Probe gathers pace, IT notices sent to Indians, NRIs in Pandora; notices supervised by panel set up by govt

The Multi Agency Group (MAG), set up by the Government to probe the Pandora Papers, has supervised dispatch of notices via the Income Tax Department to “most” of the Indians named in the ongoing investigation. Notices have also been sent to NRIs figuring in the revelations asking them to specify their residence status.

A senior official who is a member of the MAG said two meetings of the body have already been held. The MAG is headed by the Chairman of the Central Board of Direct Taxes (CBDT) and has representatives from the CBDT, Enforcement Directorate, RBI and the Financial Intelligence Unit (FIU).

It is understood that notices have been sent under Section 131 of the Income Tax Act (which is related to alleged concealment of income).

The MAG was set up on October 4, 2021, the day The Indian Express, in collaboration with the International Consortium of Investigative Journalists (ICIJ) and 150 other media organisations, launched its ongoing series revealing details of 29,000 offshore entities set up by 14 offshore service providers.

Of the 300-plus Indian names, the offshore holdings of 60 prominent individuals and companies have been corroborated and verified by The Indian Express so far.

The notices, officials said, asked the taxpayer named whether the information about setting up the offshore entity/trust was accurate; which offshore service provider was instrumental in setting it up; and whether its/their existence had been declared in the Schedule FA (foreign assets) while filing their annual tax returns.

Significantly, officials said, the MAG, in the wake of the latest offshore data leak has “exercised all channels.” One channel remains the DTAA (Double Taxation Avoidance Agreement) route wherein jurisdictions with whom India has an exchange arrangement is sent information. Another is the office of the FIU.

This, officials said, has been done for the first time following an offshore media probe and responses are trickling in to queries sent by the FIU from New Delhi to offshore jurisdictions which figure in the Pandora Papers.

Officials said that in more than a dozen cases of prominent Indians, previous investigations and cases were already in progress and fresh Pandora leads have been added to charges of suspected tax evasion or concealment of foreign assets.

Several cases of individuals who also figured in previous offshore leaks like the Panama Papers (2016) and the Paradise Papers (2017) have been traced. During the early MAG meetings, agencies like the CBDT and ED have been asked to pool in their existing intelligence and action on those named.?

Records showed how many individuals already accused in economic offences and under investigation created an offshore network in tax havens like Samoa, Belize or the Cook Islands, besides larger tax havens like the British Virgin Islands or Panama. Some of those named in the Pandora Papers are in jail and several subjects of the investigation are on bail.

The Pandora list also includes defaulters who allegedly diverted a sizeable section of their assets into a maze of offshore companies. Many promoters parked their assets in offshore trusts, effectively protecting themselves from personal guarantees to loans being defaulted by their businesses.

While offshore trusts are recognised by law in India, what has led to a rush of Indian industrialists and business families to set up Trusts is the fear of a return of the estate duty, which till its abolition in 1985, was as high as 85 per cent.

This is the eighth leak reported by this newspaper with ICIJ. The Government said that following earlier leaks such as HSBC, Panama Papers and Paradise Papers, it had enacted the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015.

“Undisclosed credits of Rs 20,352 crore approximately (status as on 15.09.2021) have been detected in the investigations carried out in the Panama and Paradise Papers,” the Ministry had said last month.