Taxmen clamp down on jewellers, traders stop accepting old notes amid raid fears

People buying gold jewellery at a store in Mumbai (Pic: Kamlesh Pednekar)
A day after demonetisation of Rs 500 and Rs 1,000 notes, the Income Tax (I-T) department on Thursday conducted surveys on jewellers and suspected hawala operators across Mumbai, Delhi and parts of Punjab.

There have been reports of illegal profiteering by discounting of money, sale of gold at an up to 60 per cent premium, and sale of jewellery for over Rs 2 lakh without PAN details.

“We are keeping a watch on illegal transactions. I can only say that legal and honest taxpayers have nothing to worry about,” Sushil Chandra, chairperson, Central Board of Direct Taxes (CBDT) told Business Standard, but did not specify details of survey operations.

The government discontinued legal validity of the existing Rs 500 and Rs 1,000 notes on Tuesday night in an attempt to curb black money flow in the economy.

Revenue Secretary Hasmukh Adhia clarified that only surveys have been conducted by the tax department and not raids as feared earlier in the day.

Raids are used in common parlance, but in the tax lexicon there is no such expression. It is either search or a survey. While in search, any premises of the assessee — residents, shops, offices or any other place can be entered, in survey only shops, factories and godowns can be entered. There are other differences as well.

The surveys by the tax department were aimed at plugging loopholes being exploited by several black money holders to get rid of scrapped notes. These were conducted by taxmen in several parts of Delhi, mainly Karol Bagh, Dariba Kalan, Chandni Chowk, Zaveri Bazar in Mumbai, Ludhiana, Chandigarh and Jalandhar.

There have been reports of discounting of money in these areas. “Surveys are being carried out based on the information that we have got. Many are converting old currency notes of Rs 1,000 for lesser value of Rs 400 or Rs 500,” said a source who did not wish to be identified. He added there was no intention of harassing the honest taxpayers.

Besides, gold was allegedly being sold by jewellers on backdated bills at up to Rs 55,000 per 10 grams as against the market price of around Rs 31,000. “We are verifying the information that jewellers are selling gold at a much higher price. Many are in fact selling gold and jewellery for over Rs 2 lakh without PAN card details. We are acting on a lot of information we have in hand,” said the source.

Surendra Mehta, secretary, India Bullion and Jewellers Association (IBJA) said, “I-T raids were conducted on a few jewellers to check certain malpractices that took place after the demonetisation.”

While most of Zaveri Bazaar in Mumbai was closed on Thursday, shops opened for business in the evening. “There is no business at all. Normally, jewellery is purchased with surplus cash which has vanished suddenly from the market. We expect this sentiment to continue at least for the next six months, till the entire trade is transformed completely from cash to cashless. The entire wedding season is going to prove lacklustre this year,” said Kumar Jain, director, Umedmal Tilokchand Zaveri, a bullion dealer and jewellery retailer in Zaveri Bazaar.

Besides jewellers, I-T officials also raided moneychangers who were exchanging old notes for bundles of Rs 100, or for new notes. 

These surveys were also conducted in cities like Ludhiana, Chandigarh and Jalandhar. The tax officers have been asked to keep a check on illegal transactions and suspicious movement of huge cash aimed at tax evasion.

On Wednesday, the finance ministry had warned that black money holders will not get any relief from existing provision of 90 per cent tax on unaccounted income over Rs 2.5 lakh of cash deposits.

“It should be clear that it is no immunity scheme. This (deposit) does not provide any relief from taxation. The law of land will apply (on source of fund),” Finance Minister Arun Jaitley had said.

Explaining it further, Adhia had said, “We would be getting reports of all cash deposited during the period of November 10 to December 30, 2016, above a threshold of Rs 2.5 lakh in every account. The (tax) department would do matching of this with income returns filed by the depositors. And suitable action may follow.”

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