ADDITIONAL AFFIDAVIT ON BEHALF OF THE RESPONDENT NO.1 – UNION OF INDIA – 27.10.2014 – (3)

IN THE SUPREME COURT OF INDIA

(ORIGINAL JURISDICTION)

WRIT PETITION (C) NO.176 OF 2009

IN THE MATTER OF:

Ram Jethmalani&Ors.                                             … Petitioners

                               Versus

Union of India &Ors.                                               … Respondents

 

 

ADDITIONAL AFFIDAVIT ON BEHALF OF THE RESPONDENT NO.1 – UNION OF INDIA

I, AkhileshRanjan, Joint Secretary, FT&TR-I, Department of Revenue, Ministry of Finance, Government of India, 8th Floor, “C” Wing, HudcoVishala Building, BhikajiCama Place, New Delhi do hereby solemnly affirm and declare as under:

1. It is respectfully submitted that I.A. No. 14 of 2014 was filed before this Hon’ble Court on 16.10.2014 in which the following prayers have been made

i.  Clarify that despite laying down the general principle that “no treaty can be entered into or interpreted, such that constitutional fealty is derogated from”, this Hon’ble Court has not prohibited the Government of India to enter into a treaty wherein a commitment may be made by the Government to maintain the confidentiality of information received as per international standards

ii. Clarify that right to privacy is an integral part of right of life and accordingly information received under a tax treaty cannot be disclosed even under a proceeding under Article 32(1) of the Constitution unless there is prima facie evidence of wrongdoing which can be based on complaint filed by the Income Tax Department in a Competent Criminal Court, or a public court, for launching Prosecution for Tax Evasion

iii. Clarify that as per International Standards on maintaining confidentiality, the information is public when quoted in public court proceedings arising out of tax related issues arising from complaints, prosecutions, etc. in a Competent Court and only that information which the tax authorities choose to produce in the Court to substantiate its case. Once the information becomes public this way, the same can be accessed by other law enforcement agencies and/or can be made available to public at large at the discretion of the said Court

2. It is respectfully submitted that in making the above prayers, there is absolutely no intention on the part of the Government to withhold information, including names of persons who have stashed black money abroad; but only to seek certain clarifications that will enable the Government to enter into agreements with other countries/jurisdictions, under which information relating to unaccounted money lying abroad can be obtained. The information received under these tax treaties and agreements willbe disclosed after following the due process of law, in all cases where evasion of tax is established. The intention of the present Government is clear and unambiguous. The Government is keen to unearth black money held abroad and for that purpose it will use all diplomatic and legal means and also all investigative agencies to obtain information that can assistin such unearthing. One of the first acts of the present Government after it was formed on May 26, 2014 was to constitute the Special Investigation Team on May 29, 2014 as directed by this Hon’ble Court. In terms of the judgement of 04.07.2011 of this Hon’ble Court, the SIT has been charged with the responsibility of not only monitoring the ongoing investigations in all cases of black money held abroad, but also to examine all cases where investigation may have been concluded and to direct further action as may be necessary and appropriate in such cases. In accordance with this mandate, a complete list of cases where information has been obtained from the German and French Governments, along with up-dated status of the action taken by the Income-tax Department, was submitted by the Central Board of Direct Taxes (CBDT) to the SIT on 27th June, 2014. In a meeting with the Chairman and Vice-Chairman of the SIT on 5th August, 2014, the SIT was briefed on the status of the cases in detail, covering the main action areas including the background and nature of information received, references made under the relevant tax treaties, non-sharing of information by the Swiss authorities, constraints faced in taking further actions including assessment, penalty and prosecution and alternative methods to obtain account details. Certain directions have been given by the SIT, which are being complied with. The CBDT has sensitized the field authorities on different aspects of these cases including the need for expeditious completion of proceedings. All these cases are in different stages of investigation, assessment and prosecution.

3.  As per international standards, the information received under the tax treaties can be used only for tax purposes and such other purposes as permitted in the relevant treaty and only by persons, courts or authorities concerned with the relevant taxes whomay disclose the information in public court proceedings or in judicial decisions. Thus, when investigations are completed and a complaint/prosecution is filed in a Competent Court, the information becomes public.

4. It is respectfully submitted that Government is committed to disclose names of persons holding illegal money abroad. However, every account held by an Indian in a foreign country may not be illegal and the fundamental right of citizens to privacy under Article 21 of the Constitution cannot be ignored and has been recognized by this Hon’ble Court in its judgment of 04.07.2011. This Hon’ble Court has also held that the State cannot compel citizens to reveal, or itself reveal details to the public at large unless the State itself, through properly conducted investigations has been able to establish prima facie grounds to accuse the individuals of wrongdoing. Thus, the names and information/documents cannot be disclosed even during proceeding under Article 32(1) of the Constitution unless there is prima facie evidence of wrongdoing which can be based on a complaint/prosecution filed in a Competent Court for tax evasion.

