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New treaties with foreign govts lead to fresh leads in black money trail

There has been a surge in information from foreign governments following the signing of new treaties with various countries and offshore financial centres.

S.P.S. Pannu | May 23, 2012 | Updated 11:23 IST

Tax authorities are investigating 3,300 fresh leads received this year from foreign governments to unearth black money stashed in secret overseas accounts by Indians.

Finance ministry figures show that there has been a surge in information from foreign governments following the signing of new treaties with various countries and offshore financial centres. The leads received from foreign governments during the five-month period, January and May, was three times the number received in the six-month period between July and December 2011. This in turn was more than twice the number received in January-June of 2011. 

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The information relates to details of assets and payments received by Indian citizens in several countries, including banking information. The exchange of information has become possible under the new clauses that have been incorporated in the tax treaties signed with various countries and also as part of the multilateral pacts that have come into force at the behest of western nations to check the menace of illicit funds financing terrorist outfits worldwide.

With information becoming available more easily, the number of requests for administrative assistance to foreign tax authorities sent by the field formations of the income tax department has also gone up. While 92 such requests were place by the field formations in 2010-11, the number went up to 386 in 2011-12.

Along with the increase in the flow of information coming into the country, the government has also responded more liberally by providing information sought by foreign tax authorities about their nationals. More than 58,000 pieces of information were sent to eight countries last year under the automatic exchange of information route, according to finance ministry figures.

Among the major tax evasion cases detected with the help of overseas information recently was that of a pharma company which exports to Ukraine, Cyprus, and Russia. The company claimed bogus marketing expenses through dummy companies in the Ukraine, Cyprus, and the UK and a sum of Rs 150 crore was shown under this heading.

Similarly, the National Tax Agency of Japan passed on information about remittances to the extent of $4.84 million in the bank accounts of an Indian taxpayer by a Japanese entity maintained in Hong Kong. The information was received by the EOI Cell and the same was passed on to the in come tax authorities. As much as Rs 1.13 crore of unexplained cash was seized along with incriminatory documents from the woman entrepreneur, who admitted to having bank accounts in Hong Kong. The finance ministry, however, has not divulged the names of the business persons or their companies citing the secrecy clause in the international tax treaties. According to the international standards, if information is originally regarded as secret in the transmitting state, it shall be used only for tax-related purposes, but may be disclosed in public court proceedings or in judicial decisions. A senior official said the "government has taken up the issue of relaxing the confidentiality clause with several countries". "In all the new agreements being negotiated, attempts are being made to provide for sharing of information among the investigating agencies with the consent of the concerned country," he added.

Courtesy: Mail Today 

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