IT raids at 6 locations of entry operators in Ahmedabad; Rs 19 crore cash found

Ahmedabad: The income tax department has today raided 6 locations connected to Jignesh Shah and Sanjay Shah in Ahmedabad and seized around Rs 19.3 crore suspected black money along with 18 demat accounts.

Black money holders take the help of ‘entry operators’ to launder large amounts of unaccounted cash through banking channels. These entry operators are chartered accountants or middlemen who launder money on behalf of clients by operating multiple bank accounts. These intermediaries provide cheques to beneficiaries to convert unaccounted cash into legal tender. This is done against cash deposits in the accounts of operators who later raise bogus bills for a commission of 1-2%. Knocking on the doors of individual ‘beneficiaries’ of entry operators is generally a next step after such raid.

The ritual of “Jama Kharchi” has become an integral part of the business environment over years. This is a system wherein “entry operators” provide cheques to beneficiaries to convert unaccounted cash into legal tender. This is done against cash deposits in the accounts of operators who later raise bogus bills for a commission of 1-2%. These entry operators are chartered accountants or middlemen who launder money on behalf of clients by operating multiple bank accounts.

One pays certain ammount to the entry operator to form a shell company through a structured transaction and save on taxes. Suppose if one needs to convert Rs 1 crore capital from black (hidden) to white, the original owner of the money will give Rs 1 lakh to an entry operator, who would divide the sum into 10,000 shares of Rs 10 each. Each of the shares would then be sold at an exorbitant premium of around Rs 1,000 to directors of shell companies. This would instantly increase the value of the company from Rs 1 lakh to Rs 1 crore. Through a network of fake companies, the money then moves to the original owner. The entry operator charges a fee. Often, the directors of these companies are daily-wage earners like tea sellers or office guards. The more the capital, the higher the cost of registration for opening such a company. Thus, opening one with Rs 1 lakh capital would require much less of registration fee than opening one with a capital of Rs 1 crore.It is easy to find ‘directors’, who for Rs 5,000 will sign anywhere.There are brokers and entry operators; they run many companies from a single premise and a laptop.

DeshGujarat