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Black money trail: Govt may move against HSBC, Rs 80 cr mopped up by Ritu Sarin

The Government is contemplating legal action against HSBC Bank for what is being described as the “active’’ role of their executives in persuading Indian account-holders to open accounts to park undeclared money in their branch in Geneva.

The Central Board of Direct Taxes (CBDT) has sought the opinion of the Law Ministry for this and underlined that a similar course of action has been taken by other countries who, like India, have been given access to bank account details held by their nationals in HSBC Geneva.

This comes at a time when the Government, in Parliament last week, promised a White Paper on black money.

As first reported by The Indian Express (August 8, 2011), French authorities handed over lists of roughly 700 Indians who opened accounts in HSBC Geneva prior to 2007 and this is being seen as a major black money trail. Six months after the lists were received by New Delhi, IT officials revealed that in a vast majority of cases, the Geneva accounts or the money parked there had not been declared in the account-holders’ income tax returns.

Take the case of clients residing in New Delhi, for instance. Of the 700-odd account holders, 68 live in Delhi and only “two or three” of them were found to have declared their HSBC Geneva deposits.

IT investigators in New Delhi have since completed their probe and an estimated Rs 80 crore has been mopped up from these HSBC account-holders in the capital itself. While one account holder was found to have deposits to the tune of Rs 40 crore in the account, 10 of them had deposits of around Rs 20 crore each. Significantly, sources said, these HSBC account-holders have been taxed as per existing slabs and paid penal interest on their 2007 balances.

No prosecution or court cases have been filed. Reason: despite an official communication being sent by the CBDT, HSBC Bank in Geneva has given no official acknowlegement of the data handed over by French authorities and without this endorsement from the Swiss or detailed banking transactions, officials feel the cases may collapse in economic offence courts.

But with the account-holders revealing that their Geneva accounts were being “operated’’ from New Delhi by bank officials — both for deposits and withdrawals — and the balances were not reflected in their tax returns, a fit case for filing a prosecution against the bank itself may be made out.

When contacted, Malini Thadani, HSBC’s head of communications in India, said that HSBC does not comment on government inquiries or accounts of customers/individuals. “HSBC does not condone tax evasion. Individuals are responsible for their own tax affairs. HSBC seeks to comply with the law in all jurisdictions in which it operates,” she said.

Sources said that clear pattern has emerged in the New Delhi accounts: there are no major industrial groups who figure on the list but individual businessmen including a baker and an automobile dealer. Almost all of them, on receiving notices from the I-T Department, paid their taxes and interest. A few account-holders voluntarily came to the IT department and paid their taxes and thus did not need to be subjected to search operations.

But officials said that several account-holders have refused to respond to the notices. It is understood that there are 300 Mumbaikars — including prominent businessmen — on the list of 700 with the average deposit in their accounts far higher than those of account-holders based in New Delhi.

The mega-list has since been split and sent to IT investigation units in Kolkata, Chennai, Hyderabad and Ahmedabad as well.

Incidentally, the HSBC black money trail landed in India thanks to a widely reported data theft by one Herve Falcini, a former HSBC Geneva employee, who subsequently handed over the information to the French Government. HSBC admitted to details of 24,000 accounts of individuals across the world having been stolen by Falciani, 9,000 of which were closed after the theft. As reported earlier, the Indian account-holders have since received a communication from the bank regretting the data theft.