Cabinet meets, decides to form SIT for black money

Written by fe Bureau | New Delhi | Updated: May 28 2014, 10:44am hrs
The Modi government at its first cabinet meeting on Tuesday decided to set up a special investigative team (SIT) chaired by former Supreme Court judge Justice MB Shah to probe black money stashed abroad.

The team would have RBI deputy governor, CBDT chairman, revenue secretary and directors of IB, RAW, ED and CBI as members, said Ravi Shankar Prasad, minister for communications and IT and law.

The government's move is in light of the Supreme Court order last week giving a weeks time to the Centre to set up an SIT to probe money stashed in foreign banks.

This issue has become a priority in India's relations with countries like Mauritius and Switzerland and influenced the way India's tax department handled alleged under reporting of income by businesses. Former finance minister P Chidambaram has recently threatened action on Switzerland under Indian law if the country failed to share information about the secret accounts some Indians had in HSBC Bank. The minister reiterated that it is the commitment of the government to pursue the issue of black money. "In the first Cabinet of the new government...in the light of the directions of the SC, we have constituted an SIT for unearthing black money... This was an important issue for us," Prasad said.

The government had to rush to the apex court with a time-extension plea as the three-week deadline to constitute the SIT set by a three-member bench on May 1 expired on last Thursday.

Meanwhile, the proposed investigation was one of the promises made by Modi during his election campaign. There is no accurate estimate of the extent of black money generated in India. As per a white paper on black money tabled in Parliament in 2012 by the then FM Pranab Mukherjee, many Indians could be routing their unaccounted wealth into local stock markets through opaque and multi-layered instruments called participatory notes (P-notes) issued by foreign institutional investors. Around 10-15% of FII investment into India is routed through P-notes.

The report had also pointed out that although the source of generation of black money may lie in any sphere of economic activity, sectors like real estate, bullion and jewellery market, financial markets, public procurement, non-profit organizations, trade, international transactions involving tax havens, and the informal service sector are more vulnerable to this menace.