Political Economy

IT Dept and ED Raids Are at an All-Time High, but Convictions Remain Elusive

In the last 9 years, the ED has carried out 1,700 raids under PMLA in connection with 1,569 specific investigations. It has so far managed to secure convictions in a paltry 9 cases.

New Delhi: India’s income tax (IT) department and the Enforcement Directorate (ED) have over the past decade become busier than ever, but still struggle to see their cases through a court of law and secure convictions, according to official data.

The ED, which in recent times has become a fearsome ‘super’ investigative agency that has sparked criticism by opposition political parties, is responsible for investigating violations under the Prevention of Money Laundering Act (PMLA) and the Foreign Exchange Management Act (FEMA).

Under PMLA, the agency has conducted over 1,700 raids from March 2011 to January 2020 in connection with 1,569 specific investigations. In the same period though, the ED has managed to secure convictions in only a paltry 9 cases, most of which are relatively-speaking low profile cases.

The IT department too has become more active in recent years – specifically since 2014-15, and in terms of both raids and prosecution cases launched – but still struggles to make headway in terms of making those cases stick. In FY’19, 570 of its prosecution cases were disposed of by Indian courts, but it managed to secure convictions in only 105 cases, which is less than a 20% success rate.

As the charts below shows, both the ED and the IT department have become more active from 2014 onwards, although the next decade will show us if the Narendra Modi government manages to improve on the abysmal conviction record of both agencies.

For example, the ED conducted just 99 raids in FY’12 for PMLA and FEMA cases. This jumped to a high of 670 raids in FY’19, even though the number of actual cases that the investigative agency has initiated hasn’t increased correspondingly.

The number of ‘search and seizure’ actions by the IT department, commonly referred to as a ‘raid’, has also broadly increased in the last four years, hitting a high of 1,152 raids in FY 17.

As the table below shows, both agencies haven’t been able to convince India’s courts that their efforts are genuine. Not only is the ED’s conviction rate quite poor when it comes to PMLA cases, but its efforts at appealing adverse judgments also isn’t much better.

In FY’13, for example, the ED had 13 PMLA cases under appeal – but in the next year (FY’14), it just dropped to one case without securing any new convictions, which implies that a higher court dismissed at least 12 of those appeals.

A similar story is playing out with the IT department. In any given financial year, the number of cases in which convictions are secured is far less than what is disposed of by Indian courts.

What explains the poor conviction record?

In the past, multiple media reports have highlighted how India’s investigative agencies do a poor job in putting together their case and arguing it in a court of law. In April 2016, the-then finance secretary Hasmukh Adhia even chided the ED over its abysmal conviction rate.

Anonymous ED sources have through various stories complained about insufficient manpower, the difficulty in establishing evidence of a proper money trail and poor litigation strategies.

The numbers put out so far should also be seen in the context of India’s notoriously slow judicial system. Even though the ED has special PMLA courts to prosecute its cases, the system is still creaky and often has multiple delays in seeing a full case through.

Nevertheless, the data is likely to be viewed by some, particularly opposition parties, that the ED continues to be used as a political tool of intimidation.