2011 (7) TMI 844 - SC - Income Tax

Transfers of monies and accumulation of monies unaccounted in foreign bank - DTA with Germany - the secreted quantum of monies and the manner in foreign banks and with the nature of activities for the accumulation of such monies leading to the concentration of economic power and unlawful activities and cross-border criminal activity - Writ petition was filed in 2009 that citizens and also non-citizens with presence in India have generated and secreted away large sums of monies in various foreign banks especially in tax havens - whether in India or outside India but relating to India - Hassan Ali Khan was served with an income-tax demand for Rs. 40, 000.00 crores and that the Tapurias were served an income-tax demand notice of Rs.20, 580.00 crores - raiding Hassan Ali s residence in Pune certain documents and evidence had been discovered regarding deposits of 8.04 billion dollars with UBS bank in Zurich - filing of this writ petition under Article 32 is proper as the inaction of the Union of India as described above violates the fundamental rights-to proper governance inasmuch as Article 14 provides for equality before the law and equal protection of the law and Article 21 promises dignity of life to all citizens - Union of India repeatedly insisted that the matter involves many jurisdictions across the globe and a proper investigation could be accomplished only through the concerted efforts by different law enforcement agencies both within the Central and State Governments - status reports submitted to this court that the Enforcement Directorate has moved in some small measure the actual facts are not comforting to an appropriate extent - the Union of India did not provide any evidence that Germany specifically requested it to not reveal the details with respect to accounts in the Liechtenstein even in the context of proceedings before this court - the Union of India has chosen to proceed under the assumption that it could have requested such information only pursuant to the double taxation avoidance agreement it has with Germany - The petitioners contend that the Government of India took such a step primarily to conceal the information from public gaze. Held that - the Union of India shall disclose to the petitioners all documents and information which they have secured from Germany like names of those individuals with bank accounts in Liechtenstein as revealed by Germany with respect of whom investigations have been concluded either partially or wholly and Special Investigation Team shall take over the matter of investigation of the individuals whose names have been disclosed by Germany as having accounts in banks in Liechtenstein.

Summary

Issues Involved:
1. Appointment of a Special Investigation Team (SIT).
2. Disclosure of documents and names of individuals with foreign bank accounts.

Issue-wise Detailed Analysis:

1. Appointment of a Special Investigation Team (SIT)
The court discussed the necessity of forming a Special Investigation Team (SIT) to address the issue of unaccounted monies allegedly held by certain individuals in foreign banks. The petitioners argued that the government had been lax in investigating and prosecuting these cases, which involved significant amounts of unaccounted money. The court noted that the government's responses were evasive and slow, leading to concerns about the seriousness and effectiveness of the investigation.

The court emphasized the importance of a coordinated and serious investigation, given the complexity of the issue and the involvement of multiple jurisdictions and agencies. The Union of India had formed a High-Level Committee (HLC) to oversee the investigation, but the court found this insufficient and proposed converting the HLC into a SIT, headed by two retired judges of the Supreme Court.

The court ordered the formation of the SIT, including the members of the HLC and additional members, to ensure a comprehensive and coordinated investigation. The SIT was tasked with investigating, initiating proceedings, and prosecuting cases related to unaccounted monies, both in India and abroad. The SIT was also directed to prepare a comprehensive action plan to strengthen the country's efforts against unaccounted monies.

2. Disclosure of Documents and Names of Individuals with Foreign Bank Accounts
The petitioners sought the disclosure of documents and names of individuals with bank accounts in the Principality of Liechtenstein, which were obtained by the Union of India from Germany. The petitioners argued that the government had not made a serious attempt to secure and investigate this information, and that the reluctance to disclose the names was to protect powerful individuals involved in unlawful activities.

The Union of India contended that the information was obtained under a double taxation avoidance agreement with Germany, which proscribed disclosure. The government also argued that revealing the names would violate the right to privacy of individuals who may have lawfully deposited money in these accounts.

The court examined the provisions of the double taxation avoidance agreement and found that it did not proscribe the disclosure of the information in the context of public court proceedings. The court emphasized the importance of transparency and accountability in constitutional proceedings and rejected the government's arguments against disclosure.

However, the court also recognized the right to privacy and ruled that the names of individuals with bank accounts in Liechtenstein should not be disclosed unless there were prima facie grounds for wrongdoing. The court ordered the Union of India to disclose documents and information related to the accounts, except for the names of individuals who were still under investigation and had not been found to have committed any wrongdoing.

The court directed the SIT to take over the investigation of individuals with accounts in Liechtenstein and to review the concluded investigations to ensure thoroughness. The names of individuals with completed investigations and initiated proceedings were to be disclosed.

Conclusion
The court ordered the formation of a Special Investigation Team (SIT) to investigate unaccounted monies held by individuals in foreign banks and directed the Union of India to disclose relevant documents and information, while protecting the right to privacy of individuals who had not been found to have committed any wrongdoing. The SIT was tasked with ensuring a comprehensive and coordinated investigation and preparing a plan to strengthen efforts against unaccounted monies.