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Notice to 50 Indians: CBDT
May, 13th 2009

The government has made the first move to home in on individuals and entities who have stashed away black money in one of the offshore banks.

The Central Board of Direct Taxes (CBDT) has sent notices to at least 50 individuals figuring among a list of Indians who hold accounts with the LGT Bank, Leichtenstein, a tax haven which borders Germany.

We have sent notices. Whatever action that can be taken under law would follow, CBDT chairman SSN Moorthy told ET. The tax authorities have sought information on the source of the money lying in the overseas bank and whether the account holders have paid tax on the amounts.

The list, provided by the German government, reportedly contain the names of some prominent Indian businessmen and industrialists. However, the Indian government is under obligation not to make the names public as they were provided under the Indo-German Double Taxation Avoidance Agreement (DTAA).

The information exchanged under DTAA is confidential, but the government is free to act upon the information. In the run-up to the polls, the Congress has come under attack from the BJP for not doing enough to bring back the black money parked by several Indians in offshore destinations around the world. At a recent election rally prime minister Manmohan Singh has rubbished these allegations saying that the issue is nothing but a election stunt.

According to international reports, wealth stashed away by Indians in offshore banks could be $1-1.5 trillion. Tax Justice Network, an organisation that works towards fair tax treatment, says the wealth concealed in tax havens across the world at between $11-12 trillion. Indian IT laws have provisions to prosecute a taxpayer who refuses to pay tax after a crystallised tax demand.

A way to bring money to India

If a person who holds accounts abroad is served a demand notice but declines to pay, (s)he could be invariably prosecuted under I-T laws. Legal experts opine that prosecution is an ideal tool to bring back unaccounted wealth held by citizens offshore.

Mahesh Jethmalani, senior advocate, says the prospect of prosecution could be the most effective way of bringing such money back to India.

The government, in an affidavit to a public interest litigation filed by noted jurist Ram Jethmalani and four others, told the Supreme Court that it has the names of Indians holding accounts in LGT Bank.

However, tax experts and senior income-tax officials opine that there are roadblocks on the way to accessing accounts in LGT bank because of the limitation period that bars the I-T department to take up cases older than six years. Experts say the existing law on limitation needs to be altered. But to be effective, the law should be altered with retrospective effect.

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