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Income Tax department may pass ex parte order against overseas account holders
November, 04th 2014

The income-tax department could pass ex parte orders against overseas account holders who don't cooperate or appear before the authorities as it rushes to complete investigations in five months.

"We could look at ex parte assessment orders," said a government official familiar with the matter. The government has pledged to the Supreme Court that it will meet a March 2015 deadline for completing assessments of 627 account holders.

These names figure in the list passed on to the apex court last week after the latter insisted the government do so. The list was given to the Special Investigation Team inquiring into the matter, although the government is said to have already done so anyway in June.

Apart from the aforementioned deadline, the cases will become time-barred by March when a six-year limit runs out, which means the tax authorities won't be able to take any action or raise tax demands after that date.

Hence, the need to consider drastic action in the event of delaying tactics on the part of account holders. Prosecution, however, can still be initiated for non-disclosure of bank accounts.

Ex parte or best-judgement assessment orders are passed when a taxpayer does not cooperate or present himself despite being given several opportunities to do so by the authorities. However, it's up to the authorities concerned to make sure they have a strong case, else such orders could get struck down.

"Proper procedures have to be followed for an assessment to stand the test of judicial scrutiny," said an income-tax official.

In case an assessee does not have assets and recovery cannot be carried out, tax authorities have the option of getting passports and visas revoked.

The Narendra Modi government is committed to fighting black money, sending out a strong message to the authorities dealing with such cases that there cannot be any letup, officials have said. The prime minister reiterated his determination to get funds illegally stashed overseas back to India in his radio address on Sunday.

The government's efforts got a boost last month when Switzerland agreed to provide information in respect of account holders regarding whom India can establish that independent investigations have been carried out. Switzerland had denied requests for information before this, saying the names of account holders were derived from stolen data. The list given to the Supreme Court largely contains names of account holders given to India by the French authorities.

Having to give the names to the court has clouded the issue of disclosure norms that are inherent in global and bilateral treaties and whether this would weaken India's ability to accede to such accords even though the country has been a champion of such information exchange.

As part of the ongoing investigation, the tax authorities have also received information from HSBC India in select cases where assessees have come forward and owned up to the accounts.

If the tax authorities can establish a linkage between accounts and funds that are unaccounted for, holders could find themselves in trouble.

"Taxpayers will find it difficult to contest if they have not extended cooperation to tax authorities despite several opportunities given," said Sunil Jain, partner at law firm J Sagar & Associates.

However, Jain said tax officials will have to ensure that the case is sound and that ex parte orders were passed only after lack of cooperation. The establishment of the Special Investigation Team at the behest of the apex court to closely monitor cases on black money could make it more challenging for non-cooperative taxpayers, he said.

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