that has come into force w.e.f. 01.07.2015. Inter alia, for the first time, this law has included the offence of willful attempt to evade tax etc. in relation to undisclosed foreign income/assets as a Scheduled Offence under the Prevention of Money-laundering Act, 2002 (PMLA).
  • There was a one-time compliance window of 3 months, inter alia, providing an opportunity to taxpayers to make declarations of theirundisclosed foreign assets before they were subjected to more stringent provisions of the new law. 648 declarants filed declarations up-to 30.09.2015, which was the last date of filing such declarations, disclosing undisclosed foreign assets worth Rs 4164 crores. An amount of about Rs 2476 crore has been collected as tax and penalty in such cases.