Administrative Mechanism to Trace Black Money in India


“Measures to Tackle Black Money in India and Abroad”, Government of India, Ministry of Finance, 2012; “White paper on Black Money”, Ministry of Finance, Department of Revenue, Central Board of Direct Taxes, May 2012; Press search
With black money generation rampant across various sectors of the economy, the government has set up various administrative agencies to tackle its generation, the principal agencies being the Central Board of Direct Taxes (CBDT) and the Central Board of Excise and Customs (CBEC).
Central Board of Direct Taxes: The CBDT and the I-T Department use tools of scrutiny assessment and information-based investigations for detecting tax evasion.
The Investigation Wing of the I-T Department carries out surveys to collect evidence of tax evasion. The department receives data relating to cash transactions in bank accounts, registered immovable property below the circle rate, and capital market transactions in the form of Annual Information Returns (AIR), which is analyzed to identify cases of tax evasion. An Integrated Taxpayer Data Management System (ITDMS) is used for analyzing data gathered from AIRs, permanent account number (PAN) database, I-T Department (ITD) applications, to unearth illegal transactions.
Central Board of Excise and Customs: CBEC, including Commissionerates of Customs, Central Excise and Service Tax; Directorate of Revenue Intelligence (DRI); Directorate General of Central Excise Intelligence (DGCEI), etc., are all engaged in the administration of matters relating to Customs, Central Excise, Service Tax, etc.
DGCEI is responsible for detecting cases of evasion of Central Excise and Service Tax. The Directorate develops intelligence, especially in new areas of tax evasion through its intelligence network across the country and disseminates information in this respect by issuing Modus Operandi Circulars and Alert Circulars to apprise field formations of the latest trends in duty evasion. Wherever necessary, DGCEI on its own, or in coordination with field formations, organizes operations to unearth evasion of Central Excise Duty and Service Tax. DRI is responsible for handling matters relating to violations of customs laws and anti-narcotics law.
Other regulatory agencies undertaking supervision include the Directorate of Enforcement (ED); Financial Intelligence Unit (FIU-IND); Economic Offences Wing of the State Police, Central Bureau of Investigation (CBI), Serious Frauds Investigation Office (SFIO), and Narcotics Control Bureau (NCB).
Additionally, there are co-ordinating agencies such as the Central Economic Intelligence Bureau (CEIB), National Investigation Agency (NIA), and the High Level Committee (HLC), which also play an important role in fighting the menace of black money.
Central Vigilance Commission (CVC) is the principal Central Government anti-corruption watchdog; with anti-corruption units of the Central Bureau of Investigation (CBI) as its principal implementing arm. The Comptroller and Auditor General of India (CAG) also provides oversight for the Central Government and central PSUs, while the State Auditor General (AG) oversees the state government and its organizations. CAG established by the Constitution of India under
Chapter V, audits all receipts and expenditure of the central and state governments, including those of bodies and authorities substantially financed by the government. Of late, the role of CAG has come in the limelight as a result of its audit reports on the 2010 Commonwealth Games and allocation of licenses for 2G telecom spectrum and coal mining blocks.
The newly formed government has also constituted a Special Investigation Team (SIT) for unearthing black money.
In its efforts to track black money in the economy, the I-T department is gradually moving from regular search and survey operations to non-intrusive methods of data mining through electronic databases and information available through electronic portals of banking and other financial intermediaries. The department has also developed cyber forensics labs and various software tools for tracking black money.
Integrated Taxpayer Data Management System: The ITDMS is a data mining tool implemented by the I-T department that is used for detection of potential cases of tax evasion. The tool assists in generating a 360-degree profile of the high net-worth assesses by compiling information from all internal and external data sources such as AIR, TDS, and the Central Information Branch.
It has an identity search tool, ‘PrimeMatch’ that can handle possible variations in identification parameters such as name, address and date of birth while dealing with large data volumes. In case of an individual, the family tree of the person is also created by relating the names and addresses, and also links the information to all the related entities in which a person being investigated has interest as a partner or director. The government has implemented the tool in all 20 Directorate General of Income Tax (Investigation).
