Although demonetisation was brought in with the best of intentions to curb black money, unscrupulous operators and conniving bank officials have succeeded in converting it into a conduit to turn black money into white. Thus, while the common man sweated it in queues before banks, the big fish got away with the loot. Only strong action against the bigger fish will restore confidence and faith
It is quite sometime now since the demonetisation of high value currencies was announced, but the aftershocks have not died down as yet. The long queues at banks are still there. Bank customers either do not, or only get small rationed amounts of cash. The RBI has announced that about six lakh crore worth currencies have already been pumped into the market after demonetisation. But then, where has the released money, which is about 45 per cent of the total demonetised money, gone?
The answer is not too far to seek. We see every day that new currencies are being seized in crores of rupees by the Income Tax department and other enforcement agencies since demonetisation. When, with the rationed release of cash, a person could not have more than a lakh of rupees, how is it that some people are in possession of crores of rupees? There are cases of seizure of more than Rs. 10 crores in some individual cases. The Income Tax department, Pune, discovered more than Rs. 10 crores from the lockers of an American company at a nationalised bank. Most new currencies seized are the pink currencies of Rs. 2000 denomination. It is apparent that the newly released money, particularly new Rs. 2000 currencies have gone into the black market. The ‘pink’ has become ‘black’ on its very arrival. This much admired pink currency has taken a shortcut to reach the wealthy hoarders instead of following the legal route of bank counters. Demonetisation, in principal, was a good move to eradicate black money, then why is this happening? Who is to be blamed?
This issue has become newspaper headlines and topics of TV debates. The winter session of Parliament remained largely non-functional due to shouts and counter shouts in the well of the two Houses on this issue. Even the honourable Supreme Court has been seized with the matter and now the legality of demonetisation will be decided by the Constitutional Bench of the court. Common men and women from villages to cities are discussing the good and bad aspects of the decision. Some opposition political parties have said that this decision is bad for the country and that it should be revoked immediately, while others have said that its implementation has been too bad though it may be good in principle. On the other hand, the government has repeatedly said that the decision was for the good of the country as it will work to halt increased counterfeit notes and black money in our economy, while also putting a brake on corruption. The government accepted that it will cause short term inconvenience to the people as the proposed change was mammoth, affecting 86 per cent of the existing currency notes.
Despite all the inconveniences, people at large had more or less accepted this big change, hoping for a better tomorrow. They believed in the old saying that there is no gain without pain. But our people are now getting angry when they see the big bundles of new currencies being found in the hands of big tax evaders while they are standing in queues for small cash from banks. The anger is genuine, as since demonetisation, cash of Rs. 300 crores have been seized by the Income Tax department, which includes cash of more than Rs. 100 crores in new currencies.
We see innovative methods adopted by the hoarders of old demonetised, and now, new high value currencies. We also see some corrupt market operators and bank officers involved in the racket of taking out the money from the system for a commission”
We see innovative methods adopted by the hoarders of old demonetised, and now, new high value currencies. We also see some corrupt market operators and bank officers involved in the racket of taking out the money from the system for a commission. The money unscrupulously going out of the system becomes black money instantly. The old black money is getting replaced by the new black money. Before I go to elaborate, I must say that a very good move by the government is being sabotaged by some black sheep amongst us. Let us see this with some of the search and seizure instances, which have surfaced in the media after demonetisation.
The country is witnessing many of our citizens pulling out rabbits from their hats. It is said that innovation distinguishes leaders from followers. But sadly, the innovations seen these days are for giving life to dead money by big tax evaders and hoarders of back money. The commonly followed technique is to hunt for surrogate bank accounts like surrogate wombs hunted by couples when they cannot give birth to babies on their own. The magic here lies in discovering large number of poor cousins, poor abandoned friends and even their employees. Some go to poor villagers and urban slum dwellers, who recently got their Jan Dhan Yojana bank accounts and had not, used their accounts, to deposit their ill gotten money. People who hesitated earlier to even give a coin to our poor brethren now have full trust in them, as they want them to deposit lakhs of rupees in their accounts. The more the merrier, as lakhs deposited in this manner in many accounts gave birth or is likely to give birth to crores of new money.
To illustrate this technique, I cite the case of a recent Income Tax raid against an engineering college where it was detected that the owner of the college had deposited Rs. 2 lakhs each in the bank accounts of its 400 employees. This was how he had tried to get back his Rs. 8 crores of dead money, as the government had announced the policy that moderate deposits up to 2.50 lakhs would not be questioned by the tax department. Instances have surfaced where big deposits of crores of rupees have been made in bank accounts of poor people.
In a similar manner, huge amounts of dead currency have been seen being deposited in the accounts of shell companies with the connivance of some of our banker friends, and immediately after such deposits, these amounts have been transferred to multiple accounts and finally to the real owner. This way, the dead money, through multiple banking transactions, has become available once again to the real owner. One leading private bank was seen as opening many fictitious bank accounts in the names of non existing entities or in the names of shell companies for a peaceful travel of dead black money to being reborn.
