CBDT creates specified units to speed up probe into Panama, Paradise papers

The Central Board of Direct Tax (CBDT) has created specified units to expedite probes into the Panama and Paradise papers and other foreign assets-related cases, a senior official said.

"The CBDT wants to complete Panama and Paradise cases as early as possible, so for this department is creating units which only deal in foreign assets," a senior income-tax department official told Moneycontrol.

Units in the investigation wing have been increased to speed up these cases. "In Mumbai and Delhi, which have the highest numbers of foreign assets cases, these units have been increased. Mumbai has twelve units from the earlier eight, and in Delhi four more units have been set up,” a source in the investigation department said.

The CBDT had issued a circular last month for increasing these units. The investigation against entities and individuals named in Panama Papers has been going on from 2016. Similarly, the Paradise Papers case is being probed since 2017.

In 2016, approximately 400 companies with foreign accounts were under the scrutiny of the CBDT. In the Panama Papers case, the CBDT had brought into light over Rs 1,000 crore of undisclosed income, in which several celebrities were also named. In 2017, in the Paradise case, approximately 700 companies and individuals were named.

A source in the income tax department said the pace of investigation had slowed as “the department does not have much information about foreign entities and is dependent on foreign agencies for details.”

Sonam Chandwani, Managing Partner, KS Legal and Associates, told Moneycontrol: "There are a lot of stages involved in it like coordinating with foreign agencies to retrieve the information which will make it difficult for CBDT to achieve the deadline. Even after they are able to meet the deadline and impose penalties but recovery of the penalty would be a challenge as the parties may go for an appeal".

Under existing laws, the CBDT can investigate Panama, Paradise or other foreign-related cases under the Foreign Exchange Management Act, 1999 and the Black Money Act, 2015. However, once the CBDT starts filing prosecution cases, they will have to bring these cases under the Prevention of Money Laundering Act, 2019.