The government may have to amend the income tax laws or bring in a special ordinance to probe suspected tax evasion by Indian individuals named in the Panama Papers as maintaining offshore accounts.
Around 500 Indians, including politicians, businessmen and filmstars, appear in a list of individuals who paid Panama law firm Mossack Fonseca to set up offshore entities in tax havens around the world. The names were made public by the International Consortium of Investigative Journalists (ICIJ), an international coalition of media houses, which included the Indian Express, on April 4. Following the revelation, the government announced a committee comprising officers from the Central Board of Direct Taxes, Financial Intelligence Unit, foreign tax and tax research division and the Reserve Bank of India, to look into the leaks.
According to section 148 of the Income Tax Act, past assessment of an Indian taxpayer can be undertaken only for six years, besides the scrutiny for the current year, whether overseas or within the country. The alleged period of tax evasion by Indians named in the Panama Papers is much before seven years.
“Under the current legal framework, tax cases if they need scrutiny can be reopened within seven years, which includes the current assessment year. But beyond that there is no legal provision to do so…so this case will have to be handled differently,” Manoj Kumar, legal expert and managing partner, Hammurabi and Solomon, told HT.
“The government may soon hit a wall on the Panama probe in the current legal framework,” another legal expert added.
“The investigation has just begun…and nothing can be said at this point,” a senior government official who did not wish to be identified said.
Finance minister Arun Jaitley has said all necessary steps would be taken to resolve the issue and get “maximum information from all sources, including foreign governments, to help in the investigation process.”
Additionally, before taking any action, the committee will also have to segregate genuine transactions from the non-genuine ones, Kumar added.
The government has so far filed 52 prosecution complaints based on a previous exposé by the ICIJ in 2013, in which 700 Indians were shown to have offshore accounts. The government has identified 434 people out of that list as Indian residents and 184 have admitted their ties with such offshore entities. 52 prosecution complaints under the provision of I-T Act have been filed against offenders so far. Sources said in these cases, the frauds were committed within seven years.
The finance ministry also said that progress has been made in the investigation relating to accounts of 628 Indians in HSBC Switzerland, based on the information received in 2011 from the French government. Out of the list, 569 people have been traced, it added.