On 27 May 2014, soon after taking over as Prime Minister, Narendra Modi presided over the first meeting of his Cabinet, which announced the setting up of a high-level Special Investigation Team (SIT) to help unearth black money stashed away abroad.
Briefing reporters after the meeting, Union Law and Justice, Communications and Information Technology Minister Ravi Shankar Prasad said the SIT would be headed by former Supreme Court judge Justice M. B. Shah and another retired Supreme Court judge Justice Arijit Pasayat would be its vice-chairman.
The SIT is a high-level committee named by the Supreme Court and is headed by Justice M.B. Shah, a former judge of the Court, with another former apex court judge, Arijit Pasayat, as vicechairman. It is an inter-agency group that includes the Secretary, Department of Revenue; the Deputy Governor of the Reserve Bank of India, and the heads of the Intelligence Bureau, the Research and Analysis Wing, the Enforcement Directorate, the CBI, the Central Board of Direct Taxes and a few other agencies. Its primary responsibilities include the investigation and prosecution of cases involving unaccounted money.
Undoubtedly, the establishment of the SIT is being touted as being in accordance with the policy commitments made by Modi government; the virtual groundwork was laid down by the Supreme Court in July 2011, which had specified the terms of reference for the SIT while acting on a writ petition filed by the former Law Minister and senior advocate Ram Jethmalani.
The United Progressive Alliance regime had been dragging its feet on implementing a July 2011 Supreme Court order to form such a team, and even made a vain bid to stall a court-monitored investigation on the plea that it would erode the authority of the executive. Its stand had given the impression that the previous government — despite its active partnership with other countries in global efforts to get evasion-friendly jurisdictions to shed their obsession with banking secrecy — was not serious about retrieving ill-gotten wealth deposited abroad. However, the UPA government did not comply with the order for nearly three years and sought a direction to review/modify the order.
A Bench headed by Justice H.L. Dattu dismissed the review application and gave three weeks’ time for the Centre to notify the SIT. On 23 May 2014, the apex court extended the time limit by one more week. Accordingly, the Modi government decided to implement the direction without any delay. The court had empowered the SIT with the responsibility of preparing a comprehensive action plan, including the creation of institutional structures that would enable and strengthen the country’s battle against generation of unaccounted monies, and their stashing away in foreign banks or in various forms domestically.
It is almost a herculean task for the SIT and SIT Chairman Justice Shah himself has spoken about the complexities involved. Broadly speaking, there is no clear estimate of the quantum of money parked in overseas bank accounts, and it is not known whether all the money that is said to have gone out of the country had not returned in some form through ‘round-tripping’ or participatory notes, or investments in the name of entities and individuals hiding under layers of corporate cover.
The Indian Government’s 2012 white paper on black money put the amount that Swiss banks owed to India in 2010 at 1.95 billion Swiss Francs, or 0.13 per cent of its total liabilities towards all countries, suggesting that estimates in the range of tens of thousands of crore of rupees may be exaggerated. The SIT will be facing an uphill task, as its investigation will have to take into account the provisions of existing double taxation avoidance or taxation information exchange agreements that come with a heavy responsibility on recipient-states to limit the use of such information to deciding taxation issues alone.
In the wake of the reported move by the OECD in evolving a set of global standards on ‘Automatic Exchange of Information in Tax Matters’, which is likely to come into force around 2017, and it may be possible for countries like India to obtain information related to bank account balances, interest and dividends so that they could compute capital gains on these sums. Nevertheless, whether such a mechanism will result in repatriation of such money or not is yet to be seen. The government should take all necessary measures to do away with this evil of black money.
By Dr. Arvind Kumar
