Armed with data from tax havens, IT Dept confronting HNIs

Armed with information obtained from jurisdictions such as Singapore, Switzerland, Cayman Islands and British Virgin Islands, the taxman is going after high-networth individuals. The tax sleuths belonging to the investigation wing of the IT Department are also scrutinising their non-resident status.
According to a report in The Hindu Businessline, these summons mostly pertain to Indians who apparently control certain entities or are decision-makers in them.
In some instances the probes are going back decades in time.
“A large amount of data from various jurisdictions is being received by Indian authorities, linking Indians with certain offshore interests like trusts, corporate entities, and bank accounts, in various capacities. This has triggered issuances of a large number of summons from the tax authorities seeking explanations and additional information around offshore interests,” said Ashish Mehta, Partner at Khaitan & Co.

Mehta also said that a questionnaire is attached with the summons, the objective of which is to find out whether they are bonafide non-residents, if applicable.

The department is seeking tax returns, passport and immigration details from the time of acquiring asset. These assets could have been acquired 30-40 years ago.
The requirements are quite stringent. Individuals who are confronted with such summons have to provide details of their residential status in each financial year. If they become non-resident in any financial year, they have to furnish evidence of their stay abroad India. In that case they have to provide addressees and other details.
“Many high net-worth individuals who migrate abroad for work or permanently, start filing their returns as non-residents but miss updating their records. This is pertinent compliance to ensure that tax authorities have the requisite details for determining their status,” said Raashi Shah, Partner, Illume Advisory.
To be sure the summons is only an initial stage of the investigation.
The documents that individual has to furnish to prove his/her residential status include the passport, lease agreements, employment contracts, bank statements and even utility bills.
Shah added that one could expect queries about travel history, employment, and residency status in India and abroad.
According to Mehta, one could furnish tax returns as a non-resident besides copies of passport that shows periods of stay in India. If needed IT sleuths can verify the stay in India with information from the Bureau of Immigration.
If the IT department is satisfied with the non-resident status of the concerned individual, it might close the file and dispose of the case. However, if they are not satisfied, it can be further investigated for tax evasion. In some cases, the IT sleuths can slap provisions of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015. The proceedings can very well stretch beyond a year after the summons.