Saturday, November 19, 2016

Is possession of lot of old notes a crime?

Possession of lot of old notes a crime?

The Income Tax department is now conducting raids across the country based on tip-offs. In one case, in Delhi, a doctor was arrested when he was loading lot of cash in his car. A sum total of 69.86 lakhs was recovered from him in 100 rupee notes.

A man by the name Nazer-e-Alam was arrested in Delhi on Nov 18th with Rs. 1000 notes worth 96 lakhs. Alam was arrested under Section 103 of Delhi Police Act which is about possession of property for which no satisfactory explanation can be provided.

Though the above two cases appear to be same, however there is a big difference.

Technically, all our notes are legal tender. However, the Government on 8th November declared that Rs. 500 and Rs. 1000 are no longer legal tender. It is not known under what act this declaration was made. Though some may consider that Government declaring the notes not being legal tender is akin to Government reneging on its promise. Every currency note is a promissory note and is guaranteed by the Central Government. Nevertheless, that is not a point of discussion for this article.

When the notes are no longer legal tender, these notes are just pieces of paper. So When a man possesses a large amount of these notes like Nazer-e-Alam, technically he cannot be charged for possession of assets disproportionate to his known income. Neither can he be charged for possession of property for which no satisfactory explanation is provided because the notes he is in possession off is no longer legal tender. Since it is no longer currency and is worthless, unless and until deposited in a bank, technically any lawyer can successfully argue and rescue him.

The sudden declaration by the Government has caught many small time traders and businessmen with cash which has not been declared to the Income Tax authorities. So they are expected to use people couriers to transport such cash from one place to another. It is expected that some of them will get caught and will be tried under various sections. However, it would be interesting to watch how the prosecution will unfold.

However, when people are found with Rs. 100 notes which are perfectly valid legal tender, there would be no respite from the income tax authorities from prosecuting the arrested persons.

Indian economy predominantly runs on cash. Demonitisation cannot happen overnight. It would take sufficient effort by the Government to move much of this to digital cash. Not many people understand how to use e-wallets. Not many trust those as well. It would help if the Government of India comes out with an e-wallet which would be readily acceptable in all places. There would be trust factor if the Government steps in as the Government would be responsible for security. The Government though at the moment seems to be letting the PayTMs of the world run with the ball.

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