Lok Sabha Question No. 600 (UNSTARRED), answered on 2016-02-26
Subject: Circulation of Black Money
Ministry: FINANCE
Asked by: RAMDAS CHANDRABHANJI TADAS

## GOVERNMENT OF INDIA MINISTRY OF FINANCE DEPARTMENT OF REVENUE

## LOK SABHA UNSTARRED QUESTION NO. 600

TO BE ANSWERED ON FRIDAY, FEBRUARY 26, 2016

PHALGUNA 7, 1937 (SAKA)

## Circulation of Black Money

## †600. SHRI RAMDAS C. TADAS:

Will the Minister of FINANCE be pleased to state:

(a)  whether  the  Enforcement  Directorate  and  the  concerned  departments  have  taken  any effective  steps  to  curb  black  money  and  circulation  of  currency  through  Hawala  in  the country recently, if so, the details thereof and the action taken against those involved;

(b)  the  details  of  the  action  taken  to  curb  black  money  in  the  country,  bring  black  money deposited in different banks during the last three years and the current year;

(c)  the  State/UT-wise  details  of  cases  going  on/pending  against  persons  involved  in  such activities;

(d) whether the Special Investigation Team (SIT) on black money has submitted its report to the Government recently and if so, the details thereof; and

(e) the follow-up action taken by the Government in this regard?

## ANSWER

## THE MINISTER OF STATE IN THE MINISTRY OF FINANCE (SHRI JAYANT SINHA)

The Government has taken several effective steps, both by way of policy level initiatives as well as through more effective enforcement action on the ground, to curb the menace of black money in the country.  These steps include :

- (i) Constitution of the Special Investigation Team (SIT) on Black Money under the Chairmanship and ViceChairmanship of two former Judges of Hon'b le Supreme Court.
- (ii) Enactment of a Comprehensive new law titled 'The Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015' to specifically and more effectively deal with the issue of black money stashed away abroad which has come into force w.e.f. 01.07.2015.
- (iii) Introduction of the Benami Transaction s (Prohibition) Amendment Bill, 2015 to amend the Benami Transaction s (Prohibition) Act,  1988 with a view to, interalia, enable confiscation of Benami property and provide for prosecution.
- (iv) Proactively engaging with foreign governments  for enhanced  exchange  of information under Double Taxation Avoidance Agreements (DTAAs)/Tax Information Exchange Agreement (TIEAs)/Multilateral Conventions.
- (v) According high priority to the cases involving black money stashed away abroad for investigation and other follow-up actions.
- (vi) While  focusing  upon  non-intrusive  measures,  due  emphasis  on  enforcement measures  in  high  impact  cases  with  a  view  to  prosecute  the  offenders  at  the earliest possible for credible deterrence against tax evasion/black money.
- (vii) Proactively  furthering  global  efforts  to  combat  tax  evasion/black  money,  interalia,  by  joining  the  Multilateral  Competent  Authority  Agreement  in  respect  of Automatic Exchange of Information and having information sharing arrangement with USA under its Foreign Account Tax Compliance Act (FATCA).
- (viii) Rationalization  of  the  PAN  quoting  requirements  in  respect  of  certain  financial transactions which includes the need of compulsory quoting of PAN for sale or purchase, by any person, of goods or services of any nature (other than those for which separate requirements have been prescribed under rule 114B of the Incometax  Rules,  1962)  of  the  amount  exceeding  Rs.  2  lakh  per  transaction  w.e.f.  1 st January, 2016.

(b) & (c) : Appropriate  action  against  evasion  of  taxes/black  money  is  an  on-going process.  Such action under direct tax laws includes searches, surveys, enquiries, assessment of  income,  levy  of  tax,  interest,  penalties,  etc.    and  filing  of  prosecution  complaints  in criminal courts, wherever applicable.  Disclosure of information regarding specific taxpayers is prohibited except as provided under section 138 of the Income-tax Act, 1961.  However, numbers of groups of persons in which searches were conducted under the Income-tax Act, 1961 during financial year 2014-15 in different regions of the country are given in Annexure.

(d) & (e) : The  Special  Investigation  Team  (SIT)  submits  its  reports  directly  to  the Hon'ble Supreme Court. So far SIT has submitted four repor ts inter-alia recommending the following:-

- (i) There  should  be  institutional  mechanism  through  a  dedicated  set  up  which examine mismatch between export/import data with corresponding import/export data of other countries on at least a quarterly, if not monthly basis.
- (ii) To make declaring  PAN mandatory  for  all  sales,  where  payment  is  in  cash  or through bank, above a value of Rs. One lakh.
- (iii) To  control  holding  of  unaccounted  money  to  a  large  extent,  a  threshold  cash holding limit of Rs. 10 lakhs or 15 lakhs should be prescribed.
- (iv) To make tax crime as a predicate offence.
- (v) FEMA should be amended to provide for seizure and confiscation of property of equivalent value within the country, if it is held that property held abroad is in violation of section 4 of FEMA.
- (vi) FIU should have access to widest possible range of financial, administrative and law enforcement information.
- (vii) SEBI needs to have an effective monitoring mechanism to study unusual rise of stock prices of Companies and misuse of exemption on Long Term Capital gains tax for money laundering .
- (viii) SEBI needs to examine misuse of Participatory notes for money laundering and come up with regulations where the ' final beneficial owner ' of P notes/ODIs are known. The information of ' beneficial  owner ' with  SEBI  should  be  in  form  of individual whose KYC information is known to SEBI.
- (ix) P  notes  are  transferable  in  nature.  SEBI  needs  to  examine  if  this  provision  of allowing  transferring  of  P  notes  is  in  any  way  beneficial  for  easing  foreign investment.  Any  investor  wanting  to  invest  through  P  notes  can  always  invest

afresh through a Foreign Portfolio Investor (FPI) instead of buying from a P note holder.

