On Friday, December 16 Revenue Secretary Hasmukh Adhia said if the deposits are in bank accounts held by political parties, they would attract no tax.

Image: Business Standard
 
Despite it’s high voltage campaign, ostensibly against black money, political parties appear to have been spared. Is this a brazen attempt to build a cross-party silence or consensus?Worse, this means that individuals or corporations can launder their money through the account of political parties and escape the net!

The Modi government has put out an email ID for whistleblowers to send information about possible conversion of black money by individuals, but it seems to have given political parties a free run with deposits of old currency notes in their accounts. On Friday, Revenue Secretary Hasmukh Adhia said if the deposits are in bank accounts held by political parties, they would attract no tax.

The government has put out an email ID for whistleblowers to send information about possible conversion of black money by individuals, but it seems to have given political parties a free run with deposits of old currency notes in their accounts. On Friday, Revenue Secretary Hasmukh Adhia said if the deposits are in bank accounts held by political parties, they would attract no tax.

Both the Economic Times and the Indian Express have widely reported this controversial move.

“Dekhiye, if it is a deposit in  the account of political parties, they are exempt. Lekin agar individual ke account mein, kisi ke bhi account mein jama ho raha hai, toh woh toh definitely the information will come on our radar (See, if it is a deposit in the account of political parties, they are exempt. But if it is deposited in any individual account, in anyone’s account, that information will definitely come on our radar.)

Finance Ministry officials said that the tax exemption to political parties will be subject to existing conditions in the law. According to Section 13A of the Income-tax Act, political parties are exempt from income tax provided they maintain books of accounts and record details of individuals making donations over Rs 20,000.

Separately, at a FICCI event, Finance Secretary Ashok Lavasa, when he was asked about deposits of political parties, said, “Jab tak 30 December tak purane note koi bhi jama kara sakta hai toh isme kisi ke khilaaf aisa koi vyavdhaan nahi hai ki falaana aadmi nahi kara sakta aur falaana kara sakta hai (Until December 30, anyone can deposit old notes. There is no provision that says so-and-so cannot deposit and so-and-so can). Anybody in India can deposit these notes in his account.”

Having collected around Rs 1 crore in every search-and-seizure and admissions of Rs 2,600 crore of concealed income through 295 surveys, the tax department on Friday announced commencement of the second opportunity. Beginning Saturday, Adhia said, citizens can come clean with their unaccounted wealth through the Pradhan Mantri Garib Kalyan Yojana (PMGKY) till March 31, 2017.

Declarations made in the 105-day scheme will be subject to total 49.9 per cent of tax, penalty and surcharge, along with the declarant having to deposit 25 per cent of the undisclosed income in an interest-free deposit scheme for four years. Adhia said that black money cannot be converted to white unless taxes on undisclosed assets are paid and full investigation is concluded. Adhia announced an e-mail ID — blackmoneyinfo@incometax.gov.in — for whistleblowers to send information about possible conversion of black money.

Central Board of Direct Taxes (CBDT) chairman Sushil Chandra said the tax department was also receiving a lot of real-time information, which was being matched with existing profiles of tax assessees. He said that since the November 8 announcement of discontinuing high-denomination currency notes, the department had seized Rs 393 crore after conducting 291 searches and seizures. Of this, Rs 316 crore were cash seizures, including Rs 80 crore in new currency notes. Apart from this, jewellery worth Rs 77 crore was seized.

“Deposits in bank accounts are being watched and, therefore, they should come very clean under this scheme which is the last window available for anyone,” Chandra said, adding that around 3,000 notices have already been issued based on the deposits made after November 8.

Emphasising that scrutiny of data will be “non-intrusive” so that there is no fear of ‘Inspector Raj’, Adhia said that the government would also take help from professional agencies to analyse information of deposits made post the currency discontinuation decision.

“We want people to come forward and declare on their own unaccounted cash/deposit. The moment all the deposits come by December 30, we will analyse the voluminous data that we get. We would scrutinise all the data in a non-intrusive manner so that the fear of ‘Inspector Raj’ is not there in the minds of people,” he said.

Unlike the previous four-month long tax compliance window — Income Declaration Scheme (IDS) — which ended on September 30, declarants under the PMGKY will have to produce a receipt ensuring that they have paid taxes and penalties, before filing a declaration. Under IDS, declarants made their disclosures before payment of tax and penalty. The disclosure scheme is part of The Taxation Laws (Second Amendment) Act, 2016, approved by the Lok Sabha earlier this month and has the President’s assent.

Adhia said that while declarations made under the new taxation and investment regime of PMGKY will not be admissible as evidence under different tax Acts such as Central Excise, Wealth Tax or Companies Act, the declarants will not enjoy any immunity under existing criminal laws.

He said that if the undisclosed cash or deposit in accounts was not declared under the PMGKY scheme, it will attract tax, surcharge and cess totalling 77.25 per cent of the income if it is declared in the income tax returns. In case the disclosure is not made either using the scheme or in returns, a further 10 per cent penalty on tax will be levied followed by prosecution, he said. Under the scheme, the income declared will not be included in the total income of the declarant under the Income Tax Act for any assessment year.
 

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Mahesh Shah detained

Viewers of a regional news channel witnessed high drama on Saturday evening as Ahmedabad-based realtor Mahesh Shah who had vanished after disclosing Rs 13,800 crore in cash under the IDS — which ended on September 30 – reappeared in the studio to claim the astronomical sum which he had declared to the IT department was not actually his.

The black money sought to be surreptitiously laundered, he claimed, belonged to politicians, bureaucrats and businessmen who had offered him a hefty commission for his “services”. Shah added that he will disclose the names of those who sought to hide behind his name to the IT department.

Admitting that what he did was unlawful, Shah maintained that he did so out of compulsion and lure of the handsome compensation.

“Those whose money I disclosed backed out at the last moment, so I could not pay the first instalment of the tax due to the IT department as stipulated in the scheme”, said Shah.

During the hour-long interview he maintained that he now feared for his life and that was why he chose to make his disclosure on a news channel. Shah said he was in Mumbai for the past 10 days and had just returned to Ahmedabad.

The drama reached its climax when in response to a telephone call by the news channel, the police accompanied by IT officials barged into the studio and took him under custody live on television.

A possible cause for the last minute alleged backing out by politicians and bureaucrats could be the fallout of the government's demonetisation of high value notes notification coming as it did soon after the last date —  September 30 — for the voluntary income disclosure scheme.
  
 
 
 

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