The Supreme Court may consider winding up the Special Investigation Team (SIT) it appointed in 2011 to investigate cases of unaccounted money held abroad by Indians. The SIT was established to oversee investigations into cases like Hassan Ali Khan and Tapurias regarding foreign black money. However, its constitution represented an overreach of the judiciary into the executive's powers over tax matters. Further, a new government is now in power and has established its own agencies like the Multi Agency Group to handle similar cases, creating duplication of efforts. It is argued that the time has come for the Supreme Court to review whether continued supervision of the SIT's work falls within its jurisdiction and whether the SIT should continue functioning as a parallel body

1. Volume XV Part 3 May 10, 2016 3 Business Advisor
Supreme Court may kindly consider
whether SIT appointed on its order needs
to be wound up
T. N. Pandey
Countering a note of caution against judicial activism at
Supreme Court Judges retreat in Bhopal on Saturday,
the 16th April, 2016, the President, Shri Pranab
Mukherjee said that it should not lead to dilution of the
separation of powers. “Each organ of our democracy
must function within its own sphere and must not take
over what is assigned to others,” he said in his address
to the fourth retreat of SC Judges.
“The balance of power between the three organs of the
state is enshrined in our Constitution. The Constitution is supreme,” he
added. Exercise of powers by the executive and legislature is subject to
judicial review. “However, the only check possible in the exercise of power by
the judiciary is self-imposed discipline and self-restraint by the judiciary,”
he said.
2. SIT‟s constitution, it is said with utmost respect to the SC, on SC‟s
instructions, seems to be an intrusion on the powers of the executive [may
be because of its inefficient functioning] entrusted under the provisions of
the I.T. Act, 1961 (Act) to the I.T. Dept., which is to make assessments of
income after making necessary enquiries/ investigations and collect tax due
from the taxpayers. The Apex Court comes into the picture as the last tier
appellate authority against the orders of the HC on questions of law coming
on appeal before them. Under the normal scheme of income tax levy, the
Apex Court is not expected to intervene or supervise the work relating to
assessment, in income determination, in process of levy and collection of tax
The Apex Court comes into the picture as the last tier
appellate authority against the orders of the HC on questions
of law coming on appeal before them.

2. Volume XV Part 3 May 10, 2016 4 Business Advisor
unless the I.T. Dept. is acting in flagrant disregard of the I.T. Act when the
Apex Court can be approached by a Wit Petition if the circumstances
mentioned in Article 32 of the Constitution of India are found to exist.
3. Genesis of SIT
Shri Ram Jethmalani, Sr. Advocate & a few other enlightened citizens of
India filed Writ Petition (Civil) No.176 of 2009 in the SC, which was disposed
of by a Bench of the two judges of the court on 4th July, 2011. While
deliberating on the Writ Petition, the Apex Court noticed that unaccounted
monies, especially large sums held by nationals and entities with a legal
presence in the nation, in banks abroad, especially in tax havens or in
jurisdictions with a known history of silence about sources of monies,
clearly indicate a compromise of the ability of the State to manage its affairs
in consonance with what is required from a constitutional perspective. This
is so in two respects. The quantum of such monies by itself, along with the
numbers of individuals or other legal entities who hold such monies, may
indicate in the first instance that a large volume of activities in the social
and the economic spheres within the country are unlawful and causing
great social damage, both at the individual and the collective levels.
Secondly, large quantity of monies stashed abroad would also indicate a
substantial weakness in the capacity of the State in collection of taxes on
incomes generated by individuals and other legal entities within the
country. The generation of such revenues is essential for the State to
undertake the various public goods and services that it is constitutionally
mandated, and normatively expected by its citizenry, to provide.
A substantial degree of incapacity, in the above respect, would be an indicia
of the degree of failure of the state; and beyond a particular point, the State
may spin into a vicious cycle of declining moral authority, thereby causing
the incidence of unlawful activities in which wealth is sought to be
generated, as well as instances of tax evasion, to increase in volume and in
intensity.
3.1 The two-judge bench opined that the issue of unaccounted monies held
by nationals, and other legal entities, in foreign banks, is of primordial
importance to the welfare of the citizens. The quantum of such monies may
be rough indicators of the weakness of the State, in terms of both crime
prevention, and also of tax collection. Depending on the volume of such
monies, and the number of incidents through which such monies are
generated and secreted away, it may very well reveal the degree of “softness
of the State”.

