VAT, state tax offences should attract PMLA charges: SIT

Violation of state tax laws like VAT should be made a predicate offence attracting action under anti-money laundering laws by agencies like ED which will act as a deterrent against economic crimes, the Vice Chairman of Special Investigation Team (SIT) on black money said today.
The Union government, only last year, has widened the category of predicate offences and included offshore tax evasion as a criminal offence based on which the Enforcement Directorate has been empowered to slap the stringent Prevention of Money Laundering Act (PMLA) against offenders.
SIT Vice Chairman Justice (retd) Arijit Pasayat, who was delivering key note address during an Enforcement Directorate event here, also rejected criticism that probe agencies were slow, saying they need to be meticulous so that they can stand the scrutiny of law and obtain convictions, or else the criminals will take advantage.

He also said that probe agencies working under the high-power panel have revealed "horrifying" figures where it was found that there are "97,000 people who are Directors in more than 20 companies and 2,000 others are in this position in more than 100 companies in the country in gross violation of laws".
This despite the fact that there is a provision in the Companies Act that you cannot be a Director in more than 20 companies.
Referring to the money laundering Act, he said it "has a peculiar feature that it does not act on its own. Only when a predicate offence is committed then only the ED is triggered... You have murder and attempt to murder in those offences but unfortunately tax offences were not and are still not (in that category).

"Major of them (tax offences) are predicate offences. There is a need for that (to include them in predicate offences list).

"Somebody who does not file his income tax return correctly and suppresses his Rs 10,000 crore income actually murders the financial stability of the country. That fellow has to be properly tackled," Pasayat said.
The SIT deputy chief said that even tax offences under the jurisdiction of a state should also be brought under the predicate offences category.
"State tax laws like VAT, if they are made predicate offences that will also send some message to the business community.... There will be of course a large number of cases but somewhere you have to make the economic offences more subject to deterrent effect," he said.

The term predicate offence denotes the registration of a crime under IPC or CrPC provisions which is later taken cognisance by ED to invoke the PMLA against the same accused.
On the the probe being carried out in the 'Panama Papers' disclosure, where about 500 Indians have been named, Pasayat said the agencies are undertaking a "verification" of all such individuals and entities.
"First thing to be known is whether these (Panama) accounts are legitimate or illegitimate. Just because some name comes, that does not mean (wrongdoing). Without a verification if you show it (then it's not correct)... The process of verification has to be faster," he said.

The retired judge of the apex court said these disclosures were "complex transactions and wave of deceptions one after the other."
"You have to lift the corporate veil sometimes to find out the ultimate beneficiary that certainly is a very difficult task," he said.
"The job of tax agencies and ED is herculean. There is a belief now that we are slow paced...People attribute motives thinking that they (probes) should be fast tracked and not played like test match but like T-20 players not knowing that in a hurry if there is a slight mistake somewhere, ultimately the criminals will take advantage of it.

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The retired Supreme Court judge recounted the extent of the menace of shell and fake companies in the country as he gave out some numbers in this regard.
"From our investigation we got know some facts. There is a provision in the Companies Act that you cannot be a Director in more than 20 companies. We asked the Ministry of Corporate Affairs to give us a list of people who are Directors in more than 20 companies. To our horror, we found there are 97,000 people and there are 2,000 people who are directors in more than 100 companies.

"On the face of it, it's so shocking. Then we said give us the addresses of places where there are more than 20 companies operating. Of course, that is no offence but being a director of more than 20 companies is an offence which carries a minimum fine of Rs 25,000 per day," he said.
Citing an example, he said if probe agencies go a "little deep", probably every day they can collect more than Rs 20 lakh of fine from those people who are directors of more than 20 companies.
"To our horror, we found there are some small rooms in Kolkata and some places in Kolkata and Delhi which have offices of more than 20 companies," he said.

Pasayat, who along with SIT Chairman Justice (retd) M B Shah periodically reviews the work of at least eleven probe agencies in the country, also rued the fact that punishment for committing different quantum of economic crimes is on an equal footing in India.
"A man who takes a bribe of Rs 20 gets one year and a man who takes a bribe of Rs 300 crore also gets one year. That is the tragedy in this country," he said.
Pasayat said there cannot be a "Taliban-style" quick investigation of financial crimes in the country and the probe agencies should do be allowed to do their work "systematically and methodically" so that they can obtain good convictions and stand the scrutiny of law.

He added another area of practical difficulty for such agencies is lack of proper infrastructure.
The SIT Vice Chairman said India has a robust judicial
system but at the same time "we must not allow the criminals to outsmart us".
"We have to tackle their intelligence with a right way to their wrong ways. For that you need innovation. I expect all of you to be innovative," he told the officers of the ED and those drawn from sister agencies.
He said the work of investigative agencies should be such that it "blacken the faces of black money holders".
"That's the only way we can show to the world that India lacks nothing. Not certainly the courage to deal with these criminals and whether they call it money laundering or whether they call it black money. We will blacken their faces," he said.

He added most of the foreign jurisdictions who were previously non-cooperating in black money probe cases, have now started cooperating with India.
"Now, we are getting a lot of information," he said.
Pasayat added that the mandate of the SIT, notified by the central government in 2014 on the directions of the Supreme Court, is to probe not only foreign but also domestic black money cases.
"In fact, most of our recommendations are for domestic...That is a misnomer (calling it SIT to probe illegal assets of Indians abroad)," he said the source and matrix of all such crime is within the country in many cases.