The Hindu Business Line : Black money in the bank

NO LEVY in recent years has raked up as much controversy as the new Banking Cash Transactions Tax (BCTT). Though the 0.1 per cent tax on withdrawals from current account may be nominal, it is the principle behind the levy that is being objected to.

The Finance Minister has, however, stoutly defended the tax citing evidence of black money transactions being conducted through banking channels. There is the case of a bank whose branches in Coimbatore, Thrissur, Ernakulam and Palakkad received cash deposits aggregating Rs 76 crore between October 1999 and April 2000, only to be encashed almost immediately.

Critics, however, argue that black money is seldom deposited in banks, and even if it is, the revenue authorities are clothed with powers to investigate the source of the deposits.

Is it possible to deposit unaccounted monies in banks? The Madhya Pradesh High Court affirmed this in the Amar Agarwal vs Director of Income-Tax Investigation (276 ITR 182) case. Amar Agarwal of Sendhwa town happened to be the nephew of Kishorilal Agarwal.

While travelling to Bhopal by car on January 24, 2003, the police intercepted him and found that he was carrying cash of Rs 29.8 lakh, supposedly belonging to his uncle who was the proprietor of Om Cotton Corporation.

It appears that for his business requirements, Kishorilal wanted to deposit the cash in his bank account at Indore and claimed that he had withdrawn Rs 28 lakh in cash from his account with the Sendhwa branch of State Bank of Indore. The amount was withdrawn on two consecutive days — Rs 13 lakh on January 22 and Rs 15 lakh on January 23.

His books showed a cash balance of Rs 2.83 lakh, and, adding the same, he handed over Rs 30 lakh to Amar on January 23, with instructions to go to Indore and deposit the same in the Kishorilal's account there.

Amar was, however, specifically told that he should get final confirmation from Kishorilal in this regard after reaching Indore. Amar reached Indore at midnight and telephoned Kishorilal who had suddenly left for Aurangabad for settling his daughter's marriage. As Amar was unable to contact him, he proceeded to Bhopal to meet his sister.

The police wanted Amar to explain how he came to possess such large sums of cash. Not satisfied with Amar's explanation, the police seized the car and the cash and informed the income-tax officer (ITO) concerned, who took the seized items under Section 132A of the Income-Tax Act, 1961.

The books of accounts were impounded and a survey was conducted on January 24.

Also, statements were recorded and summons issued under Section 131.

A writ petition was filed before the Madhya Pradesh High Court to quash the authorisation dated January 24 issued by the Director of Income-tax (Investigation) under Section 132 A. It was argued that the cash was withdrawn from the State Bank of Indore branch at Sindhwa and there were bank slips evidencing the withdrawals.

The I-T Department argued before the High Court that the cash found in the car's boot was not properly explained. The seized currency notes of denomination Rs 500, Rs 100 and Rs 50 had bank slips which were mostly dated January 17, 18, 20, 21 and 22. Besides, bundles of currency notes were issued from different banks based at Indore, such Vyasya Bank Ltd., Indore/Vijaya Bank, Indore/Central Bank of India, and so on.

It was argued further that the amount seized was not the same as sum withdrawn by Kishorilal, who was only trying help his nephew to explain away the source of the cash seized from his possession.

According to the I-T Department, the seized cash represented Amar's unaccounted income and presumption arose in law that the cash belonged to the person in whose possession it was found during search.

There were contradictions in the various statements given by Amar and circumstantially, too, it was difficult to believe the story that Kishorilal had to leave urgently for Maharashtra to settle his daughter's marriage, leaving Amar totally stranded at Indore at midnight with Rs 30 lakh in cash.

The High Court agreed with the Revenue that the amount did not represent the withdrawal from the State Bank of Indore at Sendhwa.

On the other hand, the bank slips showed that the amount was withdrawn between January 17 and 22 from various other banks. No doubt a citizen is entitled to carry currency notes with him but he has to explain the possession of the currency notes when required.

The initial explanation given did not gel with the bank slip details. Amar's explanation was, prima facie, not found to be reliable in view of the slips on the currency notes, the initial statement to the police and Amar's change of version.

It was not mere suspicion but incorrect explanation for the cash found that led to the formation of the belief that the cash found was not likely to be disclosed to the I-T Department. The writ petition was dismissed .

This case proves that the maintenance of a bank account is no guarantee against black money being deposited. But does this justify the levy of the BCCT?

(The author is a former Chief Commissioner of Income-Tax.)

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