Panama Papers: Notices sent to 400 people under Black Money Act
Two years after the Panama Papers brought to fore alleged hidden offshore accounts of the world’s wealthy, the income-tax department has issued notices to many in India for not disclosing all their foreign assets as well as interest and income earned through such assets. Notices were issued following an investigation by the taxmen and the Enforcement Directorate (ED), said people in the know.
The notices ask the individuals to provide details of “foreign bank accounts, bank account statements since 2015 and complete narration of debit/credit entries in these bank accounts”.
ET has reviewed a copy of the notice served on a Delhi-based high net-worth individuals (HNIs). In 2016, about 500 prominent Indians, including film personalities and businessmen, were named in the Panama Papers. ED and the tax department summoned HNIs named in the papers and sought an explanation. Most people claimed they had used the liberalised remittance scheme (LRS) route to buy properties and make investments outside India. Under the scheme, Indians can remit up to $250,000 every year.
People close to the development said notices were sent to about 400 people whose names appeared in the Panama Papers.
Most people created offshore accounts in British Virgin Islands, after hiring a law firm in Panama, where the money was deposited. Following that, investments in real estate or other assets were made in London, the US and Dubai.
After the written submissions by the HNIs, the tax department and ED discovered that not all the assets and income arising from these assets were disclosed.
For the first time, notices have been issued under the Black Money Act (Undisclosed Income and Assets) that could lead to 120% in taxes and penalty. If it’s found that wrong details were furnished, then an additional `10 lakh penalty could be levied. “During the course of assessment, if it’s discovered that tax has been evaded by not disclosing foreign income and assets, heavy penalties could follow.
Taxpayers who did not take advantage of the black money disclosure scheme would now be required to submit necessary documents to the tax department, which may be followed by penalties and prosecution in case of adverse findings,” said Amit Maheshwari, partner, Ashok Maheshwary &Associates.
Most HNIs had told the taxman and ED that there was nothing illegal in what they had done. “Most of the people named in Panama Papers stated that the investments were made out of disclosed source and money was remitted through authorised dealer-complying FEMA (Foreign Exchange Management Act) regulation. In some cases, where the assesse had made some error in not disclosing the full asset value, though remitted officially, the tax department is attempting to levy penalty under the Black Money Act,” said Dilip Lakhani, a senior chartered accountant.