What an idiotic article by none other than Soutik Biswas, a left leaning leech, in guise of BBC. He only claims that Black money will be overturned into new currency but skips over part how much. And then he throws inconvenience to consumers. Stashed black money is in lackhs of crores, how many currency will one exchange.
He completely forgot harm of counterfeit money with ZERO error that our neighbor was injecting and cost savings due to full stop in operations of Terrorist and Maoists.
Read below article to fully understand why Black money cannot be converted into white so easily as he depicts.
CA’s open letter to Kejriwal goes viral: Why Rs 2,000 notes were issued
In his boldest step against the black money menace yet, Prime Minister Narendra Modi on November 8 demonetised Rs 1,000 and Rs 500 notes. This sudden decision has thrown the entire nation into a tizzy, with hostile political parties calling it a financial emergency and an attack on the common people who have been put to hardships. However, many common people are fully supportive of the PM’s move and assert that they are willing to be inconvenienced slightly for the good of the nation.
One of the questions, however, that seems to be on people’s minds is why did the government introduce Rs 2000 notes. Jumping on to the bandwagon of politicians who spoke up against the PM’s decision was Delhi Chief Minister Arvind Kejriwal, who released a video questioning the logic behind issuing new Rs 2,000 notes.
As a reaction to the Delhi CM’s video, a Surat-based chartered accountant Mehul Shah has penned an open letter to explain the probable logic behind issuing new Rs 2,000 notes instead of Rs 1,000 notes and also the reason for lower withdrawal limits and ease of carrying currency notes, etc.
This letter, giving a detailed explanation, has gone viral. Read it yourself to get a better understanding of the logic behind this life-changing decision of the government:
“Sir, I am a practising Chartered Accountant aged 28 in Surat and I was very hopeful that you would support the Notification for Demonetization of Currency and was very eager for your Reaction because your very entry into Politics was for supporting any small move to reduce Black money and Corruption and after all, this was indeed a very big and bold move….!
But after going through the Video released yesterday, my expectations from AAP as a Commonmen were shattered once again because I believed that a person of such stature and designation as you would spread positivity all around without any ifs and buts to make this Mega Clean-up Drive possible and rather help the common men in mitigating the problems rather than nagging about the same and hence I would like to bring to your knowledge the following Points.
Point 1
As you have stated in your Video that it took full 2 days for you to understand the various aspects of the Scheme and even after consultation with various Experts , you could not basically understand the Logic of why 2000 Rupee Notes were released instead of 1000 Rupee Note, I would like to make an attempt to tender my best possible logic ( Please enlighten me if I am wrong somewhere) as follows:
Sir, let us Simply take 2 Scenarios to understand the funda !
Scenario A : If as per your suggestion , Rs. 2000 Note are not issued but only New Rs. 1000 Notes are issued.
Lets say , for example Mr. X has Rs. 1,00,000/- black money in 100 Old Notes of Rs. 1000 each.
Mr. X divides those Rs. 1,00,000/- into 10 Equal Bundles, each comprising of 10 Old Notes of Rs. 1000 each and puts each Stack on a Table.
On Day 1 , in the morning Mr. X would deposit the first Bundle i.e. 10 Old Notes of Rs. 1000 valued at Rs. 10,000 into the bank and on same Day 1 in the Evening he would withdraw 10 New Notes of Rs. 1000 again valued at Rs. 10,000 and put it in the Locker in his house.
Now the real Game starts.
On Day 2 : Morning , Mr. X would deposit the second bundle of 10 Old Notes of Rs. 1000 valued at Rs. 10,000 kept on the Table. However in his books of accounts submitted to Income Tax Department, he will show that he has deposited the same 10 New Notes which was withdrawn on Day 1 : Evening ( which is actually still lying in the Locker of House )
On Day 2 : Evening , Mr. X would again withdraw 10 New Notes of Rs. 1000 valued at Rs. 10,000/- and keep the same in Locker . So at the end of Day 2, Mr. X has Rs. 80,000 on Table in Old Notes and Rs. 20,000/- in New Notes in Locker.
Now Day 3 will come in next week as limit of Rs. 20000 per week.
The same exercise shall continue till Day 10 and by the end of Day 10, Mr. X shall have no Old Notes and Rs. 1,00,000 in 100 New 1000 Rupee Note in the Locker.
However, to the Income Tax Department while presenting his cash book, Mr. X has shown that he was having only Rs. 10,000/- as black money initially ( i.e. one bundle of 10 Notes of Rs. 1000 ) and he has rotated the same Rs. 10,000/- by depositing it into Bank account in the morning and withdrawing it in the evening and again redepositing the same on next day and so on.
Thus, Mr. X has paid tax only on initial Rs. 10,000 whereas he has managed to convert all his Black money of Rs. 1,00,000 into new Notes. The New Notes lying in locker are still not known to any I.T Officer and remain unaccounted.