The demonetisation battle can still be won by the government by taking some more measures. With the help of intelligence gathering departments and supported by Income Tax, ED and CBI, it must identify those bank accounts where substantial old notes were deposited after November 8, 2016 and immediately act to prohibit the withdrawal of money from these accounts”
Another gimmick being used is hunting big value item traders who have big cash turnovers like bullion traders and jewellers. These traders did huge business during the night of demonetisation and in the initial few days by selling gold biscuits at a high premium against the demonetised currencies. The cash thus generated was deposited in their current accounts and thereafter the money was transferred to various other bank accounts so as to avoid the action of possible seizure of such money by the department. For illustration, the case of big bullion traders of Mumbai has come to light where they are said to have kept trading for the whole of the demonetisation night and cash deposited in Mumbai bank accounts was transferred to some bank account in Noida. The amount so far detected is about Rs. 60 crores.
For some time after the demonetisation announcement, people were allowed to change their old currencies up to Rs. 4,000 and Rs. 2,000 by going to any bank. It has come to notice that mules were used in large numbers who visited different banks and made black money white for their masters. The good policy to help common people was misused by some cash hoarders this way.
In a similar mode, the policy of buying air tickets for some period against demonetised currency was misutilised. Some people bought costly business-class air tickets against dead currency and sought new currency against cancellation of their purchased tickets. This was a deliberate attempt to transform old notes into new notes, as at the very outset, travel was never intended.
Many tricks were seen but the thing which really hurts is the transfer of new currency in banks with the collusion of some corrupt bank officials. Income tax raids against a mining baron who is also a trustee of a famous religious trust has resulted in the seizure of Rs. 134 crores of cash and 77 kg of gold, which included new currencies worth Rs. 34 crores. How he got the new currencies of Rs. 34 crores is being investigated by the ED, CBI and Income Tax department as normally be could not have got more than Rs. 1 lakh officially from the normal banking route. In this connection a top civil servant has been raided along with his relatives and new currency of Rs. 30 lakhs and also five kg of gold was seized.
In pure and simple words, the new currencies found and seized amount to theft from banks, facilitated by some insiders, for rich and powerful people. Similar seizures have been made from Bengaluru, where seizure of new currencies valuing Rs. 6 crores was made from a government engineer connected with road construction work. In one case in Bengaluru, new currency notes of more than Rs. 5 crores was found from behind bathroom tiles. There was another piece of news again from Bengaluru, wherein the driver of a state government department officer who committed suicide stated in his suicide note that his employer had indulged in money laundering for a mining baron.
This goes to indicate that there are some market operators who work as money launderers in collusion with bank officers and even RBI officers. The officers who have come in the news for their wrong doings have been arrested. Such cases are many and multiplying every day. It appears that the government and RBI failed to visualise such large scale swindling of new currency. This defeats the purpose of demonetisation to a large extent. Demonetisation was done to stem the cancer of corruption and also to eradicate black money from the system, but we see that both the evils continue to exist.
Ruthless and exemplary punishment should be given to the culprits in a short span of time. People should see that the culprits are caught and punished. One very big precaution which needs to be taken is that common people are not harassed. It should be our effort to catch the big fish, as that will give us back good tax and penalty”
The demonetisation battle can still be won by the government by taking some more measures. With the help of intelligence gathering departments and supported by Income Tax, ED and CBI, it must identify those bank accounts where substantial old notes were deposited after November 8, 2016 till December 30, 2016 and immediately act to prohibit the withdrawal of money from these accounts. There is a provision in the Income Tax Act U/S 132 (3) for doing that for which warrants u/s 132 (1) have to be issued to begin with. The money can be seized from the bank accounts if the same is not explained in a brief time frame, of say one month. The investigation wing of the Income Tax department will be the designated authority for doing that.
There are also provisions in the Prevention of Money Laundering Act (PMLA) by which cash credited to the bank accounts can be prohibited and seized. The accused person doing illegal deposits under PMLA can be arrested as well. The provision of the Prohibition of Benami Property Act which is now effective from November 1, 2016 may also be considered, where money has been deposited in the bank accounts of others. The provision of arrest is also there under this Act along with the seizure and confiscation of deposited amount. In the case of transfer of money to the ultimate beneficiary through banking transactions, both the transferor and the transferee should be identified and booked. Tax and penalty together will eat away 85 per cent of the fund deposited, and the concerned persons should be arrested under provisions of different Acts, whichever are applicable on the facts of the case.
Ruthless and exemplary punishment should be given to the culprits in a short span of time. People should see that the culprits are caught and punished. One very big precaution which needs to be taken is that small mistakes should be ignored and common people are not harassed. It should be our effort to catch the big fish, as that will give us back good tax and penalty. Big cash illegally taken away from banks will come back. There should be a message that illegality has zero tolerance but at the same time care should be taken that there is no emergence of inspector raj for common citizens. Market operators and corrupt bank officials should be taken to task to the logical end. Harsh measures against the culprits in a short span of time will work as the catalytic agent for the success of the new amnesty scheme in the form of Pradhan Mantri Garib Kalyan Yojana. Our carrot will be more juicy when our stick is real hard. Our common citizens will be happier seeing the people who had stolen their share of money from the banks and making them stand in queues for a longer duration, going to jails.
by SK JHA
