 "Black Money")
The Special Investigative Team (SIT) on undisclosed money wants a ban on any cash transaction over Rs 3 lakh and a limit of Rs 15 lakh on cash holdings.
These are in its latest report, to the Supreme Court. It wants the law to penalise any breach of this.
In the wake of the 'Panama Papers' leak, it also recommended amending the law to provide for confiscation by the state of such money abroad.
The SIT is chaired by retired judge M B Shah. This is its fifth report to the apex court. It feels a large amount of unaccounted wealth is stored and used in the form of cash.
"Limits on cash transactions would discourage white-collared criminals or hardened criminals from money laundering and dealing in unaccounted/black money," it said.
Also: "Maybe corrupt persons would find out ways and means by accepting gold or ornaments or constructed premises. However, it would prevent to a large extent the funding of terrorism and organised crimes, and transferring unaccounted money from one destination to the other..."
It recommended that from the start of the next financial year, all banks, including cooperative ones, be directed to notify any income or withdrawal of more than Rs 3 lakh to the Directorate General of Income Tax (Investigation) and to the Financial Intelligence Unit. Besides, an upper limit of Rs 15 lakh on cash holding, seen as the root cause of black money circulation. If any person or business unit required to hold more cash, permission has to be sought from the area's commissioner of income tax.
It said unaccounted wealth being held in cash could be confirmed by the huge cash recoveries in numerous actions by law enforcement agencies from time to time. According to the Central Board of Direct Taxes, total cash seizure was Rs 514 crore for 2013-14, Rs 519 crore for 2014-15 and Rs 471 crore for 2015-16. Most seizures by the income tax department were in the medical and education sector. "Black money runs the parallel economy and takes out from the stream the productive money. Domestic black money represents a bigger danger which needs conviction, commitment, and dedication on the part of the government to contain this menace… If the recommendations of SIT are incorporated into the law, it shall go a long way in dealing with the menace," said Rakesh Nangia, managing partner, Nangia and Co.
In light of the Panama Papers leak on offshore accounts, the SIT suggested amendment of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, by incorporating the provision that "undisclosed foreign income and assets would vest in the Union of India".
Stating that in some of the Panama cases it is contended by the assessees that they had permission from the Reserve Bank (RBI) before depositing the amount in foreign countries, the SIT said such information is not given by the assessees to the tax authority.
"Once it is held that under the law, property vests in the Union of India, the person who is holding the said property outside the country shall have to prove that it was acquired legally and/or held after obtaining necessary permission from RBI," it said.
The Panama Papers refer to 11.5 million documents 'leaked' from a Central American law firm, Mossack Fonseca, specialising in setting up offshore companies that can be used to conceal wealth. The leak resulted in the resignation of Iceland's prime minister, while several global leaders found their finances under public scrutiny, particularly with regard to source of income.
"Considering the recent disclosure in the Panama Papers investigation, it appears that unless there is the deterrent provision, it would be difficult to get back the stashed money outside the country," said SIT.
