Black money: I-T dept to file court case if illegal foreign assets detected

Taking a tough stance against black money, the CBDT has directed the Income Tax department to mandatorily launch court cases against people found to be holding stash funds and tainted assets abroad and consider "compounding" of such offences only at a later stage.

The apex policy-making body of the tax department has recently issued a directive in this regard to all I-T offices in the country after the latter raised "doubts" over the applicability of the provisions of the "Compounding of Offences" under the Income Tax Act, 1961 in these cases.

"Such cases (where a person has been found to be holding illegal assets abroad) can be compounded only after filing the prosecution complaint and shall not be compounded at the stage of show cause notice and/or without filing the complaint in the court," the new directives, accessed by PTI, said.

The Central Board of Direct Taxes, sources said, also obtained the opinion of the Special Investigation Team (SIT) on black money on the subject and after obtaining its approval it subsequently gave a directive to the I-T department that launching of court cases in such offences is a must.

The Compounding of Offences is undertaken under section 279(2) of the I-T Act by a panel of senior I-T officers in an assessment range keeping in view factors such as conduct of the person, nature and magnitude of the offence and facts and circumstances of each case.

In case a court case has been filed, the department duly obtains the permission of the court to initiate these provisions which aim to help a cooperating offender of tax evasion.

"It has been made clear that the compounding of offences, which means settling the case with a consenting party without going into tedious litigation process but under the ambit of the I-T law, will be only used in chosen and deserving cases of black money but a court case will have to be filed in the first instance," a senior I-T official said on Tuesday.

The Board also made it clear that in case of non-cooperating assesses, compounding will not be done.

"The cases in which the assessee has not admitted the foreign bank account(s) or assets and/or has not cooperated with the department in the assessment, penalty and recovery proceedings shall not be compounded," the directives said.

The cases, it said, in which the assessee "has admitted accounts/assets either fully (all accounts with which he is associated) or partially (only a few accounts out of all accounts with which he is associated), paid taxes and penalty and cooperated with the department may be considered for compounding as per the (existing) guidelines, only after filing the complaints."

Officials said the latest directives are in spirit of the decision that was announced by the CBDT to its top brass during their annual national conference early this year here where it was made clear that cases of black money where Indians hold tainted assets, especially in foreign shores, should not be just decided by way of levying penalty but should be taken to the courts by way of filing complaints under anti-tax evasion laws.

The Board also made it clear that these directives will not be applicable under the new Black Money law that was enacted by the government this year.