Taxmen tracking unaccounted money flows into benami accounts

The Income Tax Department has warned people against stashing away money in other people's bank accounts, stating that where such instances are detected, violators will be prosecuted under the Benami Property Transactions Act, 1988, which is applicable on both movable and immovable property.

Under the Act, enforced from 1 November, people depositing their unaccounted old currency in someone else's bank account, will be treated as violators and will be prosecuted, which would result in a penalty and rigorous jail term of a maximum of seven years.

Official sources said that in 80 surveys and 30 searches conducted by the Income Tax Department after the announcement of Rs1,000 and Rs500 currency notes on 8 November, income tax sleuths have detected suspicious use of over Rs200 crore in undisclosed income.

Prime Minister Narendra Modi while announcing the demonetisation of Rs500 and Rs1,000 currency notes, said holders of these notes can exchange them at banks till 30 December 2016. But, with a Rs2,000 limit (reduced from Rs4,500 earlier) and the I-T department initiating action against those depositing huge amounts, it is unlikely that the government will be able to track all black money and fake currency.

Reports said, I-T officials have initiated a country-wide operation to identify suspect bank accounts where huge cash deposits have been made since the 8 November announcement demonetising a Rs500 and Rs1,000 currency notes.

''The CBDT has asked the Income Tax department to closely monitor all such transactions where people are using bank accounts of other persons for hiding and converting into white their black money using the old currency notes of Rs500 and Rs1000.

While I-T notices will primarily be issued in cases of huge cash deposits beyond the threshold of Rs2.5 lakh, tax officials will also inspect cases where banks report suspicious deposits or withdrawals.

These included such deposits where old currency in Rs500s or Rs1,000s are deposited in the bank account of another person, possibly with an understanding that the account holder shall return his money in new currency – a clear instance of benami transaction under the Act.

In such cases, the person who deposits old currency in the bank account of a third party will be treated as beneficial owner and the person in whose bank account the old currency has been deposited will be the benamidar.

The Act provides that the benamidar, the beneficial owner and any other person who abets or induces the Benami transaction, shall be punishable with rigorous imprisonment for a period ranging from 1-7 years.

The money in deposited in the benami account post de-monetisation will be seized and the accused will be liable to a fine of up to 25 per cent of the fair market value of the benami property or money.