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IT department serves notices to individuals refusing to share details of bank accounts with HSBC Geneva

Posted Date : 26-Dec-2013 , 08:12:51 am | Posted By CASANSAAR print Print

The income-tax department has served prosecution notices on Indian nationals who have refused to share information on their undisclosed bank accounts with HSBC Geneva. 

The names of these individuals had figured in a list of more than 600 HSBC account-holders. The Indian government had received the information in June 2011 from French authorities, who in turn had obtained the list from a former HSBC employee who stole the data. 

The investigation, which has not made much headway in the past five years, is believed to have gathered steam after the assembly elections. 

Indeed, the recent show-cause notices for initiating prosecution proceedings against account-holders have been issued from December 6 onwards. 

The show-cause notices have been served on individuals who failed to submit consent letters that would have enabled the income-tax department to officially seek details of bank statements and other documents. 

The consent letters, marked 'confidential', are addressed to David Garrido (general counsel-Switzerland-HSBC Bank-Geneva) and copied to Christine Knight Maunder (general counsel-Global Private Bank-HSBC Bank). 

The consent letter is a waiver from all protections under the data protection and bank secrecy laws of Switzerland. 

I-T officials, after conducting search and seizure operations in July and August 2011, had sought information such as bank statements and residential status of account-holders on the date of opening the bank accounts. 

"While some complied, many refused to give letters and a number of account-holders, after submitting their consent, withdrew the letters," said an official of the Central Board for Direct Taxes (CBDT). 

According to official sources, the list of HSBC Geneva account-holders includes business tycoons, construction giants, hoteliers, the office-bearer of a cricket body and politicians across Delhi, Mumbai and Chennai. 

"A North India-based senior politician had zero balance in his HSBC Geneva account, and hence was not served a notice," said a senior tax official. The list also mentions a film production company, but the star associated with the company was given a clean chit as no irregularities were found, said the person privy to the investigations. 

Also, a large Delhi-based real estate company was served a notice but no search and seizure action was carried out. The company concerned was asked to pay taxes and no prosecution was initiated. 

According to the tax department official, a former bureaucrat, known for his proximity with a leading political family, was associated with the group, disclosed a senior I-T commissioner. 

It's learnt that the promoter family of the property group, which has a joint venture with an overseas realty firm, were found to have four accounts with HSBC Geneva. 

"The matter, which was being initially probed by the Directorate of Intelligence and Criminal Investigation of the department, was handed over to the investigation wing and subsequently, the searches were called off," said an official on condition of anonymity. The head of investigation in Mumbai and Delhi were recently transferred. 

Sections within the department have raised eyebrows on the pace and pattern of the probe. "No one knows the exact number of accounts. Does the original list given by French authorities tally with the list handed over to investigation wings of Delhi, Mumbai and Chennai? And, why were routine channels bypassed, and information shared with a few officials? This forced tax officials who were in the official channel but not privy to all the details to add words like 'purported to be list of foreign accounts', in the covering letter attached with sealed envelops. And at the office of one of the investigation wings, tasked with foreign account probe, large scale shredding of documents was carried out, that too on Saturday and Sunday." 
When contacted, finance ministry officials, while defending the 'integrity' of the team which handled investigation, said the ministry was unaware of any such development. 

"The process required secrecy and names couldn't have been divulged due to bilateral agreements with foreign countries. The investigation has been handled by credible officers, whose integrity is beyond doubt," said a senior ministry official. 

Asked about the status of the investigation, KV Chaudhary, member (investigation) of CBDT, said, "I don't have the details of foreign accounts and notices, what can I say." 

IT officials said the department had asked individual account holders to furnish 'consent letter', duly filled up, signed and notarized, so as to obtain account statements from the foreign bank. But with most account holders refusing to share the details, the tax department has taken the hard line. The prosecution notice clearly states if the person receiving the notice wilfully fails to produce information before the specified date, he shall be "punishable with rigorous imprisonment for a term which may extend to one year." 

However, around eight account holders are learnt to have moved the I-T department's Settlement Commission, a quasi-judicial body, to seek immunity from prosecution and penalty and declared undisclosed income. But even as the pressure from the tax office mounts, many account holders, questioning the authenticity of stolen data, are still denying any knowledge of having bank accounts with HSBC Geneva. 

"Perhaps, they have sensed that the case cannot be settled by paying tax and even a penalty. They feel that if the government is bent on carrying out assessment and prosecution, then what is the point of giving in to pressure from the I-T department," said a person familiar with the case. (Economic Times)

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