3. Volume XV Part 3 May 10, 2016 5 Business Advisor
3.2 Discussing further the problem, the court said that instances of the
powers that be ignoring publicly visible stock market scams, or turning a
blind eye to large scale illegal mining have become all too familiar, and may
be readily cited. That such activities are allowed to continue to occur, with
weak, or non-existent, responses from the State may, at best, be charitably
ascribed to this broader culture of permissibility of all manner of private
activities in search of ever more lucre. Ethical compromises by the elite –
those who wield the powers of the state, and those who fatten themselves in
an ever more exploitative economic sphere – can be expected to thrive in an
environment marked by such a permissive attitude, of weakened laws, and
of weakened law enforcement machineries and attitudes.
4. SC appoints SIT
After detailed discussion on the issues relating to unaccounted money in
India and abroad and the Govt.‟s failure to tackle the problem, the court
ordered the appointment of SIT comprising officers from the Govt. to assist
it, headed by two retired Judges of the SC named in the SC‟s order [one of
whom B. P. Jeevan Reddy, J., expressed his inability to be a part of the SIT
and in his place another SC retired Judge Arijit Pasayat, J. was named].
Thus, the SIT has two retired judges of the SC [i.e., M.B. Shah & Arijit
Pasayat, Js, as Chairman and Vice-Chairman respectively] to guide the
Committee in its functioning. The SC not only appointed the SIT but also
specified the scope of its work as under:-
*The SIT, so constituted, shall be charged with the responsibilities and
duties of investigation, initiation of proceedings and prosecution, whether in
the context of appropriate criminal or civil proceedings of (a) all issues
relating to the matters concerning and arising from unaccounted monies of
Hassan Ali Khan and the Tapurias; (b) all other investigations already
commenced and are pending, or awaiting to be initiated, with respect to any
other known instances of the stashing of unaccounted monies in foreign
bank accounts by Indians or other entities operating in India; and (c) all
other matters with respect to unaccounted monies being stashed in foreign
The court said that instances of the powers that be ignoring
publicly visible stock market scams, or turning a blind eye to
large scale illegal mining have become all too familiar.

4. Volume XV Part 3 May 10, 2016 6 Business Advisor
banks by Indians or other entities operating in India that may arise in the
course of such investigations and proceedings. It is clarified here that within
the ambit of responsibilities described above also lie the responsibilities to
ensure that the matters are also investigated, proceedings initiated and
prosecutions conducted with regard to criminality and/or unlawfulness of
activities that may have been the source for such monies, as well as the
criminal and/or unlawful means that are used to take such unaccounted
monies out of and/or bring such monies back into the country, and use of
such monies in India or abroad. The SIT shall also have the responsibility of
preparing a comprehensive action plan, including the creation of necessary
institutional structures that can enable and strengthen the country‟s battle
against generation of unaccounted monies, and their stashing away in
foreign banks or in various forms domestically.
*That all organs, agencies, departments and agents of the State, whether at
the level of the UOI, or the State Govt., including but not limited to all
statutorily formed individual bodies, and other constitutional bodies, extend
all the cooperation necessary for the SIT so constituted and functioning.
4.1 The SIT so constituted is to report and be responsible to the SC and that
it shall be charged with the duty to keep the SC in informed of all the major
developments by filing of periodic status reports and following any special
orders that the SC may issue from time-to-time.
5. Developments after the SC‟s order dated 4th July, 2011
*The UPA Govt., which was at the Centre at the relevant time of passing the
SC‟s order, did not constitute SIT as per the SC‟s order during its
continuance in office nor did the SC take any action against the Govt. for
non-adherence to its order. The Govt. at the Centre changed consequent to
5-year general elections, held in April, 2014 and in place of UPA, NDA Govt.
came to power. This Govt., just after taking over oath, constituted the SIT
vide Notification No.11/2/2009-AD.E.D. dated 29.5.2014, which reads as
under:-
In pursuance of the order dated 4.7.2011 of Hon‟ble SC in WP (Civil) No.176
of 2009, Central Govt. in the Ministry of Finance, Dept. of Revenue, hereby
constitutes the SIT, comprising the following:-
[A] Members
[a] Hon‟ble Mr Justice M.B. Shah, former Judge of SC – Chairman
[b] Hon‟ble Mr Justice Arijit Pasayat, former Judge of SC – Vice-Chairman

5. Volume XV Part 3 May 10, 2016 7 Business Advisor
[c] Revenue Secretary – Member
[d] Dy. Governor, RBI – Member
[e] Director (IB) – Member
[f] Director, Enforcement Directorate – Member
[h] Director, CBI – Member
[i] DG, Narcotics Control Bureau – Member
[j] Director, Revenue Intelligence - Member
[k] Director, Financial Intelligence Unit - Member
[l] Jt. Secy. (FT & TR-I), CBDT - Member
[m] Director, R&A Wing - Member
[B] Terms of reference
The terms of references of the SIT will be as per order dated 4.7.2011 of
Hon‟ble SC and include as under:-
[i] The SIT shall function under the guidance and direction of Chairman and
Vice-Chairman.
[ii] The said SIT shall be charged with the responsibilities and duties of
investigation, initiation of proceedings and prosecution, whether in the
context of appropriate criminal or civil proceedings of –
[a] all issues relating to the matters concerning and arising from
unaccounted monies of Hassan Ali Khan and the Tapurias;
[b] all other investigations already commenced and are pending, or awaiting
to be initiated, with respect to any other known instances of the stashing of
unaccounted monies in foreign bank accounts by Indians or other entities
operating in India; and
[c] all other matters with respect to unaccounted monies being stashed in
foreign banks by India or other entities operating in India that may arise in
the course of such investigations and proceedings;
[iii] It is also the responsibility of SIT to ensure that the matters are also
investigated, proceedings initiated and prosecutions conducted with regard
to criminality and/or unlawfulness of activities that may have been the
source for such monies, as well as the criminal and/or unlawful means that