5. It is respectfully submitted that information regarding deposits/outstanding amounts in the accounts maintained by 12 trusts/entities with LGT Bank in Liechtenstein was received by Government of India from the German Tax Authorities in March, 2009 under the Indo-Germany Double Taxation Avoidance Convention. The 12 trusts/entities involved 26 individuals of Indian origin/nationality. On completion of investigations in these cases, it was concluded that 18 cases merited prosecution under the Income-tax Act for evasion of tax. Accordingly, prosecutions have been launched in 17 of these cases (one taxpayer has expired). The information/documents received from Germany in these cases is, accordingly, available in public domain and the names have been disclosed and are enclosed as Annexure-1.

6. In a similar way, the names of persons found to have illegal money stashed abroad, as also all the information/documents received from foreign countries relating to offshore tax evasion and avoidance will be disclosed after following the procedures prescribed in the legal instruments through which the information has been received. These legal instruments, i.e., Double Taxation Avoidance Agreements (DTAAs), Tax Information Exchange Agreements (TIEAs), Multilateral Conventions etc. authorize disclosure of information in public court proceedings that are consequent to the establishing of tax evasion and thus in all cases of tax evasion where a complaint/prosecution is filed, the names/information/documents will be made public. As a part of this process, the names of persons included in the information received from the French tax authorities and in other information received, against whom prosecution under sections 276C(1) and 277 of the Income-tax Act, 1961 has been launched are hereby disclosed in Annexure-2 and Annexure-3 Several more cases are under process and the names of persons prosecuted will become public in due course. The SIT will also be kept informed about the outcome of the investigations.

7. It is respectfully submitted that this Hon’ble Court’s judgment of 01.05.2014 wherein directions have been given to disclose the information/documents received in eight cases where no evidence of evasion of tax in India has been found, only on the ground that the investigations have been completed, does not appear to be in consonance with the above principles laid down in its judgment of 04.07.2011 and hence, necessary clarifications have been requested through I.A. No. 14 of 2014.

8. These clarifications become further necessary in view of this Hon’ble Court’s observations in its judgment of 04.07.2011 that “no treaty can be entered into or interpreted, such that constitutional fealty is derogated from”. Thus a clarification is essential which will enable the Government of India to give a commitment to our current and prospective treaty partners that the information received will be used only for tax purposes and such other purposes as permitted in terms of the applicable treaty and can be disclosed in public court proceedings only after a complaint/prosecution for tax evasion is filed in a Competent Court.

9. It is respectfully submitted that the Government is making all efforts to obtain information about Indians hiding their unaccounted money in offshore financial centres. In pursuance of such efforts, a high level Indian delegation met with their counterparts in Bern, Switzerlandon the 15th of this month (October 2014) and achieved the following important outcomes:-

(i)Switzerland has indicated willingness to provide information in respect of cases where investigations have been carried out by the Income Tax Department independently from what Swiss Government considers as stolen data. This development is very significant because there are several cases of account holders which were investigated by Income Tax Department independently. Earlier, the Swiss Government had not agreed to provide any information in such cases on the ground that these were stolen data and have been obtained in breach of Swiss law.

(ii)The Swiss Federal Tax Administration has agreed that their competent authority would assist India in obtaining confirmation of genuineness of bank documents on requests by the Indian side and also swiftly provide information on requests relating to non-banking information. This willingness on the part of the Swiss authorities would help in our tax investigations.

(iii)The Swiss authorities have also agreed to provide the requested information in a time bound manner or else indicate the reasons why the cases cannot be answered within the agreed timeline.

(iv)Switzerland has also assured that they would commence talks with India for concluding an Automatic Exchange of Information (AEOI) Agreement between India and Switzerland at the earliest, after completion of their domestic procedures. This is the first time that Switzerland has agreed to commence discussions on a bilateral agreement on AEOI.

A copy of the India-Switzerland Joint Statement signed and issued on the occasion is enclosed as Annexure4.

10. The efforts to obtain information about undisclosed money held by Indians abroad also include entering into new treaties and agreements as per the new global standards on automatic exchange of information and the clarifications have been sought from this Hon’ble Court only to facilitate such efforts.

