To check the black money menace, the Supreme Court-appointed SIT on Friday called for effective norms to curb betting in cricket and a stronger set of norms for P-Notes, while also making a case for bringing donations to educational and religious bodies under tax net.
The special investigation team (SIT) on black money also said Sebi should come up with regulations on collection beneficial ownership details of P-note holders, as also for monitoring any unusual rise in stock prices.
The SIT also flagged serious concerns over huge amounts of black money being used and generated in areas like betting as also in donations to schools, colleges and religious institutions.
In its third report, the panel flagged the issue of "involvement" of huge illegal and unaccounted money in cricket betting, especially Indian Premier League (IPL) and made a case for effective legislative steps to deal with the menace.
"...it is apparent that illegal activity of cricket betting requires to be controlled by some provisions which are deterrent to all the concerned," said the report of SIT headed by Justice M B Shah (retd).
On misuse of capital markets to launder black money, the panel said Sebi should put in place an effective mechanism to monitor any unusual rise in stock prices and inform other agencies like CBDT and Financial Intelligence Unit (FIU) for necessary action.
Sebi recently barred hundreds of entities, including individuals and companies from the securities market for suspected tax evasion and laundering of black money through stock market platforms.
The SIT also suggested that the market regulator should find out beneficial ownership of Participatory Notes (PN), an instrument used by foreign investors to invest in India.
"It is clear that obtaining information on 'beneficial ownership' of P-notes is of crucial importance to prevent their misuse. Sebi needs to examine the issue... and come up with regulations where the 'final beneficial owner' of P notes/ODIs are known," the report said.
It said that about Rs 85,000 crore (Rs 850 billion) came in through P-from CaymanIsland, which has a total population of about 54,000 (in 2010). "...it does not appear possible for the final beneficial owner of ODIs originating from Cayman Islands," it said.
On generation of black money in education sector and through donations to religious institutions and charities, it said CBDT should take expeditiously finalise assessments, and if necessary, take punitive action.
The SIT suggested steps to crackdown on shell companies which are set up by entities to evade taxes and result in generation of black money.
Serious Frauds investigation office (SFIO) under Ministry of Corporate Affairs, it said, should actively and regularly mine the MCA 21 database to find out shell companies and share information with other law enforcement agencies.
"Once certain companies are identified through data mining... the list of such high risk companies should be shared with CBDT and FIU for closer surveillance," it added.
On trade-based money laundering, it said false declaration and falsification of documents, it said, those involved in such activities should be dealt with severely under the relevant law.
Referring to its second report on holding of cash beyond a limit, the SIT said the suggestion of imposing a limit on possession of cash should be implemented to control stashing of black money.
According to the panel, "if holding of cash is restricted and regulated, to a large extent, it would control circulation of black money within the country and discourage stashing of money abroad".
Raising the issue of generation of black money through donations to educational institutions, religious bodies and charities, it said "the person who accepts the donation and the donor requires to be prosecuted under Prevention of Corruption Act".
"For this, it would require legislative change which is necessary because nowadays, donation to educational institutions which are in demand, is rampant. In some cases, it goes to Rs 1 crore (Rs 10 million) and more. This would go long way in curbing the generation and circulation of black money," it said.
Quoting the response to its query from revenue department, SIT said: "Nobody can object for charity donation but at the same time, that when large amount is donated, it should be only accounted money and that payment should be by account–payee cheque to the charity or the institution.
"Even if gift of jewellery is made to the charity or institution, it should be by mentioning donor’s name and his PAN Number." The SIT also insisted that Central KYC Registry (CKYC) should be notified as early as possible.
It also pitched for empowering Directorate of Revenue Intelligence to investigating cases of mis-invoicing or violations of Customs Act in relation to special economic zones (SEZs).
