New Delhi, Feb 29: A committee under the stewardship of the Central Board of Direct Taxes ( CBDT) chief has suggested a drastic overhaul of laws to provide more stringent punishment, a fast- track judiciary and stronger administrative machinery to take on the black money hoarders, Mail Today reported.
The first draft of the black money committee report recommends that the punishment for those convicted under the Prevention of Corruption Act should be increased from the present seven years to a maximum term of 10 years rigorous imprisonment, says the report.
The report states that generation of black money is a matter of serious concern and the offence “ cannot be treated as less diabolical than the moneylaundering or commercial production of and sale of illicit drugs'' which carry maximum prison terms of 10 years and 20 years respectively.
The committee headed by the CBDT chairman includes, CBDT member ( legislation and computerisation), the Enforcement Directorate chief, DG of Directorate of Revenue Intelligence, director general ( currency), CBDT joint secretary ( foreign trade and tax regulation), director of Financial Intelligence Unit, CBDT's member ( investigation), commissioner of income tax ( investigation) and law ministry joint secretary.
The committee wants foreign banks to report to the authorities all transactions undertaken by Indian account holders above a certain threshold value.
To support its case the panel's report cites the Patriot Act of the US under which global financial transactions above a threshold limit by or with Americans gets reported to the law enforcement agencies such as the IRS and FBI.
“ We recommend that India should also insist on entities operating in India to report all global transactions above a threshold limit. For this purpose, appropriate laws, rules or contractual licensing arrangements with these entities may be framed and implemented,'' the report observes.
It points out that currently there is no system of data mining and monitoring of international money transfers.
As a result the source and the end- use of funds remitted out and received in the country remains unchecked.
The data reported cannot be matched with the purpose declared by people before various authorities.Such flows of money take place through banking and the payment gateway channels.
As in the case of domestic transactions, there should be financial reporting of overseas transactions as well for better regulation and such data should be reported to both the income tax department and the FIU- India.
“We recommend that the RBI should make urgent arrangements to put such a reporting mechanism in place,'' the report states.
The panel has also taken on the sources of generation and laundering of black money.
The report highlights the fact that black money is used either in conspicuous consumption or in non- productive sectors such as real estate, bullion and jewellery. Black money is also re- invested in the regular economy through laundering or in the financial markets.
Real estate has been identified as a sector which both generates and consumes black money and probably constitutes the largest part of the black money economy in the country.
The problems besetting the sector range from lack of a regulatory mechanism, different rates of stamp duty, nonscientific ways of fixing circle rates and lack of “ updation”.
To rein in black money transactions in the real estate sector, the panel has recommended that pre- emptive purchase of immovable property be reintroduced in the I- T law.
Similarly, the bullion and jewellery sectors are seen as a big consumer and generator of black money second only to the real estate sector.
The report says while the I- T department has made it mandatory to quote PAN number for purchase of bullion above Rs 5 lakh, proper reporting or enforcement of this provision has not been put in place.
“We, therefore, recommend that the I- T department expeditiously put these mechanisms.Similar rules should be framed for purchase or sale of jewellery and implemented,'' it adds.
Since substantial sums of black money investments take place in financial markets, the panel has also recommended that the oversight mechanism for them must have manpower with proper domain knowledge.
This will involve placing officials from the financial investigating agencies in the vigilance machinery of banks and financial institutions to keep a proper vigil and ensure that rules and regulations are followed.
The report also states regulations are still not in place in some commodity markets and it needs to be done on an urgent footing.
According to the committee, the effective battle against black money cannot be ensured unless the judicial machinery to deal with the malaise is specialised and the trial of offences is expeditious and punishments exemplary but all these areas are “ sadly lacking”.
The committee, has recommended that the proposed National Tax Tribunal be set up immediately to deal with all tax litigation in the country.
“We further recommend that for criminal trial of economic offences all high courts should set up exclusive economic offences courts with special summary procedure,'' the report states.
The judicial officers posted in these courts should undergo mandatory refresher courses in the training centres of the tax departments to properly equip them in dealing with such complex cases, the report adds.
