Black Money

                  Uncorrected/ Not for Publication-13.05.2015

                                 The question was proposed.

 DEPUTY CHAIRMAN: Okay. The time allotted to this is two hours.

Should we stick to two hours or reduce it to one hour? …(Interruptions)…

All right.  Now, Dr. E.M.S. Natchiappan.

E.M. SUDARSANA NATCHIAPPAN (TAMIL NADU): Mr. Deputy

Chairman, Sir, I support the Black Money (Undisclosed Foreign Income and

Assets) and Imposition of Tax Bill, 2015.  As our leader has said, the

Congress Party fully supports this Bill.  At the same time, we have to bring

up certain deficiencies which are there to be rectified in future amendments.

First of all, I would like to bring to the attention of the Government that

we are bound by the United Nations General Assembly which, as early as

31st  October, 2003, had made that on the basis of recalling its Resolution

55/61 of 4th December, 2000, it established an ad hoc committee to go into

the question of these types of evasion of taxation throughout the world.  It

happened for three years by having different types of meetings and finally,

they came forward with the United Nations Convention against Corruption.  I

would just quote the beginning of the Preamble.  I quote,

“Concerned about

the seriousness of problems and threats posed by corruption to the stability

and security of societies, undermining the institutions and values of

 democracy, ethical values and justice jeopardising sustainable development

and the rule of law”. This is where the Government has it.  All the States-

Parties of the Convention have signed it.  140 countries have signed this

Convention.  On that basis, different levels of discussions were going on and

finally, they came out with different topics and chapters, so to say, covering

about 71 articles.  In different ways, States-Parties have to follow it in their

own countries.  I find that this particular Bill which is coined as the Black

Money Bill (Undisclosed Foreign Income and Assets) and Imposition of Tax

Bill is very, very fragile and it is only an extension of Section 139 of the

Income Tax Act.  Section 139 is very clear in stating that the filing of Income

Tax Return is compulsory. In various cases, they are saying that. Finally,

sub-clause (3) provides that any asset including financial interest in any

entity located outside India or signing authority in any account located

outside India is required to file a return of income in prescribed form

compulsorily, whether or not he has the income chargeable to tax. But, if

you see the present Act, it defines why this particular Act has come into

force.

(Contd. by KR/2R)

KR/PSV/2R/2.45

E.M. SUDARSANA NATCHIAPPAN (CONTD.): On the basis of the

definition, we can find in clause 2 (11) “undisclosed asset located outside

India” means an asset (including financial interest in any entity) located

outside India, held by the assessee in his name or in respect of which he is a

beneficial owner, and he has no explanation about the source of investment

in such asset or the explanation given by him is in the opinion of the

Assessing Officer unsatisfactory.” This is, more or less, expansion of section

139. If we go further, clause 4 also defines like that. Finally, we can very

easily find out how the architecture of this Bill is repeated on the basis of the

Income-tax Act. The Income-tax Act is also having the Assessing Officer.  It

is having its own hierarchy of officers who go into it.  If the officer has given a

verdict, then, about that, there is an appeal provision given for the Tax

Appellate Tribunal. Similarly, the Tax Appellate Tribunal is vested with the

same powers in this Bill for the violation also. Then, they can go to the High

Court, and finally they can end up in the Supreme Court.  This is the

architecture on which this Bill is made. That means we are repeating the

same Act which is already there in the Income-tax Act, and we are culling

out certain portions, and defining it further, and saying that we want to stop

the black money.  Actually, we are not addressing the problem which we

have promised to the people. In the international Convention also we have

shown such a position, and I will quote from article 3 of the international

Convention.  “This Convention shall apply, in accordance with its terms, to

the prevention, investigation and prosecution of corruption and to the

freezing, seizure, confiscation and return of the proceeds of offences

established in accordance with this Convention.” This is the promise you

have made. We have accepted this Convention.  But now we have not

mentioned anything on the topic of prevention, investigation; only the

prosecution is there. There is nothing on the freezing, seizure, confiscation

and return of the proceeds of offences. That means, we just want to make a

white washing of our own enactments, telling that we are very much

interested in abolishing black money, and, therefore, we are bringing a law.

