Recall of Rs 500, Rs 1,000 notes: Eye on hawala, Income Tax department conducts searches

The raids come two days after the Prime Minister Narendra Modi scrapped the existing currency notes of Rs 1,000 and Rs 500 to curb black money.

Shopkeepers at Delhi’s Chandni Chowk, where searches were conducted, Thursday. Express Photo by Amit Mehra

The income-Tax Department on Thursday conducted searches in Delhi, Mumbai, Amritsar, Ludhiana and other major cities, targeting hawala operators who were converting invalid notes of Rs 500 and Rs 1000 to valid legal tender, tax officials said. The I-T action comes two days after Prime Minister Narendra Modi announced scrapping of the existing Rs 1,000 and Rs 500 currency notes to curb black money.

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Searches were conducted in Chandni Chowk and Karol Bagh areas of Delhi, triggering panic among shopkeepers. They began around 3.30 pm and ended late at night.

A shop owner said that more than 50 officials entered jewellery shops around Bhagirath Place at Chandni Chowk and downed the shutters. “When other shopkeepers realised what was happening, they shut their shops immediately,” he said.

Sources said the searches were also aimed at preventing shopkeepers from using back-dated forged bills to make the hoarded money legal.

In Mumbai, searches were conducted at Kalbadevi, Opera House, Crawford Market in south Mumbai.

“The raids took place after the department found that hawala operators were offering to convert invalid currency notes to valid legal tender at a high premium,” said a tax official.

The sources added that their actions were based on “specific” and “actionable” intelligence. These include reports of traders buying the scrapped Rs 500 and Rs 1,000 notes, selling gold at a premium and reports of trade in the local hawala market. Around 100 tax department officials were involved in the survey operations while there are reports of documents having been confiscated at several places.

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The operations were planned after the CBDT top brass directed investigation units to keep vigil on illicit movement of large amounts of cash and suspicious transactions reported since November 8.

On November 9, The Indian Express had reported that within hours of the Prime Minister announcing scrapping of high-value currency notes, frantic efforts were made in Mumbai’s trading community to convert the invalid currency notes by cutting barter deals like exchanging the high currency notes for lower denomination notes (Rs 100 and below) at a premium or swapping invalid currency notes for gold bars, gems, diamonds and foreign currency.

Sources said the trend was most visible in cash-driven gold, diamond, steel, pharmaceutical, imitation jewellery and garments trade.