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New Delhi: The government has set up a team to investigate suspected tax evasion by Indian individuals named in the so-called Panama Papers as maintaining offshore accounts.

Names of more than 500 Indians appear in a list of individuals who paid Panama law firm Mossack Fonseca to set up offshore entities in tax havens around the world, according to an Indian Express report on Monday.

A finance ministry statement said that following orders from the prime minister, the government will form a group, including officers from the investigation unit of the Central Board of Direct Taxes, Financial Intelligence Unit, foreign tax and tax research division and the Reserve Bank of India.

“The group will monitor the flow of information in each one of the case. The government will take all necessary actions as required to get maximum information from all sources including from foreign governments to help in the investigation process," the statement added.

To be sure, not all offshore accounts are illegal and at least some of the Indians named in the report have explained that they had previously disclosed all their offshore investments.

According to The Indian Express, actor Amitabh Bachchan was appointed director of at least four shipping companies registered in offshore tax havens and set up 23 years ago. Bachchan, who has since resigned from the companies, according to the report, has not commented on the documents.

His daughter-in-law, Aishwarya Rai Bachchan, was also a director and shareholder of an offshore company, along with members of her family, before it was thought to have been wound up in 2008, according to the daily. The media adviser of the former Miss World winner has rejected the documents as “totally untrue and false".

DLF Ltd promoter K.P. Singh, whose name appears in the Panama Papers along with those of relatives, also denied any wrongdoing. Another magnate who figures in the report, Onkar Kanwar, too denied breaking any laws through a spokesperson for his company, Apollo Tyres Ltd.

DLF shares fell 1.82% on Monday, while Apollo Tyres fell 1.81% even as the benchmark Sensex rose 0.51%.

Senior counsel Harish Salve told Legally India that including his name in the reports was unfair, since his use of a British Virgin Islands-based (BVI) shell company was legal and was declared in his tax returns. He had told the Indian Express in a statement that all three BVI firms he had been involved with had zero revenues and were inactive.

He said: “That (Express) reply was sent from Paris. After coming back to India, I have checked and all my investments are appropriately disclosed in my tax return of 2013—they (Express) had asked me for 2012. (The) March 2013 returns were obliged to carry disclosures, and my returns had all the assets and investments disclosed. Assessments are complete."

Salve said that he had never had any bank account in the BVI, but only set up a company there when he wanted to invest in the UK. “I was advised that making investment in and from UK may render me a tax resident in UK, so I set up a company in BVI in 2012," he said, intending to move his portfolio there from the UK. “But since 2014, as I became a tax resident of the UK, I abandoned the idea."

Salve had joined London’s elite Blackstone Chambers of barristers in 2013, often working from the UK on arbitrations during India’s court vacations, and said he has since then paid taxes in both the UK and India.

Salve reiterated, however, that all foreign bank accounts, as well as “shares that were to be transferred to the BVI company" were mentioned in his financial returns.

Another person named in the Panama Papers, Sameer Gehlaut, has a similar explanation. In a statement, his company Indiabulls said: “Sameer Gehlaut has made overseas investments after paying full taxes in India; each and every overseas remittance is disclosed to the RBI, right from the beginning when the first overseas investment was made in 2011. All disclosures related to these investments are also made with the Income Tax authorities in yearly returns as well as with RBI in annual performance reports. All overseas investments made by Mr Gehlaut are done strictly in accordance with RBI framework of overseas direct investments. The proofs of each of the RBI disclosures and the Income Tax filings have been sent to the concerned newspaper. The returns filed by SG Family Trust have been duly scrutinized by the Income Tax department and SG Family Trust has received a clean order without any tax demand from the Income Tax authorities."

Shares of Indiabulls Real Estate fell 1.56%.

Indeed, offshore accounts are not illegal and it is likely that the Panama Papers contain details of people who used them in accordance with the law of their countries as well as those who used them to evade tax, or mask their ownership of assets and companies.

In the case of the Indians named, if the charges are proved, the guilty will have to face prosecution under the stringent Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, which aims to crack down on money illegally kept abroad. It provides for up to 10 years in jail and confiscation of domestic assets of an equivalent amount.

The statement said that the government has so far filed 52 prosecution complaints based on a previous exposé by the International Consortium of Investigative Journalists in 2013, in which 700 Indians were shown to have business connections with offshore entities.

The government has identified 434 persons out of that list as Indian residents and 184 persons out of these have also admitted their ties with such offshore entities/transactions. Further, the government has detected undisclosed foreign accounts of such people in excess of 2,000 crore.

Again, in the so-called HSBC list, India received information from France relating to the bank accounts of 628 Indians, of which 569 have been traced.

“Out of 628, 214 were found not actionable on account of no balance or being non-residents or being non-traceable. Out of the remaining cases, assessments have been completed in 390 cases in which undisclosed income of 5,018 crore and tax demand of 4,584 crore has been raised. Also, the concealment penalty of 1,213 crore has been levied in 157 cases. Also 154 prosecution complaints have been filed in HSBC cases," the government said.

The statement added that India is concerned that there are countries that are used as tax havens because of which all other countries of the world suffer a loss of tax. “The recent initiative of Base Erosion and Profit Shifting will help India and other countries in checking this practice of tax avoidance through such tax havens," it added.

AFP contributed to this story.

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