Kerala’s income tax department is probing suspected illegal operations in cooperative banks and societies aimed at salvaging unaccounted money after demonetisation came into effect on November 8.
Sources in the income tax department said several cooperative banks have taken in huge deposits in scrapped notes. Cooperative banks are not allowed to accept such currency but I-T sources said they have been accepting these and showing them as deposits made before November 8.
Although political parties in Kerala, except BJP, are lobbying with the Centre to keep the cooperatives sector tax-free, the I-T sources said they plan to expose the huge deposits in these banks and societies, most of which are controlled by politicians.
Cooperatives Minister A C Moitheen said the sector does not handle black money. The allegation has been raised to destroy cooperative banks in Kerala, he told The Indian Express. He said it was unfortunate that the RBI has kept cooperative banks out of transactions in old currency. “We will move the Supreme Court seeking a remedy he present crisis stemming out of the RBI directive that cooperative banks should not deal in scrapped notes,” he said.
According to I-T sources, some cooperative have used their staff to open accounts in nationalised banks to divert a chunk of black money from the banks and societies. In other instances, banks have allowed opening of fresh accounts to dump scrapped notes.
Around Rs 2,000 crore in deposits had reached the cooperatives sector after the RBI allowed it to collect scrapped notes, a decision cancelled days after demonetisation. Had the RBI allowed them to continue, I-T officials said, it would have ended up in laundering of black money in Kerala.
The I-T department, has sought details of deposits above Rs 25 lakh from cooperative banks, said this has been misunderstood by banks in Kerala. “We have decided to collect details of deposits above Rs 25 lakh initially, and of smaller deposits later. Now, these cooperative banks are trying to split these into chunks below Rs 25 lakh into many accounts to escape IT scrutiny,” an official said.
As per section 80-P of the Income Tax Act, cooperative banks and societies are eligible for income-tax relief provided they are giving agriculture loans. “But in Kerala, these banks and societies are giving gold loans under the guise of farm loans,” an official said.
The I-T department in Kerala brought the cooperatives sector under its radar a decade back. But it has not been able to go ahead with legal measures to tax these deposits, allegedly due to political influence.