- (x) Proactive detection of creation of shell companies
- (xi) All cases of Trade based money laundering detected by DRI where violation of section  132  of  Customs  Act,  above  the  threshold  provided  for  in  Part  B  of Schedule of PMLA has been found, must be shared by DRI with the Enforcement Directorate to  enable ED to take action under Prevention of Money Laundering Act.
- (xii) Generation  of  black  money  in  education  section  and  through  donations  to religious institutions and charities must be curbed.  CBDT should take appropriate action for expeditious finalization of the assessment, if required, punitive action may be taken.
- (xiii) There  is  a  necessity  for  establishment  of  additional  Courts  for  deciding  the pending cases under the Income Tax Act, 1961.
- (xiv) A central KYC Registry should be established with all law enforcement agencies, Registrar of Companies and financial institutions having access to its database.
- (xv) Ministry of Commerce issue necessary notification under section 20, 21 and 22 of the  SEZ  Act  empowering  DRI  to  carry  out  investigation,  inspection,  search  or seizure  in  the  Special  Economic  Zone  or  Unit  without  prior  intimation  or approval of the Development Commissioner.

The  following  steps  have  already  been  taken  by  the  Government  on  the  basis  of recommendations of SIT reports.

(a)  Amendment made in Income Tax Act: Vide Finance Act, 2015, Income Tax Act, 1961 was further amended to prohibit acceptance or payment of an amount of Rs. 20,000 or more in cash as advance or otherwise in relation to transfer of an immovable property. Provisions are also being made to tackle splitting of reportable transactions. To improve enforcement, CBDT  and  CBEC  are  lev ering  technology  to  have  access  to  information  in  each  other's database.

(b) Amendments made in PMLA: Similarly, vide the Finance Act, 2015, Section 132 of the Customs Act, 1962, which deals with offence relating to false declaration/documents in the transaction  of  any  business  relating  to  Customs  has  been  made  predicate  offence  under Prevention of Money-laundering Act, 2002 to curb trade based money laundering. Further, vide  the  Finance  Act,  2015,  the  definition  of  'proceeds  of  crime'  under  PMLA  has  been a mended. Under the revised definition 'proceeds of crime' would also include ' where such property  is  taken  or  held  outside  the  country,  then  the  property  equivalent  in  value  hold within  the  country '.  This  provision  will  enable  action  in  those  cases  where  'p roceeds  of crime' is taken or held outside the country and enable action to be taken for attachment of equivalent asset located in the country.

(c) Amendments made in FEMA: The Foreign Exchange Management Act, 1999 (FEMA) has  also  been  amended  vide  Finance  Act,  2015  to  the  effect  that  if  any  foreign  exchange, foreign security of any immovable property situated outside India is held in contravention of the provisions of this Act, then action may be taken for seizure and eventual confiscation of assets of equivalent value situated in India. These contraventions are also being made liable for levy of penalty and prosecution with punishment of imprisonment up to five years.

(d) Enactment of Black Money (Undisclosed Foreign Income and Assets) and Imposition of  Tax  Act,  2015: The  Government  has  passed  'The  Black  Money  (Undisclosed  Foreign

Income  and  Assets)  and  Imposition  of  Tax  Bill,  2015'.  This  Act  provides  for  separate taxation  of  any  undisclosed  income  in  relation  of  foreign  income  and  assets.  It  inter-alia includes  stringent  provisions  for  penalties  in  relation  to  undisclosed  foreign  assets/income. Further, the offence of tax evasion under the new law has been made non-compoundable and the offenders will not be permitted to approach the Income-tax Settlement Commission. The new law has also amended the Prevention of Money-laundering Act, 2002 (PMLA) to include offence of tax evasion as a scheduled offence under PMLA.

(e) Establishment of a Central Know Your Customer (KYC) Registry. The Government has notified the Rules for Central KYC Registry under PMLA and steps are being taken to establish it.

*****

## ANNEXURE

| Sl. No.   | Region     |   Number of groups of persons in which searches were conducted during financial year 2014-15 |
|-----------|------------|----------------------------------------------------------------------------------------------|
| 1         | Ahmedabad  |                                                                                           27 |
| 2         | Bangalore  |                                                                                           45 |
| 3         | Bhopal     |                                                                                           26 |
| 4         | Chandigarh |                                                                                           08 |
| 5         | Chennai    |                                                                                           44 |
| 6         | Delhi      |                                                                                           52 |
| 7         | Hyderabad  |                                                                                           49 |
| 8         | Jaipur     |                                                                                           24 |
| 9         | Kochi      |                                                                                           29 |
| 10        | Kolkata    |                                                                                           76 |
| 11        | Lucknow    |                                                                                           35 |
| 12        | Mumbai     |                                                                                           56 |
| 13        | Patna      |                                                                                           30 |
| 14        | Pune       |                                                                                           44 |
| Total     | Total      |                                                                                          545 |