This Modus operandi is called
Peak theory i.e. theory of rotation of same money which is accepted by most of the High Courts and Tribunals. Revenue is also sometimes helpless to catch Mr. X because the above scenario can also occur in genuine cases where you withdraw money from bank to purchase something and then when you think that no good deal is available, you may again deposit the same money into your bank account and hence logically are not required to pay tax again.
Scenario B : Watch what happens when PM issues New 2000 Rupee Note instead of 1000….!
Mr. X deposits first bundle of 10 Old Notes lying on Table in the Bank on Day 1 : Morning and then he withdraws 5 New Notes of Rs. 2000 on Day 1: Evening and keeps it in locker.
Now on Day 2 : Morning when he goes to deposit second bundle of 10 Old Notes of Rs. 1000 each and wrongly shows the Income Tax Department based on cash book that he has redeposited the same money which was withdrawn on Day 1:Evening – Bingo !!!
He is stuck now !! Because if AO enquires and calls for copy of the Bank slip on Day 2 submitted to bank, it will show deposition of 10 Notes of Rs. 1000 each whereas the Govt knows that Mr. X could never have withdrawn on Day 1 any note of Rs. 1000 because they were never Printed !!!!
The above examples are described to understand the
concept of rotation of money and the fact that no tax is levied on redeposit of cash into bank.
Even if the above explanation is hypothetical as a concept, it gives a glimpse that such on-paper rotations may be attempted or many other “jugaad” may also be possible using some improvised theory and hence the best way is to go for a
strategic decision to discourage the rotation of money by keeping lower withdrawal limits and at the same time deferring the printing of Rs. 1000 note as taken by our PM and hence we should respect the strategic decision of PM who is elected by democratic majority rather than questioning him at each level.
Even, if we disregard the above theory of discouragement of rotation of money , another strategy may be to call back all Rs. 2000 Rupee Notes after 2-3 year once the New Rs. 1000 Notes are in circulation and this will further keep a check on corruption which many have already been questioned. This is because the businessman who have managed bogus accommodation entries to make money white in this period are likely to reverse the entries and get them converted into Rs. 2000 notes in January 17.
Just as a food for thought, what if new Notes be printed with an expiry period of 10 years, 20 years and 30 years and so on and hence the same has to be deposited into Bank before expiry date. People are asking how do you reduce corruption after Jan 2017 ? This step shall reduce corruption and reduce chaos at every deadlines as while I have few notes expiring now I shall also have few Notes which are due expiry in next 10 years and hence do not have to stand in long queue for withdrawals !!
Also with inflation the value of Rs. 1000 notes had gone down so induction of a new higher denomination had become necessary. The US has $100 note whereas UK has €50 both valued around Rs. 6000
Another simple logic is to save the printing and transportation cost compared to its face value assuming that much cost has gone into securing that fake notes of Rs. 2000 are not easily printed. ATM cash be stuffed with more cash which is the need of the hour.
Further, the fact remains that when someone is holding the new Rs. 2000 Rupee Note , he is psychologically getting a sense of freshness that the country is in the growth phase. In a lighter note, Messages are being circulated not to write anything on New Notes which shows a feeling of possession. Imagine if the previous Government would have never issued new higher denominations notes with inflation and growth we would still be dealing with Annas and Pavlis!
Sir, the above example also gives you an explanation to your doubt as to why the withdrawal limit is kept so low and you should rather educate people around you who are standing in long queues and nagging about low withdrawal limits and explain them as to how higher withdrawal limit may lead to more rotations and tax evasions. Though the above modus operandi can still be done with Rs. 500 note however, as mentioned the incentive would be less because Mr. X cannot withdraw more than Rs. 10,000/- in a day and Rs 20,000 in a week.
And believe me Sir, each and every condition in the Notification is seen to take care of the problems likely to be faced by Citizens and at the same time making sure that such Sophisticated theories are not resorted to by Black money hoarders, but questioning by you of everything in the name of Freedom of Expression may create Panic situations or bring out Loopholes in Notifications and hamper the success of reforms.
Point 2
Sir, you have again criticised and stated in the Video that printing Rs. 2000 rupee note will help to increase Corruption because Stacking those Rs. 2000 Rupee Notes would require lesser Space as compared to Stacking Rs. 1000 Notes.
In this regard, I would like to ask that Sir, have you come across any case where the “Babus” have not taken any bribe and done work honestly because they had a small Bag which could not be fitted with Rs 1000 Notes ?!
Or have you come across any Businessman who has declared unaccounted money solely because there was no space to keep those Rs. 1000 Notes !!
