The Income Tax department has concluded its first investigation under Operation Clean Money and launched criminal prosecution against a Mumbai-based high-end electronic goods trader for allegedly depositing over Rs 3.29 crore post demonetisation in his bank account, which was opened using an illegal permanent account number (PAN).

According to court documents accessed by The Indian Express, the department has alleged that Lakhbir Singh Bhatty obtained a second PAN card with a different name and address, opened an account in a public sector bank using the new PAN and deposited Rs 3.29 crore in ten cash transactions that were executed by his employees after November 15. It alleged that Bhatty was acting on the advice of a loan syndicator. Bhatty did not respond to an email and phone calls seeking comment.

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In its plea for prosecution filed in a Mumbai court on March 14, the I-T department said that it had obtained CCTV footage from the bank that allegedly shows Bhatty’s employees and associates depositing money. The department also conducted a raid at Bhatty’s residence on December 14 in connection with the cash deposits.

The tax authority has alleged that these cash deposits were later transferred to a Zaveri Bazaar-based jeweller through real time gross settlement (RTGS) for buying gold. In its plea, the tax agency alleged that Bhatty and six of his associates, including the loan syndicator, were “systematically engaged in depositing cash in SBNs (specified bank notes) during demonetisation period in the bank account” and “willfully omitted or caused to be omitted the cash deposits in regular books of accounts”.

Prime Minister Narendra Modi had on November 8 announced that currency notes with denominations of Rs 1,000 and Rs 500 would no longer be legal tender and had asked people to deposit these notes in their bank accounts, allowing for some portion to be exchanged across the counter. The tax agency has sought seven years of rigorous imprisonment for Bhatty and six others, including the employees who deposited cash in the bank.
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“…the accused , acting in collusion with one another and with a view to evade income tax and to defraud the exchequer of its legitimate revenue and to mislead and deceive the Income Tax department and in furtherance of their common intention, have committed Offences punishable under sections 276C (1), 277 and 278 of the Income Tax Act, 1961, in one series of facts connected together to form the same transaction,” stated the plea.

Under Operation Clean Money, launched by the I-T department on January 31, it has carried out e-verification of large cash deposits made between November 9 and December 30 using data analytics to probe cases where transactions do not appear to be in line with the tax-payer’s profile. The department has identified 18 lakh persons who deposited amounts of Rs 5 lakh or more between November 9 and December 30 but whose income data did not match the amounts deposited.

Sources in the I-T department said Bhatty has not opted for Pradhan Mantri Garib Kalyan Yojana (PMGKY) to pay tax and surcharge on the alleged undisclosed money deposited in his accounts. Under PMGKY, taxpayers have to deposit 25 per cent of the declared amount as interest-free deposits for four years. This is apart from the 50 per cent tax that has to paid by declarants under the scheme. The scheme is open till March 31, 2017.