THE INCOME Tax department has taken recourse to the new law on benami property to seek the attachment of properties of about 20 individuals and entities in Mumbai whose bank accounts were allegedly used by owners of small and medium firms to deposit unaccounted money following the demonetisation announcement on November 8.
The tax department issued show-cause notices on January 27 to these individuals and entities for attachment of properties under the Benami Transactions (Prohibition) Amendment Act, which came into force on November 1, 2016, sources told The Indian Express.
Under the Act, the tax agency can confiscate and prosecute depositors and those whose illegal money has been “adjusted” in the depositors’ accounts. Violation of rules of the Act attracts a heavy penalty and rigorous jail term of a maximum of seven years.
The department has already attached properties of eight individuals who allegedly acted as “benamidar” — who lent his/her bank accounts for benami transactions — and is in the process of issuing more than 50 show-cause notices in other such cases under the new law, sources said.
Following the demonetisation of high-value notes, the tax department had issued advertisements and warned people against depositing their unaccounted old currency in others’ bank accounts. It warned that such an act would attract criminal charges under the newly enforced norms, applicable on both movable and immovable property.
So far, the properties attached in Mumbai are mostly bank accounts of individuals in two credit co-operative banks, three public sector banks and three private banks, said sources. “The agency attached the properties after a detailed probe uncovered the money trail and modus operandi employed by entities to deposit black money in banks after demonetisation,” said sources.
According to sources, several small and medium enterprises in the real estate, textile, hospitality, and gems and jewellery sectors used individuals of “small means, relatives and even fictitious people” to deposit unaccounted money in banks in the two months after demonetisation.
In one case, the tax authority attached bank accounts of a resident of Nawab Chawl, in south Mumbai, who had allegedly deposited over Rs 2.5 crore on behalf of eight firms for a hefty commission.
In another instance, the department attached the property of a gold trader who allegedly admitted to taxmen that he had lent his bank account to his son-in-law to deposit over Rs 85 lakh against forged bullion invoices.
On December 29, the tax department had raided four mid-sized bullion traders in the country’s oldest gold market, Zaveri Bazaar, after it found that they had used at least 50 shell companies and individuals of “small means” to route to their own accounts over Rs 600 crore in old currency notes accepted against sale of bullion.
Under the previous Benami Transactions (Prohibition) Act 1988, violations led to jail terms of up to three years, or a fine, or both. Under the amended Act, offenders face jail of up to seven years and a fine up to 25 per cent of the market value of properties. Besides, those who furnish false information on this issue would face jail terms ranging from six months to five years and a fine of up to 10 per cent of the market value of properties.