Last week the Central Bureau of Investigation, in an unprecedented step, raided the residence of serving Himachal Pradesh Chief Minister (CM) Virbhadra Singh, after registering a disproportionate assets case against him. The incident sparked a war of words between the Bharatiya Janata Party (BJP) and Congress, with the latter accusing the Centre of ‘vendetta politics’. The discourse, currently playing out in the national media, revolves around the political fallout. However, large sections of the national media have failed to articulate the core details of the investigation. Moreover, they failed to articulate what the case represents for India’s battle against black money.
One of tried and tested methods of concealing black money and converting it into legal cash is to purchase agricultural land and report fake bumper harvests. The case against Singh stems from allegations that he amassed vast sums of illegal wealth during his tenure as Union Minister of Steel in the Congress-led UPA government between 2009 and 2012. The vast sum was allegedly accrued from the apple orchards he owns. The orchards, according to his aides, witnessed bumper harvests between 2009 and 2012. According to news website Scroll, “Until 2009, the orchards yielded annual profits of Rs 10 lakhs-Rs 20 lakhs. But in 2012, Singh filed revised income tax returns showing earnings of Rs 6.5 crore from the orchards over a period of three years – Rs 2.21 crore in 2009-’10, Rs 2.8 crore in 2010-’11, and Rs 1.55 crore in 2011-’12.
” When asked about these bumper harvests, the manager of the orchards reportedly told the Income Tax Department, “The production of apple is wholly dependent upon weather conditions and the mercy of God”. Suffice to say, such an explanation will not hold up in a court of law. Moreover, the CBI discovered that these apples were transported to a non-functional market, where they sold the product to fictitious firms with fake addresses. The investigators have therefore alleged that the bumper harvest was a complete eyewash. The unaccounted wealth, according to investigators, was passed off as agriculture income by the chief minister.
The fault, experts argue, lies with the law. Income accrued from agriculture largely remains tax-free, with no requirement to submit detailed records of various transactions to tax authorities. Although tax authorities can initiate investigations, such cases are few and far between. To tackle such concerns, in 2014, a Tax Administration Reform Commission recommended that the state should tax large farmers with income above Rs 50 lakh per annum. The recommendations took great care to protect small and marginal farmers. In fact, the Ministry of Finance in 2012 came out with a list of recommendations to tackle the scourge of black money. “State governments may consider levy of agricultural income tax with facility for computerised processing and selection verification,” the report said. “This will, on the one hand, enhance revenues of state governments, and, on the other hand, prevent the laundering of black money in the garb of agricultural income.” Despite the availability of such recommendations, Union Finance Minister Arun Jaitley remained unequivocal in his stand that the Centre had no intention of taxing agriculture income.
The Himachal Pradesh CM is a politically convenient target in the larger scheme of things, although the government must now bring the case to its natural conclusion. However, the political class, in unison, did heave a sigh of relief at Jaitley’s stand. Meanwhile, the Government of India earlier this year launched approximately 60 prosecutions to retrieve untaxed sums stashed away in foreign banks. Closer to home, however, the Centre must act with more alacrity to block avenues of cleaning illicit money that cause serious losses to the exchequer.