Lok Sabha Question No. 1068 (UNSTARRED), answered on 2015-12-04
Subject: SIT on Black Money
Ministry: FINANCE
Asked by: MALLIKARJUN  KHARGE, J. JAYASINGH THIYAGARAJ NATTERJEE

## GOVERNMENT OF INDIA MINISTRY OF FINANCE DEPARTMENT OF REVENUE

## LOK SABHA UNSTARRED QUESTION NO. 1068

TO BE ANSWERED ON FRIDAY, DECEMBER 4, 2015

AGRAHAYANA  13, 1937 (SAKA)

## SIT ON BLACK MONEY

## 1068.   SHRI MALLIKARJUN KHARGE: SHRI J.J.T. NATTERJEE:

Will the Minister of FINANCE be pleased to state:

- (a) whether the Supreme Court appointed Special Investigation Team (SIT) has submitted its report on black money;
- (b) if  so,  the  details  of  recommendations  made  including  recommendations  on  placing instructions on Participatory Notes (PN) and extension of the Prevention of Corruption Act to private sector to check unaccounted wealth in education and religious institutions; and
- (c) the action taken by the Government thereon?

## ANSWER

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

- (a)  &  (b)  The  Special  Investigation Team  (SIT) submits its reports directly to the Hon'ble Supreme  Court.  So  far  SIT  has  submitted  four  reports  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.

(c)  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  levering  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 amended. 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  'proceeds  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.

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