Functioning of the Integrated Taxpayer Data Management System
Source: Department of Administrative Reforms & Public Grievances, Ministry of Personnel, Pensions & Public Grievances, (GoI) Website
Cyber Forensic Labs and Work Stations: Cyber Forensic labs, set up in Delhi and Mumbai by the Directorate of Income Tax Investigation (DITI) with the help of Centre for Development of Advance Computing (CDAC), are equipped with advance ICT tools for gathering and analyzing electronic data and digital evidences, and helping speed up investigation of tax evasion cases. The labs help in identifying and safely retrieving relevant data found in the course of search and seizure operations and help protecting its evidentiary value. The labs also enable retrieving hidden, password-protected, and deleted files and emails from assessees' computers and giving protection against advanced software tools which get activated if the system is not shut down/started with a particular set of keystrokes.
CAIT for Focused Investigation: The Investigation Wing of the CBDT has developed a software audit tool called, Computer-assisted investigation tool (CAIT) to analyze computerized books of accounts maintained on various accounting softwares such as Tally, ERP, and SAP. The tool assists officers of the I-T Department for detecting under-reporting or mis-reporting of income by scrutinizing computerized books of digital evidence seized during search and survey operations. CAIT was implemented in 25 locations across the country in the first phase during FY12.
Data Warehousing and Business Intelligence: As part of its efforts to track black money in the country, the I-T department is implementing a new project, ‘Data Warehousing and Business Intelligence’, wherein a new warehouse of business related intelligence and income data would be created to enable the taxman check multiple trends of expenses made by individuals and entities. The database would collate all electronic and manual intelligence and other information collected by the investigation wings of the department. The warehouse, in addition to storing the information contained in the I-T database such as PAN card information, tax returns and banking related information will also have the ability to generate information from the open source available on the Internet.
The department, through this new data warehouse, aims to bring the portals of both its investigation and criminal investigation units on one platform, to widen the tax base and check undisclosed income. The project seeks to strengthen the non-intrusive surveillance capabilities of the I-T department and will be operational by 2015.
Database on suppression of property sales amount: Government is also contemplating forming a database of instances of suppressed property sales proceeds detected by the I-T department, to help the Controller of Stamps department arrive at an appropriate price for land in an area and discourage black money transactions.
In addition to the administrative systems, the government has also created a strong legislative framework for preventing the generation of black money and for its detection. Some of the government policy instruments in this regard include the Income Tax Act, 1961, Wealth Tax Act, 1957, Benami Transactions (Prohibition) Act, Foreign Exchange Management Act (FEMA), 2002, Prevention of Money Laundering Act (PMLA), 2002, Customs & Narcotic Drugs and Psychotropic Substances (NDPS) laws, Prevention of Corruption Act & United Nations Convention Against Corruption (UNCAC), Prevention of Bribery of Foreign Public Officials Bill, Lokpal and Lokayukta Bill, Unique Identity (UID)-Aadhaar, etc.
Goods and Services Tax Network (GSTN): The Cabinet has approved a proposal to set up a special purpose vehicle -GSTN (GSTN SPV) for providing shared IT infrastructure and services to central and state governments, taxpayers, and other stakeholders for implementation of the goods and services tax (GST), both before and after the rollout of GST. During the pre-GST stage, the services would include taxpayer utility, common return submission along with tracking mechanism for inter-state trade, common tax payment gateway, common registration for states VAT and Central Sales Tax [CST]) and central levies (central excise and service tax) and building interface between the GSTN Common Portal and state/centre tax systems. This system is expected to reduce cases of tax evasion.
The GSTN SPV would be substantially funded through a one-time non-recurring grant of INR315 crore from the central government towards expenditure for setting up and functioning of the SPV for a three-year period after incorporation. 

Friday, 02nd Oct 2015, 10:56:08 AM

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