Who’s inconvenienced because of demonetization? Here are three probable candidates

(601 words, less than 5 minutes reading time)

(1) Anyone who has renewed a driver’s license has gotten a receipt of Rs. 250 in return of paying Rs. 1000, which not only includes the agent’s service fees but also the bribe component that he pays. And for the service the agent gives, he’s not even submitting the service tax to the government. I am told the bribe money makes deep inroads. Everyone is part of the chain.

Extent of inconvenience – minor. The new Rs. 2000.00 notes will in fact make it simpler for these people to hoard money.

(2) Anyone who has registered a house purchase or a rental agreement knows the difference between the ‘registration charges’ and the ‘cash’ the builder’s representative asks to carry along. The cash just vanishes in thin air! I am told these chains are rather long and deep.

Extent of inconvenience – minor. Once again, the new currency notes will make it easy to hoard money.

(3) What about the gatekeepers? I think they are the worst offenders. An example. A very close friend of mine sold his house for a new one. He took full cheque payment – meaning entire transaction was in legitimate monies. He reinvested in another house, which means he was exempt from the capital gains as per the appropriate rules. All of this was a part of his income tax return.

By his bad luck, around the time he executed the sale of the house, the so-called ready-reckoner prices were drastically increased. Now, it is a different matter to put the price on the ready-reckoner and expect the market to pay for it (unlike gold, real estate is not controlled by any index). The market did not fetch him what the ready-reckoner suggested. But he took a decision on what he felt was a fair price for his old house.

And because of this he got a notice from the I-T Department. The I-T officer felt that because there was much difference between the two prices, the rest of the money must have come from ‘black’ sources, and this god-fearing, income-tax-paying-salaried person must be sitting on a pile of cash. The scrutiny was detailed and exhausting. He was asked to produce all kind of documents, bank pass books, postal savings etc.

After the entire scrutiny, and the so-called ‘hearings’ between the I-T officer and the CA, he was given a clean-chit – simply because there was nothing ‘black’ in the entire transaction. What transpired after that is interesting to know!

The CA slapped him with a bill of Rs. 84,000! For what? Having produced all the documents required, having tallied all the amounts, and not able to show any unaccounted money?

When he asked for the breakup of the bill, he got to know:

• CA Fees – Rs. 25,000.00
• Bribe money – conveniently shown as consulting fees by the CA – Rs. 50,000.00
• Service Tax – Rs. 9,270.00 (@ 12.36%)

The CA was reluctant to bargain the bribe money on behalf of his client, simply because he has to work with that officer, and couldn’t afford to take a risk.

And the funny (or serious) part was the CA was ready to take all this by a cheque. Which means in his books he will have to cook-up the expense of Rs. 50,000.00. Isn’t it evident that the CA was in cahoots with the I-T officer?

By which logic should my friend have to pay a service tax on the bribe money also?

Extent of inconvenience – there is nothing inconvenient to the unashamed.

It is unlikely that the cash transactions – either legitimate or illegitimate – will stop because of the demonetization. But at least it will make the larger-than-life government bureaucrat and politician think about how the supposed surgical strike has hurt. It is very evident that these are the kind of people, sitting on large piles of cash. They are now in trouble.

What will transpire when the I-T department starts scrutinizing these cases should make an interesting story. The bigger question is will the government act against its own?