At the onset of the recent Demonetization of Rs 500 and Rs 1.000 currency notes ( called SCNs ), it was expected that the entire lot of SCNs in the circulation will not be banked . The fake notes will be identified and naturally will not be able to enter the banking channel. Similarly , the SCNs held by black marketeers will also not be banked due to fear of being taxed and penalized. It was estimated that nearly Rs.4 Lakh crore worth of SCNs will not be deposited, which will represent the balck monies held backin the system. Now at the end of the deadline of 30th December 2016, it is estimated that only Rs.50,000 odd crore remain “un deposited “.
This is , by any imagination is a ridiculously low figure of Black Money that was in the system before demonetization. Even the GOI estimation was that nearly Rs 4 to Rs 5 Lakh Crores are held back in the system , representing Black Money.

In reality,as it is well known, the Black Money has actually been deposited in the bank accounts by adapting various dubious methods including opening dummy accounts,depositing benami SCNs etc methods so skillfully adapted!. It is therefore for the Income Tax Department now,to identify such deposits and catch the errant persons . This is a huge and painful task . The benami account holder ( a poor Jandhan account holders, in many cases ) and the Beneficial depositor, both will come under scrutiny . The number of such cases will be huge and it will be near impossibility for the IT department to reach out for all .

Similarly, many black money holders have re written their cash books, generated higher cash balances and deposited SCNs which were held illegally till than. Such cases are as large and wide spread . This by itself will be a memoth exercise to cover all such cases for the IT Department .

But the reality will be that the IT department is also not going to give up the chase so easily . I can quite see that there will be a huge increase in IT notices and almost all of them will result into lengthy litigation.

Again, it is equally important for the RBI to exactly reconcile the Monies ( SCNs ) deposited with the Banks , with the monies (SCNs) which were in circulation as per their records. RBI will have to be sure that Fake currencies have not been pushed into the banking system and will have to tally the genuine physical notes collected by the banks with the book figures that are being provided by the bankers . These reconciliations , reaching upto branch level is another herculean task , particularly when it is equally well known that several banks and bank officials have not been so praiseworthy. It will not be a huge surprise if initially it is noticed that more SCNs are deposited in the Books of Banks and RBI than the Actual numbers of SCNs in circulation . The Fake notes pushed in the system will have to be segregated and wrong book keeping will have to be corrected before closing this exercise .

I feel the stage is perfectly set for a Catch Me If You Can type of chase . It is shameful and painful , but unfortunately true .