The Income-Tax department can initiate prosecution proceedings once the appeals of these alleged account holders and beneficiaries are dismissed at the first stage of appeal.
The IT department has served notices to more than 50 people named on the list of secret Swiss accounts with HSBC Geneva, informing them about the date of hearing of their cases.
The Income-Tax department can initiate prosecution proceedings once the appeals of these alleged accountholders and beneficiaries are dismissed at the first stage of appeal.
Tax officials have been emboldened by an appellate tribunal ruling in December that went against individuals who were named as beneficiaries of overseas trusts having accounts with a bank in a Bavarian tax haven.
Despite a Supreme Court verdict saying that trust beneficiaries are not liable to pay tax, as long as they do not receive any amount from the trust, the appellate tribunal ruled in favour of the tax department which had hauled up persons who had allegedly parked undisclosed funds in LGT Bank of Liechtenstein, a small state bordering Austria.
In the HSBC matter, the issues relate to direct accountholders as well as those who are said to be trust beneficiaries. Many alleged accountholders have denied having ever opened bank accounts with HSBC Switzerland and, in a few cases, tribunal verdicts have gone in favour of the assesses.
In the past two years, the tax department has reached out to Switzerland and other tax havens to corroborate information that they have stumbled in the course of raids or have run into following information leaks by activist hackers. In many cases, this has helped the tax office to build their case on a firmer legal footing: once authorities of other jurisdictions confirm the allegations, the information, which till now was stolen information in the eyes of law, assumes the nature of evidence.
Among tax practitioners as well as tax officers, there is a widely shared perception that the Commissioner of Income-tax (Appeals) – the first stage of appeals where the HSBC cases would now be heard – would dismiss the appeals. Once the appeals are dismissed, the tax office may file a complaint before a magistrate to begin the prosecution process.
Faced with a raid and tax notice, a person can either move the settlement commission (which has the power to waive interest and penalty on the tax as well as prosecution), or legally challenge the decision of the I-T department; but, if slapped with a prosecution notice, he can file a compounding application, admit the offence, and pay tax and penalty with the hope to close the matter once the application is approved; alternatively, he can contest the prosecution notice in the court of law.
Source: Economic Times