Even as Prime Minister Narendra Modi on Thursday said that his government is unwavering in its efforts to create an India that is corruption free, the income tax department conducted surprise searches across cities on those under suspicion of converting or laundering huge amounts of black money in withdrawn currency notes illegally.
“I assure you the government is unwavering in its effort to create an India that is corruption free and fruits of development touch every citizen,” Mr Modi tweeted, his first comment on the issue since announcing demonetisation of Rs 500 and Rs 1,000 currency notes in a surprise decision on Tuesday night in a bid to flush out black money. The surprise searches are part of the government’s stealth operations to send a strong message that it is serious about eradicating hidden stashes of black money in the country and ensuring that ill-begotten cash is not converted into any kind of material assets.
Finance minister Arun Jaitley on Thursday said that the taxman will not hound those making small deposits in scrapped Rs 500/1,000 currency, but those with large amounts of undisclosed money will have to face the consequences. He added that temples and trusts, which receive hoards of cash, will also be subject to scrutiny.
The I-T move came on a day when long queues formed before banks reopened after being shut on Wednesday to prepare for the change, as millions tried to swap worthless cash for smaller bills or new 2,000 rupee notes.
Income-tax sources said jewellers, money-launderers and those involved in illegal currency exchange are being targeted by I-T sleuths in Delhi, Mumbai and Punjab. Similar I-T operations were also launched in two south Indian cities, though details were not available. Around 100 tax sleuths were engaged in the surprise search operations that I-T officials insisted were “surveys”. Under the survey action, tax sleuths visit only the business premises of traders or operators for assessment and record the available stock and cash. Under search operations both residential and business premises are visited by taxmen.
According to a study by Ambit Capital Research, the size of India’s black economy is about $460 billion (over Rs 30 lakh crore), which is larger than the GDP of emerging markets like Thailand and Argentina. Sources further said the department had received actionable inputs that some traders, jewellers, currency exchanges and hawala dealers were allegedly exploiting the recent currency demonetisation of Rs 500 and Rs 1,000 notes and changing notes at “discounted” prices, thereby profiteering illegally. “There are reports that immediately after Prime Minister Narendra Modi’s announcement of demonetisation of Rs 500 and Rs 1,000 notes, people thronged jewellery shops with high value notes, seeking to exchange it for gold and diamond ornaments. Jewellery shops in certain places remained open till 3 am on Tuesday. Inputs also suggest that dealings were marked by back-dated entries in account books. IT sleuths are looking for those records,” sources said. “The operations (surveys) were launched in the evening as the taxmen wanted some hard cash to get accumulated at the payment counters to make the action effective. Operations were carried out at 11 locations in the national capital including Karol Bagh, Dariba Kalan, Sadar and Chandni Chowk, three locations in Mumbai and few others in Chandigarh and Ludhiana”, sources said. They said the operations were planned after Sushil Chandra, chairman of the Central Board of Direct Taxes (CBDT), on Wednesday asked all the investigation units in the country to keep a check on suspicious movement of huge cash and other illegal transactions leading to tax evasion.
Senior I-T department officials had on Wednesday said the government’s directive to them is “very clear”. Any instance of tax evasion and black money should be dealt with strictly, especially since two opportunities in the form of one-time stash declaration window had been provided.