Point 3
As stated in the Video by you, it is true that inspite of PM efforts, there shall be dubious commission agents and unaccounted Investment in gold through jewellers, but as far as I remember when the jewellers were on strike for 45 days when our PM levied excise duty on gold in month of April 2016, it was you who supported their strike. It shows that whenever some changes are suggested to regulate a particular Market, AAP opposes them and then now you nag that the Gold market is unregulated.
Infact I believe that the PM had a full blue print for the development of our country right from Day 1 of his being elected if I recall my last 3 years as a Professional.
Firstly they asked for all the bank account number in your Return of Income
Then they linked your PAN with Aadhar
They linked all the subsidies, pension and other benefits directly to your bank account through Direct Benefit Transfer Scheme.
Then they gave opportunity to all the common men to open an account with bank through Jan Dhan Yojna
They entered into revised treaty with most of the countries in which unaccounted money goes through HAWALA e.g. Mauritius and thus the route of Black Money coming from Mauritius which everyone knew is stopped.
They passed few strict laws to overcome the evil of black money such as Benami Transaction Act and Foreign Black Money Act
They levied Excise duty on Gold.
They also made TCS compulsory for Cash transactions above 2 lakhs.
They withdrew lakhs of pending income tax and service tax litigations where Common men had won at Appeal level and Department had gone further.
They also entered into information exchange agreement with such countries.
Then they gave last opportunity to all black money hoarders through Income Declaration Scheme, 2016
Now they have a Scheme for Dispute Resolution Panel again to reduce Litigation till December 2016.
Now the masterstroke, that they have banned Rs. 500 & Rs. 1000 denominations.
Not only the destination of this whole process is commendable but even the journey or the chronology of these events is interesting which explains the ultimate destination and who knows , may be the journey is still not over and the ultimate destination may still be the Swiss Account holders!!
Point 4
Further, you have stated in your Video that penalty would be levied at the rate of 200%. The said statement has created a panic and people have stated discounting their own hard earned cash.
Being in Income tax Department in the past , you ought to know that as per the present Income Tax Act,1961 penalty is never levied on Cash deposits but on “concealed income”. Hence when the common men is depositing Cash in hand which is duly accounted or out of his past savings and even out of unaccounted current years income whose return is yet to be filed, there shall not be any penalty if there is no mismatch between returned income and assessed income. Even the Government Officials in their statement used the words “underreporting” or “mismatch”. To understand the definition of “underreporting”, Sir please refer Section 270A of the Income Tax Act or go through the following article:
Instead you could have encouraged the citizens to pay appropriate Tax.
Point 5
Nowhere in the Video have you stated anything relating to Fake currency or Counterfeit Notes because you know that the issue of Existing Fake Currency is solved foolproof.
Which situation would be better ?
Scenario A:
A Labourer standing in queue to exchange Notes from bank for a Short term.
Scenario B :
A Labourer working hard whole day to get a Fake Note at the end of the day?!
The issue of Terrorist Funding is also tackled but you chose to remain silent on the same.
You have stated that Modiji should have infused Rs 100 Note from before and it would have been you only to have said in this video that “Arre ATM se do din pehle se hi Sirf Rs. 100 ki Note bahar aa rahi thi toh sab ko pata tha , yek koi Secret nahi tha”
Conclusion
Now Sir, if I am to believe that you really don’t understand these simple concepts even after consulting with Experts for 2 days as already described by you, I am deeply saddened because the common men believe that you are an IITian and have spent considerable time in Income Tax Department also.
Contrary to the same, If I am to believe that you already know the benefits of demonetization which I first learnt in
Standard 8 when subject of economics was introduced to me and the concept of Peak Theory which is described by me above and which I learnt with my very limited experience while pursuing my profession of Chartered Accountancy , then I am more saddened and feel AAP Party as more dangerous because I believe that above any religion, politics or reservations in any caste or creed, it will always be education which shall uplift the common men and it is the common men who have elevated you to a position where you are looked by millions as their Idol and it is your duty to educate them and spread knowledge and not keep them in ignorance to preserve your vote bank.
I am grateful to all my Teachers who have selflessly shared their knowledge and some fellow members of CA fraternity who are playing an active role in creating awareness and educating Commonmen about the positive consequences of Demonetization true to the Jewel crowned to the profession as “Partner in Nation Building” and I would therefore like to advise the citizens not to sell the notes at discounted prices or deposit the cash into bank accounts of other benami persons in fear of penalty. Further, do not claim any bogus expenses or bogus loss to gain more trouble. Do not manipulate accounts by creating bogus cash on hand. Be sporty and pay tax honestly to buy peace of building capital.
Jai Hind.
Regards,
CA Mehul Shah
Surat
mehul@raseshca.com
I am saving this post so that i can slap same post on your face after a year like other chinese post who claimed india can never reach Mars.
Na, we were not capable of doing that. Alexander the great came and left since we were not worth fighting.
BTW, which Chinese president got overthrown in The great leap forward ?
