Under the provisions of the Prevention of Money Laundering Act, 2002 and the rules framed there under, it is the responsibility of the banks and other financial institutions to detect suspicious transactions and report such transactions to the Financial Intelligence Unit-India (FIU-IND) under the Ministry of Finance. FIU-IND is responsible for receiving and analysing such Suspicious Transaction Reports (STRs) and disseminating information to relevant intelligence and law enforcement agencies. FIU-IND has established an information technology based mechanism for online filing Suspicious Transactions Reports (STRs) and other statutory reports and for online dissemination of the information to the intelligence and law enforcement agencies.

The STRs received by FIU-IND from the banks and other financial institutions are disseminated by it to various intelligence and law enforcement agencies including agencies administering direct and indirect taxes for taking further action. However, information disseminated by FIU-IND may or may not lead to detection of evasion of direct and indirect taxes. Moreover separate data with regard to evasion of direct and indirect taxes detected by various enforcement agencies on the basis of information shared by FIU-IND is not maintained.

Through the mechanism of Economic Intelligence Council and Regional Economic Intelligence Councils, various law enforcement agencies share information and coordinate action relating to various economic offences, including tax evasion.

 

DCI Search and Seizure Operations Reveal Undisclosed Income of Rs. 438 Crore

 

The Directorate of Criminal Investigation (DCI) was created vide Notification dated 30th May, 2011 and 19th August 2011 to perform functions in respect of criminal matters having any financial implications punishable as an offence under any direct tax law including inter-alia:

• Chapter XXII of the Income Tax Act, 1961 (Act 43 of 1961); and
• Chapter VIII of the Wealth Tax Act, 1957 (Act 27 of 1957).

The Government is satisfied with the functioning of the Directorate.

The DCI has been playing pivotal role in collection, collation and dissemination of intelligence for use by difference wings of the Income Tax Department in proceedings under direct tax laws apart from undertaking investigation in specified categories of cases including information received under exchange of information protocols from other countries.

Major part of the information collected is through the mechanism of annual Information Returns (AIR) and Central Information Branch (CIB). Such information is utilized inter-alia for computer aided selection of scrutiny cases.

Besides, the DCI has conducted search and seizure operations in 8 cases in which undisclosed income admitted was to the tune of Rs. 438 crores (aprox.).

Further, the DCI in association with Directorate of systems undertook a pilot project named ‘Non-filers Monitoring System’ in February-March 2013 with encouraging results in terms of both widening and deepening of the tax base.

The DCI has also undertaken various other projects including enquiries under direct taxes laws into allegations of violations of KYC norms by several banks, having impact on evasion of direct taxes.

Various steps have been taken to strengthen the intelligence related functions of DCI. These include legislative and administrative interventions including rationalization of CIB/AIR codes to make the functioning of the Directorate more effective. DCI’s structures would also get suitably augmented with implementation of ongoing cadre restructuring of the Income Tax Department.