Mumbai black moneybags

Of the 50 Indians who stashed away unaccounted money in the European tax haven of Liechtenstein, 25 belong to Mumbai. Tax authorities have reopened assessments of all these 25 taxpayers, or rather evaders, under section 148 of the IT Act. The law empowers assessing officers to reopen a case if there is reasonable ground to suspect that the taxpayer’s income has escaped the tax net. Tax officials from Delhi said that none of the 25 account holders in LGT Bank are big industrialists or well-known individuals. Information about Indians holding unaccounted wealth in Liechtenstein came to light after a former LGT Bank employee passed on data about such accounts, held mostly by German taxpayers, to the German government. German law provides for rewarding informers who help authorities detect income that passes through the tax net. Holding unreported accounts abroad is an offence under the Foreign Exchange Management Act (Fema) too. This allows the Enforcement Directorate, the body administering Fema, to initiate an investigation against such accountholders. Besides European tax havens, Indian citizens are also parking their undisclosed wealth in companies they have set up in free trade zones (FTZs) in Dubai. Having an establishment in an FTZ often works out cheaper. “In the last few years many Indians have opened accounts in Dubai where all one has to do is set up a shell company...It’s not surprising that most of the LGT accountholders are from Mumbai which accounts for 35-40% of the all-India tax collection,” said a senior citybased accountant. Under the present rules, the IT department can reopen only those cases where taxpayers have transferred money to these accounts over the past six years. The provisions within the Indian IT Act do not permit tax authorities to reopen cases that are more than six years old. The period of limitation earlier was ten years till the government reduced the period of limitation to six years in 2004. The action against taxpayers holding accounts with LGT Bank coincides with an affidavit filed by the Union government before the Supreme Court, which is now hearing a public interest petition (PIL) filed by jurist Ram Jethmalani. In its affidavit, the government has said it has taken all the necessary action following the information received from Germany.