Sucheta Dalal :Tax evasion: Hassan Ali getting away
Sucheta Dalal

Click here for FREE MEMBERSHIP to Moneylife Foundation which entitles you to:
• Access to information on investment issues

• Invitations to attend free workshops on financial literacy
• Grievance redressal


You are here: Home » Current Articles » Tax evasion: Hassan Ali getting away
                       Previous           Next

Tax evasion: Hassan Ali getting away  

March 9, 2011

Why are tax authorities so lax?

Sucheta Dalal

The mysterious and low-profile Pune-based horse-breeder has become the pivotal figure in the fight against black money. An income-tax (IT) raid in 2007 had yielded documents to show that Hassan Ali Khan, owner of multiple passports, had over $8 billion (around Rs36,000 crore) stashed away in a Swiss bank account (post box 8098)—specifically at Union Bank of Switzerland (UBS), Zurich. There are other documents that suggest that he also has accounts in UBS Singapore. Mr Khan had not filed tax returns since 1999; Parliament has been told that he is India’s biggest tax defaulter and owes Rs50,000 crore to the government when his legitimate annual income was just Rs30 lakh. Yet, almost everything about the course of the case over the next three years smacks of an attempt to bury it, rather than pursue it. This in a country which has successfully driven away foreign direct investment (FDI) during a major economic boom, through lack of clarity on tax policies! The capricious interpretation of rules is compounded by having revenue agencies use draconian powers to harass legitimate businesses which are then prodded to opt for a ‘settlement’ process so that wrong interpretation of rules can never be established through adjudication and litigation.

Contrast this scenario with Hassan Ali’s case, where a show-cause notice was issued in 2007 with almost no follow-up action. The notice is fairly detailed. It has specific names of various UBS executives (Retro Hartmann of UBS Singapore and Markus Grossmann in Zurich) whose recommendation allowed him to open an account. It mentions a recommendation for opening the account by notorious arms-dealer Adnan Khashoggi. In fact, there is a specific reference to a property deal (Chateau Gutsch in Lucerne) where $300 million had arrived “from the account of Shri Adnan Khashoggi maintained in Chase Manhattan Bank, New York, and hence the account of Shri Hassan Ali was tagged with the comment ‘Funds from Weapon Sales’.”

Without going into other tedious details in the 15-page show-cause notice, let’s look at where we are today. First, finance minister Pranab Mukherjee tells the media that there is no longer any money in Mr Khan’s account, as if there is no electronic trail. Taking a cue from this, in January 2011, UBS formally denies knowledge of Mr Khan’s account and alleges that the documentation in the show-cause notice is forged. UBS further claims that its stand is corroborated by the Swiss justice department and Federal Banking Commission. Does this mean that the tax authorities are fooling the country and Parliament with their claims? Why are they so quiet about a sum that could substantially wipe out India’s Budget deficit? Maybe it’s time to train our attention on the investigators and documents, to get the truth about tax-evaded Indian money salted abroad.

(This report was first published in Moneylife magazine, in the edition dated 10 March 2011, that was available on the newsstands on 24 February 2011.)

-- Sucheta Dalal