Former Dabur director gave sketchy details of investors and his employer after two years of tax summons.
In a fascinating revelation that raises more questions than it answers, former Dabur group director Pradip Burman provided several details of his involvement in opening, maintenance and subsequent closure of accounts in HSBC Zurich, including that of his mysterious employer, to the income-tax department in March this year.
These details suggest Burman's involvement was deeper than presented earlier. He was not only operating the accounts, he was also a director in some entities that put money in these accounts.
Also, the tax department had to issue summons and penalties for nearly two years before obtaining details of the bank accounts and explanation from the high-profile assessee.
After finding his explanations inadequate, the income tax commissioner recommended initiation of prosecution proceedings against Burman in May this year.
Burman is 72 years old now. Soon after moving to Dubai in 1999, when he would have been 57, Burman was employed as an investment consultant by Sheikh Abdul Rahim Al-Khwaja.
The background of Al-Khwaja and the organisation he worked for is not clear, but he brought several people interested in making investments to Burman. Burman helped them make investments, often in names of independent entities.
"In some of the companies that had opened accounts in Zurich, in order to facilitate operation and decision making, the assessee was also made director. But when the assessee returned to India in subsequent years, he disassociated himself from such companies/funds," Burman said in his submission dated March 31.
These details came out in response to a notice issued by the tax department in February, after several earlier attempts to procure details from Burman had failed.
According to the prosecution papers reviewed by Business Standard, the income tax department made as many as 17 attempts to obtain information about the HSBC accounts from Burman. It sent 11 summonses under Section 131 of the Income Tax Act and six notices under Section 142 between February 2012 and November 2013.
The department also levied penalties for not answering the summons and notices. According to tax officials familiar with such investigations, assessees usually respond to "one or two summons", failing which the department goes in for a search or a raid. Finally, the department concluded the assessment proceedings in Burman's case in January.
Responding to an e-mail seeking comments, a Dabur spokesperson said, "We have already stated whatever had to be said on this matter. Since the matter is sub judice, we will not be able to comment further."
In a statement issued after Burman's name came up last month in a list of people who held accounts in foreign banks, Dabur had said, "This account was opened when he was an NRI, and was legally allowed to open this account. We have followed all the laws and the complete details regarding the account have been voluntarily, and as per law, filed with the income tax department, and appropriate taxes paid, wherever applicable. Therefore, it is unfortunate that every person having a foreign bank account is being painted with the same brush."
The tax department documents state: "During the assessment proceedings, several statements of Pradip Burman were recorded under Section 131 (1) of the Income Tax Act, in which he was asked to explain the source of funds deposited in the HSBC Zurich account. He stated that the deposits were made by various investors to whom he had provided investment advisory services."
Hazy on details
Asked to names the investors, Burman replied he did not remember but they were introduced to him by his Dubai employer and "that the money was directly deposited by the clients in his Zurich account. There was no paper work done."
The department further noted: "In spite of specific and separate questions, the assessee has not come out with the basic facts based on which the income declared by him in the revised returns was calculated and neither has he submitted any documentary evidence in support of the same. He has simply offered to tax the amounts lying in his foreign bank accounts as closing balance on specific dates, Apart from this, no explanation was offered regarding the basis of such incomes offered to tax in assessment years 2006-07 and 2007-08."
Burman's offer to tax these amounts came after HSBC informed the persons associated with the opening of accounts how data stolen from the bank had found its way to the French government, which in turn shared it with the Indian authorities. When Burman's account in HSBC Zurich was finally closed, it had a balance of $3 million.
Burman contended in his submissions that he decided to pay tax "in order to buy peace of mind and to avoid litigation, mental torture and tension and to avoid loss of goodwill of the family and group companies and lead a peaceful life." He added there was no wilful default or mens rea (wrong intention) in his case.
But the department's reading of the situation is different. "It is amply clear that the assessee has disclosed the deposits in the foreign bank (undisclosed income) only on the initiative/ information/investigations of the department. If the information in respect to the undisclosed foreign bank would not have been coming/received by the department, then the assessee would have succeeded in evading tax."