A few days before the government stopped over-the-counter exchange of currency notes of Rs 500 and Rs 1,000, officers of the income-tax department raided a caterer in Mumbai and recovered over Rs 80 lakh in new notes and over Rs 40 lakh in withdrawn notes.
During the probe, they found that the caterer had outsourced the job of converting the alleged unaccounted old currency notes of his clients to a tiffin-service provider, who is not part of Mumbai’s famous dabbawallah network.
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According to official sources, the tiffin-service owner had, in turn, put his 60-odd delivery men in queues outside multiple banks for exchanging notes. Each delivery man used to exchange old notes over the counter multiple times at different banks in the city from morning to evening, said sources.
Tax surveys and raids across the country, since the demonetisation policy was announced on November 8, has found that illegal conversion of old Rs 500 and Rs 1,000 notes into valid legal tender is not just limited to bullion dealers and hawala operators. From dental implant equipment suppliers to civil contractors and real estate firms, many were adopting innovative methods to illegally convert abolished notes to legal tender, said sources.
“The intention of over-the-counter exchange of old currency notes at banks was to help the common man but it was misused by some unscrupulous people. They exploited the loophole by visiting multiple branches of different banks to exchange money,” said an official source.
Based on this feedback, the Reserve Bank of India said on November 25 that exchange of banned notes was withdrawn from all bank counters and limited to RBI counters. On November 18, the government had reduced the limit for swapping notes at banks from Rs 4,500 to Rs 2,000 for each person.
Among the instances unearthed by I-T officials of people trying to beat the system was the seizure of over Rs 60 lakh from a dental implant equipment supplier, who allegedly accepted abolished currency notes by giving backdated receipts of sale of dental equipment to doctors, said sources.
Similarly, the tax authority has booked at least two cases involving prominent real estate firms who have accepted old currency from high net worth individuals by backdating sale of flats to before November 8.
“We are also analysing the books of accounts of some high-end garment sellers and found that they have accepted old currency as advances for clothes for weddings that are slated as far as a year away,” said sources.
Electronic equipment sellers have also come under the scanner as the agency found that several dealers have accepted cash from clients and declared it as excess cash in hand in their accounts.
There is also the case being probed of the chief executive of a civil contractor who was caught at the Mumbai airport with over Rs 65 lakh in old currency. The agency has now raided the offices of the contractor across Mumbai.
Last week, tax officials also seized Rs 70 lakh from a salaried employee of a top Indian software firm who was travelling by air from Lucknow to Mumbai. Sources said investigations in both these cases are underway to identify the source of the money.
Since Prime Minister Narendra Modi announced the demonetisation policy to curb corruption and black money, the income-tax department in Mumbai and the Air Intelligence Unit (AIU) have booked at least five cases of unaccounted money being transported by air.
“On an average, the agency is conducting two surveys a day based on information received by the department. Not every information leads to a successful search none the less we are verifying each and every tip off given to us,” said a tax official.
On November 20, the tax department seized over 300 signed, blank Know-Your-Customer (KYC) forms of at least three public sector banks along with self-attested photocopies of Aadhaar and PAN cards of hundreds of individuals in a raid on a prominent event management firm in Mumbai.
The KYC documents and signed bank slips to exchange the old notes, along with self-attested identity proof, belonged to employees of the firm. The tax department found that the firm was accepting abolished notes by giving backdated receipts of events to its clients.
According to sources, the event management company was allegedly planning to open bank accounts of its employees to deposit money accepted by the firm in old currency.
The income-tax department has also raided several hawala dealers and jewellers across the country for allegedly cutting barter deals with people to convert invalid currency notes into valid legal tender. The raid on one such jeweller in Mumbai found that on November 9, the total daily turnover jumped 4000 per cent to Rs 25 crore.
“The daily turnover of this Ghatkopar-based jeweller jumped from Rs 60 lakh to Rs 25 crore on one single day after demonetisation. The shop owner helped people convert old currencies into gold at a premium,” said sources.
The tax department has also obtained the CCTV footage of the shop and identified all the buyers. It is now planning to prosecute the jeweller and all those who converted the old currency to gold after the ban.