The Central Board of Direct Taxes (CBDT) has started seeking explanations from account holders, who have made large cash deposits in PSU and private banks post demonetisation. However, account holders in District Cooperative Banks have escaped the dragnet.
Senior Income Tax Department officials told BusinessLine that under Operation Clean Money, the CBDT has identified 18 lakh persons, whose cash transactions between November 9 and December 30 have been red flagged. Emails have been sent to them seeking their responses. The Board could carry out the exercise because they had access to updated KYC.
The software could only identify those transactions, where the KYC was updated. The KYC norms in District Cooperative Bank have been lax, therefore, numerous deposits made in these banks have escaped scrutiny, the officials said.
Within the first week of the demonetisation announcement (November 8), the RBI realised that very large sums of money in ₹500 and ₹1,000 notes was being deposited in the District Cooperative Bank. Therefore RBI ordered the banks to stop accepting the deposits.
However, by that time, the banks had already received considerable deposits. The banking regulator has been wary of coop banks, as their business processes and compliance with the KYC norms have not been robust.
The officials said that cash deposits above ₹5 lakh are under the CBDT scanner. Multiple transactions are more likely to be noticed by the software systems, which are being used by CBDT.
Cloak of secrecyThe officials said that the data mining process of comparing deposits data received under demonetisation and the existing database of the Income Tax Department has been carried out in utmost secrecy by the CBDT.
For implementing Operation Clean Money, fresh recruits from the National Academy of Direct Taxes have been inducted to maintain confidentiality.