Given that the tax department has slapped a tax demand of over R70,000 crore on alleged hawala dealer Hasan Ali—a laptop found during a raid on his premises suggested he had $8 billion in Swiss banks—the Attorney General’s advice to the taxman comes as a bolt from the blue. While the taxman wanted to proceed against United Bank of Switzerland, the AG has said the charges against UBS—falsification of accounts and helping Ali file false IT returns—needed to be verified first. To quote the AG, “factual aspects need to be resolved … every care must be taken to see that there is adequate material on the basis of which prosecution is launched so that the prosecution succeeds”. Sound advice, but isn’t that par for the course? Doesn’t the taxman always look at the facts carefully before going ahead with issuing tax notices or launching prosecution?
Not quite, it would appear if you look at the track record. In the case of Hasan Ali, R16.3 crore worth of property belonging to Ali and his wife have been attached; another R27 crore of property belonging to his alleged friends has also been attached. While no case matches Ali’s in terms of amounts involved, overall direct tax arrears have doubled to R4.8 lakh crore between FY11 and FY13. Yet, of the cases appealed by the taxman, around 60% are dismissed. To get back to Ali, since Switzerland and India have agreed to share information, once the taxman has enough evidence Swiss banks are obligated to do so. The AG is simply reiterating that need to be sure of the facts. Similar advice needs to be tendered in other cases as well.