But really are we making that law?  We are just evading our international

commitment which we made.

Similarly, Chapter II of Preventive Anti-corruption Policies and Practices,

article 5, clearly says what are the preventive measures that you are taking

in a Bill represented by the State. There they have to make it clear in article

1, the Statement of Purposes. The purposes of this Convention are:  (a) To

promote and strengthen measures to prevent and combat corruption more

efficiently and effectively; (b)  To promote, facilitate and support

international cooperation and technical assistance  in the prevention of and

fight against corruption, including in asset recovery; (c) To promote

integrity, accountability and proper management of public affairs and public

property.” That means we have to come forward with a domestic

legislation, covering the preventing measures, that is, the preventive anti-

corruption policies and practices which says in article 5.1 “Each State party

shall  in accordance with the fundamental principles of this legal system

develop and implement, or maintain  effective, coordinated anti-corruption

policies that promote the participation of the society and reflect the

principles of the rule of law, proper management of the public affairs and

public property, integrity, transparency and accountability.”  We are not

covering all these things.  But we are making some small definition here.

Article 7 deals with how public sector has to be accountable for this

purpose.

(Continued by 2S/KS)

KS-VNK/2S/2.50

 E. M. SUDARSANA NATCHIAPPAN (contd.): Article 8 is on ‘Codes of

conduct for public officials’.  Lots of explanations were given.  Article 9 is on

‘Public procurement and management of public finances’.  These are all

sources of black money. These are the sources from where this would come

out.  Article 10 is on ‘Public reporting’.  Let me quote, and it says, “Taking

into account the need to combat corruption, each State Party shall, in

accordance with the fundamental principles of its domestic law, take such

measures as may be necessary to enhance transparency in its public

administration, including with regard to its organization, functioning and

decision-making processes, where appropriate. Such measures may

include, inter alia:” and, then, it explains further.   Article 11 is on   ‘Measures

relating to the judiciary and prosecution services’.  Only this has been

incorporated in the Act; nothing more than that.  That is already there in the

Income Tax Act.  Article 12 is on ‘Private Sector’.  It says, “Each State Party

shall take measures, in accordance with the fundamental principles of its

domestic law, to prevent corruption involving the private sector, enhance

accounting and auditing standards in the private sector and, where

appropriate, provide effective, proportionate and dissuasive civil,

administrative or criminal penalties for failure to comply with such

measures.” Nothing has been addressed here on this aspect. Article 13 is

on ‘Participation of society’.  Nothing is addressed here.

Article 14 is on ‘Measures to prevent money-laundering’.  Already,

there is an Act, which is also fragile. Then, Chapter III is on Criminalisation

and Law Enforcement.  Article 15 is on ‘Bribery of national public officials’.

Nothing is addressed here.  Article 16 is on ‘Bribery of foreign public officials

and officials of public international organisations’.  Nothing is addressed

here.  Article 17 is on ‘Embezzlement, misappropriation or other diversion of

property by a public official’.  Nothing has been taken into consideration.

Article 18 is on ‘Trading in influence’.  Article 19 is on ‘Abuse of functions’.

Article 20 is on ‘Illicit enrichment’.  Article 21 is on ‘Bribery in the private

sector’.  Article 22 is on ‘Embezzlement of property in the private sector’.

Article 23 is on ‘Laundering of the proceeds of a crime’.  Nothing is

addressed here.  Article 24 is on ‘Concealment’.  Article 25 is on

‘Obstruction of Justice’.  Article 26 is on ‘Liability of Legal Persons’.  Article

27 is on ‘Participation and Attempt’.  Article 28 is on ‘Knowledge, Intent and

Purpose as Elements of an Offence’.  Article 29 is on ‘Statute of Limitations’.