6. Volume XV Part 3 May 10, 2016 8 Business Advisor
are used to take such unaccounted monies out of and/or bring such monies
back into the country, and use of such monies in India or abroad.
[iv] The SIT shall also be charged with the responsibility of preparing a
comprehensive action plan, including the creation of necessary institutional
structures that can enable and strengthen the country‟s battle against
generation of unaccounted monies, and their stashing away in foreign
banks or in various forms domestically.
[C] Conditions for SIT‟s functioning
The said SIT should be responsible to the Hon‟ble SC and that it shall be
charged with the duty to keep SC informed of all major developments by
filing of periodic status reports and following up of any special orders that
SC may issue from time-to-time.
[D] The SIT is also empowered to further investigate even where charge-
sheets have been previously filed; and that the SIT may register further
cases, and conduct appropriate investigations and initiate proceedings for
the purpose of bringing back unaccounted monies lawfully kept in bank
accounts abroad.
6. Developments after the constitution of SIT
It is nearly 2 years since the SIT was constituted. Media reports show that
the SIT has submitted 3 reports to the SC, but nothing has come in public
domain to indicate the nature of work done and extent of success achieved
consequent to the functioning of the SIT. There is no information about any
special or general instructions issued by the Apex Court to the SIT for its
functioning. It is just functioning as a parallel body to I.T. Dept.‟s
functioning.
7. Perhaps, it is for the first time in the history of I.T. Dept.‟s functioning
that the Apex Court has entrusted to itself the supervision of enquiries
relating to income tax aspects of individuals like Hassan Ali and Tapurias by
an SIT appointed by its order. The SC has also to oversee “all matters with
There is no information about any special or general
instructions issued by the Apex Court to the SIT for its
functioning. It is just functioning as a parallel body to I.T.
Dept.‟s functioning.

7. Volume XV Part 3 May 10, 2016 9 Business Advisor
respect to unaccounted monies, being stashed in foreign banks by Indians
or other entities operating in India that may arise in the course of such
investigations and proceedings.” Also, the SIT is to ensure that the matters
are also investigated, proceedings initiated and prosecutions conducted with
regard to criminality and/or unlawfulness of activities, etc. It is respectfully
submitted that the Apex Court may kindly review the earlier order passed
and decide whether supervision of the activities mentioned in its order of 4th
July, 2011 falls within its jurisdiction [as stated by the Hon‟ble President of
India] and whether it should continue to monitor the SIT‟s working or
whether the SIT should at all continue to function.
8. SIT – A parallel authority, functioning vis-à-vis I.T. Dept.
The other issue that needs consideration is whether, in the changed
circumstances, when another Govt. is in power, replacing the one which
was functioning unsatisfactorily when the SC passed order regarding the
SIT, the SIT as a parallel authority to the I.T. Dept. as an investigating
authority is now called for. Recently, in the context of Panama Papers, the
FM has set up a Multi Agency Group (MAG) to enquire about the Indians,
whose names are figuring in Panama Papers. The MAG comprises the
Central Board of Direct Taxes (CBDT), Financial Intelligence Unit (FIU),
Foreign Tax and Research body (FT&TR) and Reserve Bank of India (RBI).
This agency, the Finance Minister has said, will continuously monitor the
accounts of persons whose names have been disclosed and take appropriate
strict action as per the existing laws.
8.1 The SC appointed SIT has also called for a report from the Govt.
regarding the Panama papers by 25th April, 2016. It is seen that both MAG
& SIT are to enquire through the same set of inquiry persons for the two
authorities, which are as under in both the cases:-
*CBDT [Central Board of Direct Taxes];
*FIU [Financial Intelligence Unit];
*FT & FR [Foreign Tax & Research;
*RBI [Reserve Bank of India];
Hence, it is respectfully submitted that the Hon‟ble SC may also kindly
consider whether such duplication of efforts will serve any purpose and
whether time has come to relieve the SIT from its functions entrusted to it
vide Notification dated 29.5.2014.
(T. N. Pandey is Former Chairman, Central Board of Direct Taxes.)