Indian mining sector comes under scrutiny for fraud
KOLKATA (miningweekly.com) – The Indian federal government has zeroed in on the mining sector as the prime repository of “black money” and unaccounted wealth stashed overseas, and was instructing a clampdown by tax authorities.
In a directive to tax authorities, including the Income Tax Department (ITD), the Finance Ministry observed that government assessments had revealed large-scale tax evasion by large sections of the domestic mining sector, reporting underproduction and stashing of unaccounted wealth in foreign and domestic bank accounts through a maze of transactions.
All tax authorities, including those dedicated to detecting illegal foreign transactions and money laundering, have been directed to conduct countrywide investigations and match annual returns filed by mining companies with the Indian Bureau of Mines (IBM) with their annual Income Tax Returns to detect suspected rampant misdeclaration of production and thereby generating unaccounted money, an official in the Central Board of Direct Taxes (CBDT) said.
“While scrutinising cases of entities engaged in the business of mining, the annual returns filed with IBM by the respective assessees should be invariably obtained and compared with the details submitted to the ITD to ascertain whether any suppression of production and discrepancy in stock exists and necessary action as per the provision of law may be taken,” the CBDT directive said.
The clampdown on the mining sector followed the government’s drive against unaccounted wealth stashed overseas through new legislation. Under it, a tax and penalty equivalent to 120% of the undisclosed foreign income or assets with repeat offenders facing a 10-year prison term.
The new stringent tax provisions provided a compliance window, which ended on September 20, 2015, for persons to declare their undisclosed overseas income without attracting the penalty clause. The government netted $647-million during the compliance window.
The tax official said that the voluntarily disclosed unaccounted wealth fell far short of government’s estimate of total Indian wealth stashed overseas and against such a background, tax investigations have put the lens on the domestic mining sector as among the largest generator of such wealth and the “full force of the new penal provisions would be brought down on the industry.”
The latest drive against black money in the mining sector, revived the spectre of illegal mining in India, which had been dogging the industry for the last five to six years, leading to Supreme Court monitored investigations and even a ban on mining in provinces like Goa and Karnataka.
The fresh lens of misdeclaration of production and income generation in the mining sector brought back memories of the M B Shah Commission appointed by the Supreme Court to investigate illegal mining in the country. The commission in its enquiry report had noted that there was a difference of 53.31-million tonnes of illegally mined iron and manganese ore mined, filed with IBM and with various provincial governments.
Significantly, M B Shah, a retired Supreme Court judge who headed the enquiry into illegal mining, was also heading the Special Investigation Team to undertake countrywide investigations into black money and unaccounted wealth stashed overseas.