Article 30 is on ‘Prosecution, Adjudication and Sanctions’.  Nothing is

addressed here.  Article 31 is very, very important.  It is totally missing.  It

goes against the wishes of the people.  Article 31 is on ‘Freezing, Seizure

and Confiscation’.  I will quote a small portion of it.  It says, ” 1. Each State

Party shall take, to the greatest extent possible within its domestic legal

system, such measures as may be necessary to enable confiscation of:

(a) Proceeds of crime derived from offences established in

accordance with this Convention or property the value of which

corresponds to that of such proceeds;

(b) Property, equipment or other instrumentalities used in or

destined for use in offences established in accordance with this

Convention.”

Nothing has been addressed in this Bill.  We can very conveniently say

that the Money-laundering Act will apply in this case.  But it is not

applicable; it has more or less been diluted.  It does not meet the

requirements of criminal justice.

Article 32 is on ‘Protection of Witnesses, Experts and Victims’.

Nothing has been said here.  Article 33 is on ‘Protection of Reporting

Persons’.  Article 34 is on ‘Consequences of Acts of Corruption’.  Nothing

has been said here.  Article 35 is on ‘Compensation for Damage’.  Nothing is

said here.  Article 36 is on ‘Specialized Authorities’.  Our own officers

become arbitrators of Income-tax.  Even when they themselves violate that

particular provision, they decide on it.  Article 37 is on ‘Cooperation with law

enforcement authorities’.  Article 38 is on ‘Cooperation between national

authorities’.  Article 39 is on ‘Cooperation between national authorities and

the private sector’.  Article 40 is on ‘Bank secrecy’.  Article 41 is on ‘Criminal

record’.  Article 42 is on ‘Jurisdiction’.  Finally, you have Article 43 on

‘International cooperation’.  Nothing is said, except one chapter which says

that in this way you will go in for bilateral relationships; but we are not

following the international convention to which we are the signatories.

Article 44 is on ‘Extradition’.  We do not apply this provision at all.  Article 45

is on ‘Transfer of Sentenced Persons’.

-KS/RL-DS/2.55/2T

(CONTD. BY RL/2T)

 E.M. SUDARSANA NATCHIAPPAN (CONTD.) : Article 46 is about

mutual legal assistance and in that way it goes on till Article 71 but none of

these things like transfer of criminal proceedings, law enforcement co-

operation, joint investigation, special investigative techniques and finally

asset recovery. Article 52 says about prevention and detection of transfers

of proceeds of the crime, but nothing is said here.  Article 53 says about the

measures for the direct recovery of the property.  Article 54 is about the

mechanisms for recovery of the property through international cooperation

in confiscation.  Article 55 is about International cooperation for purposes of

confiscation.  Article 56 is about special cooperation.  Article 57 is about

return and disposal of assets.  Finally, Chapter VI is about technical

assistance and information exchange and it goes on like that and

Mechanism for Implementation, Chapter VII, Article 67, Conference of the

State parties and convention.  Now we are going to attend the conference

of the State parties.  In 2015 it is going to be started.  What are we going to

report it?  Are we going to give this small fragile Bill before the international

body to tell that we are preventing everything, but we are the signatories to

the International Convention?  Sir, I request the Government to come

forward with a new amended Bill, more so, a comprehensive Act, to

address all the provisions of the conventions.  We were the signatories as

early as in 2003 when the NDA Government was there and subsequently you

have given another chance and instead of talking something outside and

doing something inside, you can straightaway go forward with a proper

convention, with a proper domestic law and that will be a good thing to

show that India is an investment destination and you can believe us and

come here as we are following the International Convention. Thank you very

much.

(Ends)

About Dr. E.M. Sudarsana Natchiappan MA ML( USA) Ph D

Dr. E.M. Sudarsana Natchiappan, was a Member of Parliment - Lok Sabha one term and two terms Rajya Sabha and Union Minister of State for Commerce and Industy, New Delhi Sr.Lawyer ,Supreme court of India, NewDelhi, India. President, Indian society of International Law, New Delhi Founder of 21st century International School, Sivagangai Tamil Nadu. Author of books WTO and India, RTI and others
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