The Special Investigation Team (SIT) on black money has said the root cause of the steep rise in illegal financial outflows over the past decade is greater openness in a liberalised environment devoid of effective regulatory agencies.
Taking cognisance of the Global Financial Integrity report released in December 2013, which pegged the estimated illegal financial outflow from India at $343,922 million from 2002 to 2011, the SIT has noted that the report ranked India fifth among the 142 countries with regard to “illicit financial flows.” The maximum outflow was detected for 2011, estimated at $84,933 million.
Recommending an integrated system of investigations into black money, the SIT asked for an investigation unit for itself to monitor and investigate specific cases having larger implications. It is closely monitoring the Central Bureau of Investigation’s probe into nine cases, including the NAFED, STC export-import, fake Chinese suppliers, over-invoicing of imported machinery and the Ketan Parekh scam cases, in which Rs. 4,100 crore was remitted to many Mauritius-based companies and diverted further to Switzerland and the United Kingdom and Rs. 877 crore routed back to India.
The case pertaining to alleged fraudulent allotment of 1.7 crore shares by DSQ Software, the cases of cheating investors allegedly by Pearl Infrastructure Private Ltd., cases of alleged corruption in defence deals and the one regarding procurement of armoured recovery vehicles in which $2.3 million was allegedly paid as commission, are also being monitored.
EnforcementBased on the findings, the SIT has recommended to the government stricter enforcement of tax laws and expediting pending prosecutions.
Government records revealed that over 8,000 prosecution cases pertaining to direct tax laws had been pending for the past several years. Nearly 5,000 other cases had been pending before lower courts for over a decade in Mumbai alone. The SIT is of the view that such delays have adversely impacted the deterrent effect. It has recommended setting up of additional courts of competent jurisdiction for clearing pending cases.
It is learnt that the SIT has come across several cases of protracted court proceedings, including the one of alleged fraud to the tune of Rs. 660 crore. The case has seen over 100 adjournments in the past three years.
The Supreme Court has directed the SIT to file its status report by November 30.
The court has asked them to complete investigations into income tax violations by March 15.
