I-T searches reveal large-scale fund routing in Karnataka’s cooperative banks

Income tax department. Representation Image (File Photo)


The Income Tax Department recently conducted search and seizure operations in several cooperative banks in Karnataka and found them to be engaged in the routing of funds of various business entities of their customers to abet them to evade their tax liabilities.

“Bogus expenditure booked in this way by these beneficiary business entities could be to the tune of about Rs 1,000 crore,” according to an official release which stated that the exercise started on March 31 and covered a total of 16 premises. Union Ministry of Finance said many incriminating pieces of evidence — hard copy documents and soft copy data — had been found and were seized during the search exercise. The search action also resulted in the seizure of unaccounted cash of over Rs 3.3 crore and unaccounted gold jewellery worth over Rs 2 crore.

The seized pieces of evidence, according to the ministry, revealed that these banks were involved in “discounting bearer cheques issued by various business entities, in the name of various fictitious non-existing entities”.

The business entities included contractors, and real estate companies, among others. On top of that, no KYC norms were followed while discounting such bearer cheques.

“The amounts after discounting were credited in the bank accounts of certain Cooperative Societies maintained with these Cooperative Banks. It was also detected that some Cooperative Societies subsequently withdrew funds in cash from their accounts and returned the cash to business entities,” the release said.

Further, during the search action it was unearthed that the management of these cooperative banks has indulged in generating unaccounted money through their real estate and other businesses.

Further investigations into the matter are in progress.