The government has cancelled the registration of one lakh companies that had suspicious and questionable operations, identified on the basis of data mined from the deposit of bank notes following last November’s demonetisation, Prime Minister Narendra Modi said on Saturday.
More such action will follow soon on two lakh similar companies and another 38,000 shell companies, Mr. Modi said, adding that the action was undertaken “48 hours before”, even as industry was focussed on the impact of the July 1 roll out of the Goods and Services Tax (GST) .
“The fate of one lakh companies has been locked with one stroke of a pen in one minute. The Registrar of Companies has removed these one lakh companies. More will be found and even tougher action can be expected against shell companies,” Mr. Modi said, addressing chartered accountants.
Stressing that the decision to scrap such fake companies could hurt some political parties, he said someone had to take the tough call and “live for the country.”
“Those who looted the poor will have to return (their riches) to the poor,” he said. “The data mining for the deposited notes is going on — where the money came from, how, and where it went after November 8, 2016. We haven’t questioned anyone yet, but just studied the figures,” Mr. Modi said, before pointing out that chartered accountants have been busier than ever before since demonetisation and some of them would have helped such companies.
“These thieves, robbers and companies went to some economic doctor for sure. Shouldn’t they have identified such (tax evaders) people? Shouldn’t such people within your community, who helped evaders be identified and moved to the sidewalk?” Mr. Modi said, urging accountants to stop helping clients at the cost of the country.
War on black money
Arguing that his government was running a Swachh Bharat Abhiyan as well as a parallel campaign to clean up the economy, he said the tough steps taken against black money in the last three years had begun yielding results, and cited the record low balances held by Indians in Swiss banks last year.
“Latest figures from the Swiss banks show the impact of our efforts to bring back black money from abroad. Since 1987, they have been disclosing this, but last year, Indians’ money (old money, not new, I mean) in Swiss banks saw a 45% decline. This is a sharper decline from the year before and in comparison, 2013 registered a 42% increase in Swiss bank balances (from India),” Mr Modi said.
Firing a fresh warning to such account holders in Switzerland, the Prime Minister said they will have more problems in two years’ time when Swiss authorities start sharing the data on such accounts’ transactions on a real-time basis with India.
Mr. Modi also hinted at tougher measures to crack down on those earning high incomes but not paying taxes, pointing to crores of luxury houses in big cities, the existence of eight lakh doctors, nearly eight lakh accountants, over two crore engineers and business school graduates and 2.18 crore Indians who went on an overseas holiday last year.
“Despite this, we have just 32 lakh people in a country of 125 crore declaring an income over ₹10 lakh in their income tax returns. Would anyone believe this? This is the bitter truth…these are mostly salaried class people in government or private companies,” he pointed out.
Laying some of the blame for this phenomenon on the accounting fraternity, Mr. Modi told the Institute of Chartered Accountants of India (ICAI) to take tough action against those who advise clients to hide the truth as that emboldens tax evaders.
“Those who give such advice must be identified and acted against. You are in charge of your human resources, curriculum, exams, rules and regulations as well as punishing wrongdoers. If India’s democratic temple of Parliament has given you such rights, why is that in the last eleven years, only 25 CAs have been acted against?” Mr Modi asked.
“Over 1,400 cases (against CAs) are pending for several years. It takes years for a single decision. Isn’t this a source of worry for such highly qualified professionals?” Mr. Modi asked, urging accountants to play a bigger role in the successful rollout of the GST regime and the war against black money.
“Don’t let this time and opportunity go out of your hands. I invite you to join the nation building mainstream. Like lawyers fought for citizens’ rights in the freedom struggle, today my CAs’ army should keep an oversight in this new era. To end black money and corruption, steer your clients on the road to honesty. People only commit crime when they know someone will save them,” Mr Modi said, leaving no doubt what he felt about the accounting community’s role in assisting tax evaders prior to, and especially after demonetisation.
“You are as patriotic as me. Your signature is more powerful than the Prime Minister’s as tax officials, government, investors take a balance-sheet on face value once you sign it. But if your audit report is incorrect or hides the truth, it’s not the company that fails but the poor widow or senior citizen whose lives are destroyed because they invested their savings in the stock market or a mutual fund trusting your signature,” he told the CAs.
Quoting Chanakya, the Prime Minister held out a sombre warning to accountants: “After the time to do the right thing has passed, time itself consumes those who didn’t act.”