This is the first big move in the investigation of the British Virgin Islands list where the I-T department has found a significant amount of tax evasion.
Shrimi Choudhary reports.
The income-tax department has established charges against five persons with unaccounted foreign assets of Rs 5,000 crore (Rs 50 billion) in the British Virgin Islands, a Caribbean tax haven. Investigations are on in more cases.
According to sources in the tax department, these persons are from the gold and diamond export business, and have strong business operations in India as well.
The total undisclosed foreign asset held by them was worth Rs 5,000 crore.
These are among the 612 Indian residents named in the list exposed by The International Consortium of Investigative Journalists in 2013.
The consortium released information about thousands of secret companies, trusts and funds in offshore hideaways.
According to tax officials, these are 'established' cases where they had made offshore investments and secret financial transactions, but it did not reflect in their tax statements.
These people are accused of holding shares/assets in undisclosed British Virgin Islands companies.
This is the first big move in the investigation in the British Virgin Islands list where the I-T department has found a significant amount of tax evasion by not disclosing their foreign assets.
"We have got material from various sources and tallied it with the profile of the persons and their disclosed assets in India and abroad. The documents we are in possession with proved the existence of significant unaccounted foreign money," said a senior I-T official.
So far, the tax department has conducted its preliminary enquiry into 292 entities, which are incorporated in Mumbai.
Of these, 151 cases were actionable and are still under investigation.
According to sources, prosecution has been initiated in 15 cases and five of these will be heard in the Mumbai special court.
Other than this, the investigation wing of the tax department has sent 19 cases to the assessment wing.
The 19 account for Rs 3,117 crore (Rs 31.17 billion) of undisclosed foreign money.
Apart from this, searches have been conducted on at least seven renowned Mumbai-based individuals.
The search operations had seen several foreign bank accounts which were apparently undisclosed.
In the case of a diamond jewellery exporter, a foreign currency credit transaction of Rs 2,150 crore (Rs 21.50 billion) was detected.
In another case, the assessee was found to be the beneficial owner and held account in UBS AG Singapore.
"Some of the payments from this account were traced to bank accounts of his concerns in India," said the official cited above.
The databases released by the ICIJ were parts of two larger databases that had been fed for nearly 30 years by two companies: Singapore-based Portcullis TrustNet, and Commonwealth Trust, based in the British Virgin Islands.
Both firms specialise in setting up offshore financial structures. They have helped tens of thousands of people create offshore companies and trusts, as well as hard-to-trace bank accounts.
Most of them in the British Virgin Islands list have signed documents and interacted with the Singapore service provider in the course of incorporating companies in the tax haven, explained official.
Soon after media reports on the British Virgin Islands companies, the Singapore firm which handled the deals had filed a complaint in August 2013 with the British Virgin Islands police about data theft.
In the British Virgin Islands, business companies need to have at least one director, either a private individual or a corporate entity, which may be resident of the British Virgin Islands or any other jurisdiction.
If the director is not a resident in the British Virgin Islands, the authorities may not be in a position to provide information of the director, the official said.
In such a situation field authorities of the I-T department need to make separate exchange of information request to the country where the director is a resident.
The counterparty tax authority cannot intimate the taxpayer as the latter may file an appeal against the supply of information.
Panama investigation hits a wall
Meanwhile, income tax officials are unable to make a breakthrough in the 'Panama Papers leaks' case due to lack of information exchange from Panama's competent authority.
Tax officials raised the concern in a meeting held by the Central Board of Direct Taxes on Friday, September 8.
The meeting was called to take stock of the offshore matter and related investigations and also on Operation Clean Money.
On the Panama investigation, officials said that the information provided by the foreign authority were basic in nature and were insufficient to trace and prove the case.
The foreign authority has responded to Indian tax authorities that the offshore entities have been struck off and the legal periods of retention of documents has expired.
The Panama authority said they were not in a position to retrieve and hence they could bot provide further details of the persons.
A senior I-T official had visited Panama last week seeking support and coordination, but it was not a successful trip, said a source with direct knowledge.
The Panama papers contain an unprecedented amount of information, including more than 11 million documents covering 2,10,000 companies in 21 offshore jurisdictions.
Each transaction spans different jurisdictions and involved multiple entities and individuals.