HSBC account holders now scared of having their accounts attached

Finance Minister Arun Jaitley's tough stance on the matter of black money is surely scaring Indian account holders of HSBC Geneva. While a Mumbai-based senior professional - among the thousands named on the list based on stolen data--has been able to obtain a clean chit from Swiss authorities, others are rushing to appeal against the tax demand. According to the Economic Times, few of them are planning to move a writ before the Bombay High Court this week to hold back the Income Tax (I-T) department from attaching their bank accounts - a step the taxman can take if an assessee fails to pay up within a month.

This case goes back to a Swiss Federal Tax Administration’s (SFTA) letter dated March 23, which confirms that the said professional and his wife, whose names figure on the list, are not beneficiaries of the trust that had an account with HSBC Geneva. Though he was only the trust's protector - a person who is responsible for safeguarding the interest of the beneficiaries - he was wrongly named as a beneficiary on the list India received from France. An Indian professional can be a protector in an overseas trust - it is similar to being a director on the board of a foreign company.

As per the ET, the said professional has submitted a copy of the letter - jointly signed by Miek Haller, deputy director, service for exchange of information, SFTA, and Nina Ulrich, a lawyer - to the IT department. The Swiss officials also said the actual beneficiaries in this case are third parties with addresses in Canada and England and there does not appear to be an "apparent nexus" with those under jurisdiction of Indian tax authorities. However, the person requested anonymity as the tax office is to clear his name.

Among the beneficiaries who agreed to share information with the tax office hoping they would be treated less harshly are facing prosecution while others are taking legal recourse.

The financial daily wrote, the entire investigation is based on stolen data, beneficiaries have received no money from the trust, and those named had no opportunity to cross-examine the Frenchman who had stolen the information and shared it with the French government.

However, they may find themselves on a considerably weaker ground with the Swiss tax administration agreeing to share data on bank accounts that have been operational since April 1, 2011.

The information on the Mumbai based professional's link with the offshore trust was part of the details on 50 accounts sought by New Delhi from Switzerland in January under the treaty between the two countries. In at least five cases, the information shared by the Swiss authorities match with the names and numbers mentioned on the stolen list.

"Individuals with direct numbered accounts are the most vulnerable. They have nowhere to hide. Those that are beneficiaries of a trust can still point to a Supreme Court ruling that says a beneficiary who has received no payout from the trust cannot be taxed for the funds or income of the trust," a lawyer familiar with the subject told the ET. In at least 11 cases, the IT office has treated the entire money lying with the trust as undisclosed income of the trustees.
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