Demonetisation: IT probe into unaccounted cash deposit in dormant accounts hits a dead-end

The Income Tax Department has hit a dead-end in its investigation of numerous demonetisation cases, where unaccounted cash was deposited in dormant bank accounts in connivance with bank officials.

The problem before the Department is on who notice should be served under various sections of the IT Act, as the original holders of the account may have shifted house, gone overseas, or are untraceable.

Senior IT officials told BusinessLine the department was trying to address this issue.

During demonetisation, dormant accounts were activated with the connivance of bank officers. Those holding large sums of unaccounted cash or cash generated out of tax avoidance deposited the same in these accounts.

The cash was then transferred to multiple newer accounts and later withdrawn by the account holders, the officials said.

To investigate such cases, the IT Department has to issue notices under Section 148 and other Sections of the IT Act, for which a valid postal address or an email ID is required. The KYC rules were not strictly followed in such dormant accounts.

Bank officers are aware of the existence of such accounts, which have become black boxes for currency movement, the officials said.

These dormant accounts generally belong to people who have transferable jobs. On leaving a city, these bank accounts were not closed by the account holders. Nor did the banks pursue them for closure. The accounts remained dormant for a long time, until the bank officials reactivated them for money laundering, the officials said.

In such a scenario the IT Department is left with only one option -- to carry out a forensic audit of such accounts and the money trail they have left behind. But given the massive scale of such deposits, it would be a tough task to trace all the tax offenders, the officials pointed out.

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