QUESTION: We are hearing suggestions that it is necessary to bring a law to deal with black money by way of confiscation, death penalty or incarceration for life. Invariably, it is repeated by all and sundry that the government is not tackling black money properly and that the law should provide deterrent punishment with all the foreign money belonging to Indians declared illegal and that they should be compelled to bring them back to India. Are the suggestions practicable or right?
ANSWER: Primarily not all the Indian money abroad, in the sense that all foreign assets belonging to Indians, is black money. A person can acquire the status of a non-resident under the foreign exchange law, which is easy, merely by the person asserting himself to be a non-resident, while going abroad for an indefinite period without a return ticket. There are non-residents in this sense in almost every family of affluent assessees, whether in business or in service. A non-resident is not accountable for his source of money abroad. He is vulnerable, if at all, only when he brings the money back to India. The law had even given immunity at one stage for foreign remittances by way of gifts, whether they are genuine or not, a practice which is followed till date, though the period of immunity is long since past.
Income-tax law cannot deal with any undisclosed and unaccounted income beyond six years, since they are out of reach of income-tax law even for residents in India. All that could fall within the jurisdiction of the income tax law are those incomes which have surfaced in the last six years and the income from the past and present assets in India during the six years.
Considerable part of the money abroad, therefore, is not all black. It may be white or grey. As for black money, the government in recent years has taken a number of steps which may bear fruit over the years.
There is no need for any immunity or amnesty to buttress the effort, but all that has to be done is to give publicity for the present provisions under the income-tax law giving immunity from penalty under Sec. 273A where any concealed income is disclosed prior to detection. In fact, such publicity in 1986 during the then regime of V. P. Singh as Finance Minister had yielded some results though it was wrongly described as amnesty scheme. There is also settlement procedure in complicated cases before the Settlement Commission. There are deterrent provisions by way of penalty and prosecution in the present statute. Confiscation is possible where the offences could be brought under Prevention of Corruption Act, 1988. Even for others not covered by this Act, tax, penalty and interest, besides compounding fee where prosecution is exigible, will far exceed the value of the asset concealed. What is, therefore, wrong is not the law but more amendments and statutes, which may only give a wrong sense of satisfaction that tax evasion and corruption are being tackled without any tangible results.
Enforcement of law is different from law itself. It is such enforcement which requires to be activated. The present law starting from the Indian Penal Code, 1880, and many more added over the years to make the law more stringent may lead to greater corruption. It is not realised that tax evasion is a crime punishable under the criminal law unlike, for example, in France, where it continues to be a civil offence. Provisions providing for excessive punishment may persuade the courts to infer innocence rather than inflict punishment, which is not commensurate with the offence so as to be self-defeating. Encouragement for voluntary repatriation of assets, which is built in the present law, should go side by side with stringent action against proved tax delinquency.
What is required is strengthening the administration of the present law rather than many new laws.