MAY 31, 2014

By TIOL Edit Team

NARENDRA Modi Government's maiden Cabinet decision to set up a Special Investigating Team (SIT) to probe illegal money stashed abroad in compliance with Supreme Court's deadline deserves guarded welcome.

There are several reasons for conditional welcome. First, it is a belated one. It has come about three years after the Apex Court asked the Government to constitute SIT. In all probability, this delay has been availed of by the holders of secret bank accounts to transfer their funds elsewhere including India as foreign direct investment (FDI) through round-tripping and other channels.

In its order dated 4th July 2011, SC not only named two judges that were supposed to oversee SIT but also specified its broad mandate. UPA Government appealed against this Order. A two-member bench of SC, in turn, gave a split verdict on 23 September 2011. This emboldened UPA Government to defy SC. The matter lingered on till 23 rd May 2014 when SC gave one-week deadline to the Government to constitute SIT.

The second reason for reservation is that new Government has not clarified whether the existing High Level Committee chaired by Revenue Secretary would be disbanded or work under the supervision of SIT.

In keeping with its commitment to transparency, the new Government should have disclosed broadly the work done by the Committee over the last couple of years in coordinating the multidisciplinary probe in important cases like Hassan Ali by various enforcement agencies.

The Government should have at least made public the Finance Ministry-commissioned ‘Study on Unaccounted Income/Wealth both Inside and Outside the Country' which National Institute of Public Finance and Policy (NIPFP) completed in 2012 as mentioned on NIPFP's website.

The study “examined the extent, methods and consequences of tax evasion. It also identified the policy measures required to curb tax evasion.”

This is one of three separate studies that were assigned by the Ministry to three institutions in 2011 and that were to be completed by September 2012.

The official release issued on 27th May merely stated: “The SIT has been charged with the responsibility and duties of investigation, initiation of proceedings and prosecution in cases of Hasan Ali and other matters involving unaccounted money. SIT shall have jurisdiction in the cases where investigations have already commenced or are pending or awaiting to be initiated or have been completed. SIT will prepare a comprehensive action plan including creation of necessary institutional structure that could enable the country to fight the battle against unaccounted money. The SIT should report to the court the status of work from time to time.”

A limitation of SC-commissioned/monitored investigations and studies is that they lack transparency. There reports are hardly made public. By keeping the reports under wraps, the SC and the Government are depriving the vigilant citizens of an opportunity to understand the operations of alleged law breakers and to contribute their bit to unearth more scams. There should be a standard operating procedure for disclosure of the action taken report on findings of SITs and special committees constituted by the Supreme Court.

The public, for instance, would like to know what action the Finance Ministry took on the verdict of apex court relating to Government's inaction against political parties for not filing their income tax returns, an issue that falls in the domain of black money.

In its judgement delivered in April 1996, the apex court stated: The Revenue “shall appoint an inquiring body to find out why and in what circumstances the mandatory provisions of the Income Tax Act regarding filing of return of income by the political parties were not enforced. Any officer/officers found responsible and remiss in the inquiry be suitably dealt with in accordance with the rules.”

The public thus expects Modi Government to adopt a structured and comprehensive approach in tackling black money stashed abroad as well as the one that is generated regularly within the country. Why there is no SIT on the booming black money/parallel economy in the country?

More important than SIT is the need for strict implementation of various laws to prevent, track and seize black money.

There is no dearth of laws to deal with the menace of black money as aptly concluded by the Committee on ‘Measures to Tackle Black Money in India and Abroad' that submitted its report under the leadership of CBDT Chairman in mid-2012.

As put by the Committee, “some new laws, such as to regulate the cash economy, and some changes to the existing legal provisions also need consideration, as suggested by various stakeholders. There are multiple administrative agencies to deal with the problem of black money. There is, thus, no need to create any further agencies. However, the existing agencies need to be strengthened, both in terms of manpower and other resources. There is also a need for better coordination among all agencies.”

We hope SIT would provide much-need coordination among all agencies to deliver tangible outcomes in the fight against black money.

We also expect Modi Government to not institutionalize SIT/empowered committee system of operation of the apex court. Different wings of the Executive should be empowered to enforce the rule of the law. The Government should consider giving Central Bureau of Investigation and Central Vigilance Commission requisite autonomy by giving them constitutional status.

Ideally, there should be no need for SIT if the Executive governs well. If the need for SIT-type probes arises, it should be overseen by independent institutions such as the proposed Lok Pal and Comptroller and Auditor General (CAG) of India.

Concentration of power in the hands of any organ of democracy is not good.