The revenue department has found that over 900 bank accounts with a combined deposit of around Rs 1,000 crore (Rs 10 billion) are being operated with fictitious names of companies and persons in the Capital.
The accounts, opened in over two dozen banks, are being used to make false entries to evade tax, interest or penalty charges, Delhi's director-general (investigations), revenue department, has reported to an expert group set up for unearthing black money.
The cash withdrawal tax, effective June 1, 2005, is aimed at stopping this practice. Though Section 277A of the Finance Act states that a person can be prosecuted for falsification of books of account or documents, prosecution is feasible only if a person is identified.
The expert group had recommended that a cash deposit tax of 0.2 per cent of the deposits be imposed. From June 1, the government, however, opted to impose a banking transaction tax of 0.1 per cent on current account withdrawals of over Rs 25,000 a day by individuals. For companies, the tax is applicable if withdrawals during a day exceed Rs 100,000.
"Enquiries have revealed that in Delhi alone a large number of accounts were opened in bogus names for providing false entries to beneficiaries. There is no record regarding the identities of the persons who actually operate these accounts. The know-your-customer rules are not being followed by banks," officials said.
It has been observed that in banks exist a large number of entry operators who make entries for others in return for a nominal commission. These are merely accommodation entries and not backed by real or substantive transactions.
The modus operandi is like this: a number of bank accounts are opened and then layered through such accounts over a period of time. This results in obscuring the origin of bank balances.
With a bank account in place, when a person approaches an entry operator for making an entry for a loan, the operator takes cash and issues him a cheque for an equal amount and charges a commission.
In case the entry is required to be reversed later, the person issues a cheque to the entry operator who, in turn, deposits the cheque in his account and withdraws the cash and returns it to the person.
Officials said this procedure was used to provide bogus bills for purchase or sale of goods, and securities and gifts. The entry operator deliberately makes false entries in his books of account to help beneficiaries evade tax or the interest chargeable.
It was observed that the State Bank of Bikaner & Jaipur's New Rohtak Road branch had "benami" deposits of around Rs 125 crore (Rs 1.25 billion). The Daryaganj branch of the State Bank of Patiala and Vijaya Bank's Ram Nagar branch had similar deposits of around Rs 100 crore (Rs 1 billion) each.
Evidence of cash deposits in the name of fictitious persons was also found in some branches of the State Bank of India, Indian Bank, the State Bank of Hyderabad, UCO Bank, Federal Bank, Oriental Bank of Commerce and Bank of Rajasthan.
