New Delhi: The Income Tax Department has unearthed a black money trail to the tune of Rs 1,000 crore in raids on co-operative banks in Karnataka which were being used as conduits by real estate companies and contractors to show bogus expenditure in order to evade tax, according to information provided by the finance ministry today.
The search and seizure operation carried out on March 31 on 16 premises also resulted in the seizure of unaccounted cash of over Rs 3.3 crore and unaccounted gold jewellery worth over Rs 2 crore.
These co-operative banks were discounting a large number of cheques in order to mask the real source of the cash withdrawal, and enabling the business entities to book bogus expenses.
Further, by using this modus operandi these business entities were also circumventing the provisions of the Income-tax Act, 1961, which limits the allowable business expenditure incurred other than by account payee cheque, the official statement explained.
During the search, it was also found that these Cooperative Banks allowed opening FDRs (fixed deposit receipts) by using cash deposits without adequate due diligence, and subsequently sanctioned loans using the same as collateral. Evidence seized during the search revealed that unaccounted cash loans of over Rs 15 crore have been given to certain persons, the statement said.
It was also found during the search action that the management of these Cooperative banks have indulged in generating unaccounted money through their real estate and other businesses. This unaccounted money, has been brought back in the books of account, by multiple layering, through these banks. Further, the bank funds were routed, without following due diligence, through various firms and entities owned by the management persons, for their personal use.
A large amount of incriminating evidence in the form of hard copy documents and soft copy data has seized during the search action. The seized evidence revealed that these Cooperative Banks were involved in rampantly discounting bearer cheques issued by various business entities, in the name of various fictitious non-existing entities.
No KYC norms were followed while discounting such bearer cheques. The amounts after discounting were credited in the bank accounts of certain Cooperative Societies maintained with these Cooperative Banks. It was also detected that some Cooperative Societies subsequently withdrew funds in cash from their accounts and returned the cash to business entities.
Further investigations are still in progress.