In early December 2016, we had published this report titled “THIS is why so many money launderers are getting caught. And it will only get worse”. An excerpt from there is as below:
We are right now in a dynamic situation since the window till 30th December to deposit old notes is still open. Banks are still accepting old notes and data is being generated even as we speak. Come January or February, all this data will be frozen and will be a gold-mine for analysts.
Any dormant account suddenly being triggered (egs: shell or dormant companies being used to launder cash) or any account which usually has lower volumes, or any newly opened accounts showing sudden increase, or any accounts showing a deposit and an instant transfer or withdrawal, all these anomalies will be crystal clear from the data of the banks. It would be only a matter of time before sleuths begin identifying and investigating the parties concerned.
And finally, that time has come. If the number of raids during the demonetisation period shocked you, the number of people under the net now will astound you. The Finance Ministry today announced that they had launched Operation Clean Money (Swacch Dhan Abhiyan).
The Ministry further stated that they are only in the “initial phase of the operation”, which basically involves e-verification of large cash deposits made during 9th Nov to 30th Dec 2016. The Ministry explained that data analytics has been used for comparing the demonetisation data with information in Income Tax Department (ITD) databases. This basically means comparing the deposits in banks with the general profile of that specific person, to ascertain whether the volume of cash deposits is commensurate with the person’s profile.
The Ministry further informed that in only the “first batch”, about 18 lakh persons have been identified in whose case, cash transactions don’t appear to be in line with the tax payer’s profile. This means as of now, 18 lakh persons have been picked up for preliminary enquiry based on the first batch of analysis.
This may give rise to fears of tax terrorism, but the Ministry further informed that the Income Tax Department has enabled online verification of these transactions to reduce compliance cost for the taxpayers while optimising its resources. The taxpayer will be able to submit online explanation without any need to visit Income Tax office.
Email and SMS will also be sent to the taxpayers for submitting online response on the e-filing portal. A detailed user guide and quick reference guide is also available on the portal. Data analytics will be used to select cases for verification, based on approved risk criteria. If the case is selected for verification, request for additional information and its response will also be communicated electronically. The information on the online portal will be dynamic getting updated on receipt of new information, response and data analytics.
Such a mechanism is already in place in the Income Tax Department’s site, where people are traced on the basis of TDS filings, and online responses are sought. In most of the cases the matter gets cleared up without any personal interaction with the person. If this new mechanism is based on similar principles then it would be a welcome relief to the honest tax payers who have been inadvertently picked up for checking in the above pool of 18 lakh assessees.
All said and done, this is just the beginning, as is indicated by the Finance Ministry. There are many more checks and balances left to be explored which can bring even more suspected crooks under the spotlight.