Government and Supreme Court at war over tax treaties: Centre ordered to finish the job as it hands over envelope with 627 names

The Supreme Court on Wednesday virtually thwarted fresh attempts by the Modi government to go slow on the black money probe, citing “sovereign powers to sign treaties”.

The court sternly asked the Centre to “just go whole hog to unearth the money”, leaving other worries to the Special Investigation Team it has constituted.

The court, after receiving a sealed list of 627 Indians with accounts in HSBC Bank, Geneva, asked the Centre to raise all its bilateral, international agreement obligations – and confidentiality clause-related grievances before the SIT, which has two retired SC judges – Justices M.B. Shah and Arijit Pasayat as chairman and vice- chairman respectively.

The list had names, account numbers and the amount of money in each account.

The Centre told the court that more than half of those in the list are Indian residents and the rest are NRIs. The court sought a status report from the SIT by November 30. Justice Shah later told a news channel that there was “nothing new” in the list, and it was the same list the SIT had been given earlier.

“We give you liberty to place all your difficulties and grievances regarding treaties and confidentiality clause before the SIT. We are confident it will have a solution to your problem,” Chief Justice H.L. Dattu, head of the special bench dealing with the black money case, told Attorney General Mukul Rohatgi.

The remarks came after Rohatgi repeatedly told the bench that disclosing the names of all Indian foreign bank account holders without arriving at their alleged illegality would breach confidentiality clauses in existing bilateral double taxation avoidance agreements signed by India with other countries.

“We don’t have anything to hide. But we only have one request. Nothing should be done by your lordships to impede the government’s ability to get further information by entering into new treaties and agreements – bilateral and international – where the confidentiality clause is very binding. Revealing of information also has its impact on double taxation avoidance agreements,” said Rohatgi.

To this, CJI Dattu retorted: “We would not have asked for the full list of names for ourselves. But see you (Centre) started the problem by asking for a modification and clarification on order to disclose the names. Then we had a suspicion on your intention and this prompted us to ask for the list. We had earlier placed faith in the SIT. It knew its job as we have autho- rised them. They are not laymen.”

GOVERNMENT’S PLEA

Rohatgi also informed the court that “India is also on the threshold of entering into the automatic exchange of information agreements that will give a host of information even unasked which will help nail tax evaders”.

He added: “Automatic exchange of information involves the systematic and periodic transmission of bulk tax-payer information by the source country to the residence country concerning various categories of income.”

Tax experts have already said that the SC directive to share the names of overseas account holders has raised worries about India’s commitment to the confidentiality clause in various tax treaties and may impact remittances from the US.

Any move to make the names public without prosecution may hamper signing of the Foreign Account Tax Compliance Act (FATCA) with the US, which contains a confidentiality clause.

In the absence of the inter-governmental agreement related to FATCA, all remittances, including payments for exports, would face a 30 per cent withholding tax, say experts.

In trying to take cover behind tax pacts it has or will have with other nations, the government has now landed between a rock-like Supreme Court and the likely hard place that will be created if any of these agreements is breached. Information flows could dry up even as the judiciary makes inroads into the executive’s turf.

An interesting feature — one that makes the present battle look out of sorts — of the three known foreign account lists which is getting obfuscated in the ongoing brouhaha is that none have emerged from a tax treaty per se.

The Liechenstein 26 list originated in the CD sold by computer technician Heinrich Keiber, in hiding and wanted by the Interpol now; the HSBC Geneva list of 627 comes from data stolen by insider Herve Falciani; the list of 612 is from the International Consortium of Investigative Journalists.

The sealed cover with 627 names of black money holders which also had documents containing correspondence with French authorities, names of the account holders and the status report of the probe conducted so far in black money cases were submitted in separate sealed covers by the Centre which the bench refused to open despite repeated request from the AG.

“We hope this is the same list you gave to the SIT. Now that we have got the names we will send the entire list to SIT and ask them to proceed in accordance with the law. They may use the CBI or the Income Tax Department. It is for the SIT now to make use of the documents. We don’t intend to open the envelope and put people to embarrassment,” said CJI Dattu.

The AG submitted that some of the account holders have already admitted to having accounts and having paid taxes. Rohatgi said that details of account holders are of 2006 which were supplied by the French government to the Centre in 2011.

“Most transactions in those accounts took place during 1999 and 2000 and the last date for completion and assessment in all these cases is March 31, 2015,” he said, adding: “The IT Act has been amended. Instead of six years, now the prosecution for tax evasion can be initiated up to 16 years of commission of the offence.” It’s all up to the SIT now.

The next hearing is on December 3, and the SIT has till March next year to complete its investigation.

Rashtriya Janata Dal chief Lalu Prasad has hit out at the NDA’s “selective disclosure” vis-à-vis people accused of stashing black money in tax havens, terming it an attempt to “tarnish the image of all political parties except one”.

The former Bihar chief minister’s attack, posted on Facebook and Twitter, came after a few social media posts cited a WikiLeaks report to name him among the people with unaccounted for wealth in Swiss banks.

Lalu, currently recuperating after two heart surgeries, said “frustrated people with a parochial mindset are spreading rumours and canards about black money account holders for more than three years under a well-planned conspiracy”.

“This is being done for political gains,” he said in his social media posts.

About the reference to the whistle-blower portal WikiLeaks, Lalu said: “People are being misled about it.”

The RJD has lodged a complaint with the Delhi Police in this regard. In a letter to the Delhi Police Commissioner, party MP and former Union minister Jaiprakash Narain Yadav said a “mala fide campaign with criminal intent” was being pursued against Lalu Prasad and other national leaders “through e-mails and social media”.

Seeking action against the culprits, Yadav said: “The campaign is being run purely on assumptions with mischievous and mala fide intentions to damage rep- utations and cause political harm. The malicious, concocted and false campaign has caused immense distress to our leaders at large.”