German cache lands on I-T browser; data on over 1,000 Indians with Gulf homes sent

Mumbai: Germany has shared with India the largest cache of information-far more than the HSBC Swiss accounts data the French had given in 2011-on thousands of properties owned by Indians in the Gulf.

It is not immediately clear how a mountain of sensitive data, pertaining to resident Indians' undisclosed properties in Dubai and other cities in the UAE, landed in the hands of German authorities.

Nonetheless, the ownership details of over 1,000 Indians have reached the income tax (I-T) department as per the 'spontaneous exchange of information' mechanism under the Double Taxation Avoidance Agreement (DTAA) between India and Germany, sources told ET.


Since end-October, a flurry of notices has been issued by the tax office based on the information shared by the government with the Director General of Income tax (DGIT) - Investigation.

Enquiries on Data Source
Notices have been issued in 14 cities including Mumbai, Delhi, Hyderabad, Bangalore, Kochi and Ahmedabad. The news of notices has flummoxed the Dubai property market as well as officials in the UAE administration-few of whom are learnt to have enquired about the source of the data with some of the practitioners and lawyers advising rich Indian clients having overseas assets. "This is the largest block of data on offshore assets of Indians that the I-T department has received so far. A few years after the data leak at HSBC Geneva, France had passed Swiss bank account details of 628 Indians. Also, this is the first instance where information on properties have reached the department through official channels," said another person familiar with the development.

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The respective DGIT will have to submit their action taken reports to the apex body Central Board of Direct Taxes by early January.

"This highlights the increasing co-operation between tax authorities under the tax transparency framework which includes automatic and spontaneous exchange of information. However, one needs to know the basis on which information was first available with the source jurisdiction which shared it with India. In the current era of digital transmission of data, there will be lot of data which may be exchanged as source of collection of this information could financial institutions, corporate service providers or intermediaries who are obligated to report certain information to their tax authorities under Common Reporting Standard," said Siddharth Banwat, partner at the CA firm, S Banwat & Associates LLP.

HARDENED STANCE
The HSBC data leak by an employee of the Swiss private banking arm of the British bank had then sparked a controversy with some of the taxpayers questioning the department's legal footing in initiating action based on stolen data. However, the argument did not cut ice with either the tax authorities or the courts in India who were willing to admit cases as long as information was accurate. Besides, the changing international environment and hardening stance on tax evasion since 2011 (when the HSBC) has brought about greater willingness among G20 countries to exchange information to minimise tax frauds.

Under the circumstances, persons who had purchased property with disclosed income (or paid tax on rental earnings) but had simply failed to report the Dubai asset in their I-T returns may get away by paying a fine. However, if their sources of income that was used to buy the properties were not declared they could be asked to cough up as much as 120%-30% tax and 90% penalty-of the current market value of the property under the Black Money Act which was passed in 2015.

However, all this data may not be considered as information culminating into proceedings.

According to Banwat, "Issuing summons under 131(1A) of Income-tax Act, 1961 has become a very common mechanism to verify information."