11. India is on the verge of entering into bilateral and multilateral agreements for automatic exchange of information that will greatly help in our fight against black money stashed in financial accounts and assets maintained overseas by Indian taxpayers. The new global standards on automatic exchange of information, which will enable us to receive information about Indians hiding their money in offshore financial centers and tax havens through multilayered entities with non-transparent ownership, have confidentiality requirements as per the same international standards. Forsigning the Competent Authority Agreements (CAA) with other countries, every such country including India has to make a commitment that such information can be used only for tax purposes and will be made public only when the investigation is complete and a complaint/prosecution is filed in a Competent Court for tax evasion.

12. The proposed Inter Governmental Agreement (IGA) between India and USA under the US law called FATCA, which needs to be entered into before the end of December, 2014, also has the confidentiality provisions of the underlying India-USA DTAA and requires a specific commitment that the information exchanged under the agreement shall be used solely for tax purposes. Unless the Indian Government can give such a commitment to maintain confidentiality as per these international standards, the IGA cannot be signed and such non-signing would have very serious implications for Indian Financial Institutions and will impede our efforts in combating black money.

13.It is respectfully submitted that the choice, therefore, is either not to receive information at all, or receive it and use it as per international standards of confidentiality. It is respectfully reiterated that these international standards do allow disclosure of names and information, but only after investigations are completed, when there is a prima facie case of wrong doing and a complaint/prosecution is filed in a Competent Court for tax evasion.

14. It is submitted that serious efforts are being made to complete investigations at the earliest by the tax department and file complaints/prosecutions in appropriate cases expeditiously, upon which the names of the tax evaders will be made public. By doing so, there would be no violation of the provisions of tax treaties and the tax evaders would also be brought to justice. Further, once a complaint is filed, the information would also be available to other agencies dealing with money laundering, terrorist financing, corruption etc. for carrying out necessary investigations.

15. It is respectfully submitted that it is in the light of these considerations that the IA No.14 of 2014 has been filed seeking the said clarifications from this Hon’ble Court.

Deponent

Verification:

I, Akhilesh Ranjan, Joint Secretary, FT&TR-1, Department of Revenue, Ministry of Finance, Government of India, North Block, New Delhi, the deponent named above do hereby verify that the contents of the above Affidavit are true and correct on the basis of information derived from the records of the case.

Verified on this day of  October, 2014 at New Delhi

 

Deponent

Annexure-1

 

Names of Persons referred to in Para 5 of the Affidavit
Sl. No. Name & Trust
1. Mohan Manoj Dhupelia [Ambrunova Trust reg. & Marline Management S.A.
2. Ambrish Manoj Dhupelia [Ambrunova Trust reg. & Marline Management S.A.
3. Bhavya Manoj Dhupelia (now Bhavya S. Shanbag) [Ambrunova Trust reg. & Marline Management S.A.
4. Manoj Dhupelia [Ambrunova Trust reg. & Marline Management S.A.
5. Rupal Dhupelia [Ambrunova Trust reg. & Marline Management S.A.
6. Hasmukh Ishwarlal Gandhi [Manichi Trust reg.]
7. Chintan Hasmukh Gandhi [Manichi Trust reg.]
8. Madhu Hansmukh Gandhi [Manichi Trust reg.]
9. Late Mirav H. Gandhi [Manichi Trust reg.]
10. Chandrakant Ishwarlal Gandhi [Ruvisha Trust reg.]
11. Rajesh Chandrakant Gandhi [Ruvisha Trust reg.]
12. Vijay Chandrakant Gandhi [Ruvisha Trust reg.]
13. Dhanalaxmi Chandrakant Gandhi [Ruvisha Trust reg.]
14. Arunkumar Ramniklal Mehta [DaineseStiftung&DryadeStiftung]
15. Harshad Ramniklal Mehta [DaineseStiftung&DryadeStiftung]
16. Mr. K.M. Mammen [Webster Foundation]
17. Arun Kochhar [Urvashi Foundation]
18. Ashok Jaipuria [Raj Foundation]

 

Annexure-2

Names of Persons referred to in Para6 of the Affidavit – information received from French authorities
Sl. No. Name
1. Shri Pradip Burman

 

Annexure-3

Names of Persons referred to in Para 6 of the Affidavit – information received from other countries
Sl. No. Name
1. Shri Pankaj Chimanlal Lodhiya
2. Timblo Private Limited and its Directors Smt Radha Satish Timblo, Shri Chetan S. Timblo, Shri Rohan S. Timblo, Smt Anna C. Timblo and Smt Mallika R. Timblo

 

Annexure-4

 Affidavit 1Affidavit 2

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