Even as the Narendra Modi-ordained 30 December deadline for bringing the financial situation across the country to normal nears its end, there has been a flurry – and rash – of cash seizures across India, ostensibly to show that people are still holding residual black money.
All of these so-called seizures, senior Income Tax Department sources admitted, are illegal because there is no law or regulation that forbids people from holding cash. The sources revealed that I-T officers across India “are under tremendous pressure to raid and seize” cash, whether in the old or new high denominations.
The sources said that no official instructions or orders have been issued by the Revenue Department of the Finance Ministry for the I-T sleuths to swoop on people suspected to be holding, or actually holding, bulk cash. Instructions are being issued over the telephone – from the Prime Minister’s Office (PMO) to members of the Central Board of Direct Taxation (CBDT), who in turn transmit them to the Director-General of Income Tax, who then verbally directs his senior officers to “produce results”; a euphemism for “showing” seizures.
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Illegal and Frustrating Exercise
One senior I-T officer, whose sleuths on 12 December “seized” Rs 1.54 crore in new currency notes of Rs 2,000 and Rs 500, said that the serial numbers on the notes proved that they were not in “long series” and were therefore not procured by illegal means. He said he was still busy preparing the inventory “which has already run into close to 230 pages”.
“This whole exercise is illegal and therefore deeply frustrating,” another senior IT official in Delhi said, adding that “there is regulation on the volume of foreign exchange an individual can hold, but there is nothing in the law or statute books that forbids people from holding cash as long as they are able to prove satisfactorily the source(s) of such money.”
On 13 December, Enforcement Directorate (ED) officials swooped down on a Chandigarh cloth merchant’s residence and seized Rs 2.15 crore in cash as part of their putative effort to check the hawala trade more than a month after Prime Minister Narendra Modi’s demonetisation move kicked in.
The ED employed provisions of the Foreign Exchange Management Act (FEMA) against the Chandigarh cloth merchant. The ED also claimed to have “unearthed a racket” involving alleged illegal conversion of the demonetised Rs 1,000 and Rs 500 notes, arresting seven people in Bengaluru and seizing Rs 93 lakh in new Rs 2,000 and Rs 500 notes. The allegation was that the money was going to be laundered.
Officials at Wits’ End
As for the I-T Department, “raids” in Chennai a few days ago unearthed Rs 24 crore in new currency notes. On 13 December, I-T raids yielded Rs 63 crore in Panjim, Goa, Rs 3.25 crore in Delhi’s Karol Bagh, and Rs 25 lakh in Faridabad adjoining the national capital. In one particular case, I-T sleuths have seized a ridiculously low amount of Rs 3 lakh as well.
Two days ago, when I-T officials seized Rs 1.54 crore in Assam’s Golaghat district, they had little to do besides prepare an inventory and let the local police keep watch over the cash haul. The I-T Deputy Director in Guwahati had not even been able to reach the precise location where the money was seized when this report was published.
In one instance, the new currency notes were found to have different serial numbers, suggesting that they could be legitimate cash, sources revealed.
The sources said that in all the “so-called seizures”, either by the I-T Department or the ED, the sleuths have simply “been at their wits’ end” to decide under which law to book the persons from whom the cash stocks were recovered. For instance, a company that may have four bank accounts, can withdraw – according to new regulations – Rs 50,000 x 4 = Rs 2 lakh.
Larger companies could be maintaining more bank accounts but could legitimately withdraw Rs 50,000 from each account per week. This does not mean they are indulging in any illegal activity or harbouring black money, the bogey that is now being used by the authorities to claim that such cash abounds even after demonetisation.
‘Pushed to the Wall’
I-T Department sources said that “daily data in the form of cash deposits” are being despatched by the CBDT to officers across India as a guide to making further seizures. “We are being pushed to the wall, especially when we have to proceed against people when it is not illegal to hold cash, whatever be the sum,” an exasperated senior I-T officer told The Quint.
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