Till now many bought time and tried to dodge the tax office by denying ownership or links with any overseas assets with false submissions, often made in letterheads of their chartered accountants and lawyers. Later, if tax officials called their bluff, such plain submissions gave them the leeway to escape harsh consequences.
That ploy would no longer work. In an affidavit, containing affirmative statements made on a stamp paper or a notarised declaration, most would refrain from holding back information due to fear of punishment under the criminal law.
The income tax (I-T) department, which is inundated with information shared by other countries on foreign assets of Indians, has sensed that insisting on an affidavit would be a quicker way to handle the cases, said persons aware of the development.
“There is a huge amount of information being received from offshore jurisdictions on a continuous basis and hence a high backlog of cases. Seeking affidavits may be a strategy to fast-forward the disposal of cases. However, assessees would need to be very mindful and critically verify the contents of the affidavits sworn on oath, as there are very harsh implications if the contents of the affidavits are later found to be inaccurate or false,” said Ashish Mehta, partner at the law firm Khaitan & Co.
According to Rajesh Shah, partner at the CA firm Jayantilal Thakkar & Co, chartered accountants are advising their clients who have received notices from FAIU (Foreign Asset Investigation Unit) to deny the department’s claims in an affidavit only when they are absolutely confident that the information received by the department is not proper and they have no connection with the banks accounts mentioned in the notices.
“Many a time assessees deny that the accounts do not belong to them. It’s also possible that they may not be aware of the same. Earlier the department used to accept such declarations. But of late, they are insisting on an affidavit for the same. Any wrong statement in an affidavit can lead to punishment under CrPC,” said Shah.The sequence of events in such matters runs like this: after receiving information under the common reporting standard – the international mechanism for collecting and sharing information on foreign tax residents – the I-T department issues a basic notice under Section 131(1)(A) of the I-T Act. The affidavit is typically sought when the taxpayer denies the information. Based on the taxpayer’s response, the tax office decides whether to open the case under the Black Money Act, which came into force on July 1, 2015, to tax undisclosed wealth stashed abroad. Based on the response, the department reaches out to its counterpart in the foreign jurisdiction to obtain additional information to strengthen a case.
Tax officials approach other wings of the government to check the non-resident status of assessees if the latter claim that the assets in question were acquired when they were NRIs. In distancing themselves from assets mentioned in I-T notices, assesses often claim that the money lying in a bank account belongs to NRI relatives or they are simply unaware of how their names are linked to bank accounts or overseas trusts.
Failing to disclose an asset in the FA (foreign assets) schedule, introduced in the I-T return form a decade ago, could trigger a penalty of ₹10 lakh while not reporting any income for tax could mean forking out 120% of the tax amount.
