Benami hunt: Why Narendra Modi govt's latest move could spring a surprise on detractors of demonetisation

The law on benami properties prohibits entering into benami transactions. If a property is held benami, it can be confiscated by the central government. Further, a penalty of 25 percent of the fair market value of the property can be levied on both the benamidar and the real property owner, besides a punishment of rigorous imprisonment for 1-7 years. There is also a prohibition on re-transfer of the property held benami from the benamidar back to the real owner. It is against this backdrop that the Narendra Modi government’s seemingly belated drive against large deposits of demonetised notes during the heady and tumultuous days of demonetisation into various bank accounts is going to be watched closely by the tax sleuths, the commentators and the Opposition. Notices have already been sent out to 10,000 depositors and more are on the way. This is a good change of track. Abhishek Manu Singhvi, the redoubtable Congress spokesperson who also wears the lawyer’s robe with aplomb, has been the fiercest critic of the Narendra Modi government’s approach in letting depositors stew in their own juices. He has been saying the Income Tax proceedings are so slow that often it grinds on painfully for more than 30 years before reaching finality. His point was even if the deposits of demonetised notes are found to be illegitimate, the multi-layers of appeal right up to the Supreme Court would only help the crooks thumb their collective noses at the authorities. Full marks to Prime Minister Modi and Union Finance Minister Arun Jaitley for pursuing dubious deposits under the new-fangled benami law and not under the staid Income Tax law. [caption id=“attachment_4495585” align=“alignleft” width=“380”]  Representational image. Reuters.[/caption] The Central Board of Direct Taxation (CBDT) which administers the income tax law is also the confiscating authority under the Prohibition of Benami Transactions Act, 1988. Its hands have been strengthened by this dual role. Its seemingly draconian provisions relating to confiscation further beefed up with a hefty penalty on both the parties and jail term for both has been sending shivers down the spines of crooks. Shah Rukh Khan has had the mortification of seeing his Alibaug farmlands being attached by the tax authorities under the Benami law. Action under the benami law for deposit of demonetised notes disabuses the naïve notion that all bank deposits automatically become sanitised and legit. Success on this front would counter and finally nail the claim that the demonetisation exercise was a failure inasmuch as 99.3 percent of the demonetised 500 and 1000 rupee notes found their way back into the banking system. The account holders might sing like a canary and give away the name of the beneficial owners of the money as well as of the property bought benami with that money. There were reports of rich people depositing their ill-gotten wealth in the bank accounts of sundry minions including drivers, peons and other underlings including pliable, beholden and frightened staff. They would have a hard time explaining their sudden wealth and shielding their employers. Jan Dhan account holders generally considered to be rustic bumpkins could similarly upset urban city slickers. Repeated deposits during the 50-day window have attracted the taxman’s curiosity and such transactions have been flagged off as well as a sudden burst of spending through credit cards by account holders. At last the results of data analytics seem to be put to use. Better late than never.

While scrutiny of PAN and credit card details have revealed a sudden burst of splurges, access to phone conversations and social media posts also seem to have provided grist to the taxman.

Who knows the Modi government might ultimately have the last laugh. Till now it has been on the receiving end of commentators’ jibes—well-intentioned but shoddily implemented has been their refrain on the demonetisation exercise. They may have to eat their words if the proceedings under the benami law result in a rich haul for the exchequer. (The author is a senior columnist and tweets @smurlidharan)