Curbing black money: 8 stringent recommendations from SIT that can put the govt in a fix

The issue of black money, which prime minister Narendra Modi had promised to resolve within 100 days of assuming power, is back to haunt the NDA government with the Supreme Court asking it to give its views on the steps recommended by the probe panel.

The Special Investigation Team on Thursday recommended several stringent steps to curb black money generation in the country. The Supreme Court sought to know from the Centre about the steps taken to implement the suggestions to bring back illegal moneys stashed in foreign banks.

 Curbing black money: 8 stringent recommendations from SIT that can put the govt in a fix

Supreme Court of India. Reuters

"The Attorney General will tell us what the Centre has done on the recommendations of the SIT," a bench comprising Chief Justice H L Dattu and Justices M B Lokur and A K Sikri said while posting the hearing for October 28.

Senior advocate Dushyant Dave, appearing for the SIT, informed the bench that the subsequent report on the progress of investigation would be complete by the month end and sought its nod to place before the court in October.

Here are the recommendations by the SIT:

1) The panel has advocated action under anti-money laundering law for trade-based money laundering, putting a cap on huge cash transactions as these mostly take place in illegal activities like drug trade and betting deals.

2) It has also said there is need to check the generation of black money in the education sector and through donations to religious institutions and charities. This is likely to be the most contentious suggestion, which has potential to put the government in a spot. The reason? The involvement of religion.

3) It wants additional courts to established to decide the pending cases under the Income Tax Act, establishment of Central KYC Registry and empowering the Directorate of Revenue Intelligence under the Special Economic Zone Act.

4) There is a a specific recommendation to take steps to check generation of black money through cricket betting. This too is likely to be a political hot potato as many senior ministers and political leaders are directly involved with the sport in India.

5) The panel has also at length dwelt on the issue of money laundering through misuse of exemption from long-term capital gains tax. It has recommended that capital markets regulator SEBI needs to have an effective monitoring mechanism to study the unusual rise in stock prices of companies when such an increase takes place. "We understand that SEBI has a strong IT infrastructure which can generate red flags for such instances. Such red flags could be built upon trading volumes, entities which contribute to trading volume, financial background of firms through their annual returns and any other indicators SEBI may develop. We believe that with effective and timely monitoring by SEBI a significant number of such instances can be checked in time," the SIT has been quoted as saying in reports.

6) It wants SEBI to share the any such information with the Central Board of Direct Taxes and the Financial Intelligence Unit (FIU). It also said the Enforcement Directorate should then be informed to take action under Prevention of Money Laundering Act for the predicate offences.

7) As far as participatory notes are concerned, the panel has said obtaining information on "beneficial ownership" of these instruments is of crucial importance to prevent their misuse. P-Notes are instruments issued by registered foreign institutional investors to overseas investors, who wish to invest in the Indian stock markets without registering themselves with market regulator SEBI. These have been controversial as there are doubts it is the illegal money that is finding way back into India though these instruments.

8) According to a report in The Hindu, the SIT has said the value of P-Note investments as of end February 2015 was at Rs 2.72 lakh crores. The top five countries from where P-Notes investments be beneficial are Cayman Islands, he US, the UK, Mauritius and Bermuda. According to the report, SIT noted that at Rs 85,000 crore, Cayman Islands accounts for the biggest portion of P-Notes investment. It wondered a small country with just 55,000 population managed to invest such a huge amount in Indian shares, the report said.

With inputs from PTI

Updated Date: Sep 04, 2015 09:42:56 IST