I-T dept unearths Rs 1,000-cr scam at credit societies

Sleuths search 24 societies where large sums were deposited during note ban

The income-tax (I-T) department has unearthed a scam involving officials and members of cooperative credit societies who deposited large amounts of cash in banks during demonetisation. Initial estimates by the agency has pegged tax evasion of Rs 1,000 crore in November and December of 2016. 

Several credit societies’ bank accounts saw a sudden surge of cash deposits, which raised a red flag in the system, said an I-T official. The scam surfaced during the scanning of databases received from scheduled commercial banks, which had on January 31 filed statements of financial transactions (SFTs) for 50 days after demonetisation.

Based on the information and data, the I-T department searched and surveyed more than two dozen cooperative credit societies, including members and depositors across the country, but mostly in Maharashtra, Delhi, Gujarat and West Bengal, in search of the source of income of members who had deposited large sums of cash during the period.

According to I-T sources, the huge amount of money was allegedly received by these societies in their bank accounts across multiple branches in the country. Further, the money received was transferred to bank accounts of several other persons through real time gross settlement (RTGS) systems. Data showed close to 200 RTGS transactions were made by these societies during the period. 

Cooperative credit societies are registered and regulated by the Reserve Bank of India (RBI). The objective of these societies is to enhance financial inclusion for those who are out of banking systems, especially in rural areas. “They are allowed to accept deposits from their members. Being in legitimate deposit-taking activity, banks never generate any alerts, unlike in case of other suspicious transactions,” a tax official explained. 

During searches at the societies’ offices and residences of key office-bearers, the I-T department found cash ledgers belonging to persons who are into sectors such as gold, jewellery, manufacturing, property dealers etc.

Tax officials are tracing accounts of those members whose details were found during the search operations. Besides, the I-T department observed that these societies have breached the Know Your Customer (KYC) norms under the Banking Regulation Act, an official said. 

Meanwhile, the tax department has sent a report to the RBI to examine the credit societies’ credentials. The issue was also deliberated with the concerned banks which maintain the credit societies’ accounts. 

There are about 1,263 such societies, with Maharashtra having the highest number at 558.

The exercise is part of the second phase of Operation Clean Money. The tax department has so far identified 556,000 people for scrutiny over huge inconsistencies in the cash deposits made during the note ban. This is in addition to the tax data that had identified 60,000 people for investigation into claims of excessive cash sales. 

UNDER LENS

• Over two dozen credit societies allegedly misused the banking channel
• Data provided by banks showed huge surge in the cash deposits by these societies
• About 200 RTGS transactions were made by these societies during the note ban  
• The probe is part of Operation Clear Money 2.0
• There are 1,263 such societies, with Maharashtra having the highest number at 558 
• I-T dept has so far identified 556,000 people for scrutiny over inconsistencies in cash deposits made during the note ban