Wednesday November 22, 2017
Home India Explaining De...

Explaining Demonetisation: Open Letter to Arvind Kejriwal from a Chartered Accountant

A chartered accountant (CA) from Surat explains Delhi Chief Minister Arvind Kejriwal the probable logic behind issuing New 2000 Rupee Note instead of 1000 Rupee Note

2
300
Arvind Kejriwal. Facebook

November 15, 2016: A chartered accountant (CA) from Gujarat’s Surat has written an open letter to Delhi Chief Minister Arvind Kejriwal, as he has been criticising the move taken by Prime Minister Narendra Modi to fight against black money.

NewsGram brings to you latest new stories in India.

Here is the full text of the CA’s open letter to Arvind Kejriwal:

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 weekaslimit 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, 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.

Go to NewsGram and check out news related to political current issues

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.
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 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 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 that he has redeposited the same money which was withdrawn on Day 1:Evening – Bingo !!!

He is caught red handed !! because the Bank slip on Day 2 submitted to bank shows 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 !!!!
Now Isn’t it really a Master StrokebyMr. Narendra Modi, the beloved Prime Minister of our country ?!
Sir, you have stated in the Video that if Someone gives you the logic of issuing New notes of Rs. 2000 instead of Rs. 1000, you will Salute the PM and support him in his endeavour. I hope this explanations finds you in good health and I am waiting for the support in full sense.

Even if the above explanation is not completely true, we should rely on and respect the PM of our country who is elected through clear democratic majority.

Further, the fact that when someone is holding the new Rs. 2000 Rupee Note , he is phychologicaly getting a sense of freshness that the country is in the growth phase. Messages are being circulated not to write anything on New Notes. Imagine if the Govternment 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 as to why the withdrawal limit is kept so low because the above modus operandi can still be done with Rs. 500 note however, the incentive would be less because Mr. X cannot withdraw more than Rs. 10000/- in a day and even if he withdraws Rs. 10,000/-, there is every possibility that Banks shall give Mr. X, 2000 Rupee note. So Mr. X cannot follow the above modus operandi.

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 everything in the name of Freedom of Expression may create Panic situations or bring out Loopholes 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 throughDirectBenefit 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.
BeinginIncome 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:

No penalty on high denominations notes deposited into bank if such amount is declared in return of income by paying appropriate tax
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 issolvedfoolproof.
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 ofTerrorrist 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 ATMse 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 andeducatingCommonmen 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

PS : Sir, Please share the same explanation to Rahul Gandhiji too as lately you both share the same thoughts and statements and have same queries.

Wait for a miraculous amount of tax collection this year !!

Look for latest news from India in NewsGram.

I have mainly written this Letter mainly for my love for writing and my love for questioning and understanding the concepts and in view of the freedom of speech and expression my country offers and hope that no one is offended.

by NewsGram team

Next Story

Demonetisation Anniversary: BJP acts cheeky, releases new video showing Frustration of ‘Corrupt’ Politicians following Demonetisation

The one-minute video, which is now going viral on social media, has already been re-tweeted more than 2 thousand times since it was released on November 7, on the eve of demonetization move.

0
34
Demonetisation Anniversary
Screen grab of the sarcastic video released by BJP to mark Demonetisation Anniversary. Twitter

New Delhi, November 8, 2017 : On November 8 2016, every Indian citizen sat glued to their TV screens as Narendra Modi was set to make a big announcement. Outcome? The Indian Prime Minster shocked the entire nation with the introduction of Demonetisation, a move that was to change the very foundation of the cash-dependent Indian economy.

The much-debated move by Modi garnered the attention of several well-versed economists from the country and abroad, alike. While some people willingly welcomed the move, there were others who stood in staunch criticism.

As the move completes its first year, the Bharatiya Janata Party (BJP) is set to observe November 8 as ‘anti-black money day’ to celebrate Demonetisation anniversary in the country.

On the eve of the Demonetisation anniversary, the BJP released a cheeky video claiming to depict how ‘corrupt’ politicians have been criticizing the move, as the nation won following demonetisation.

WATCH BJP’S TONGUE-IN-CHEEK VIDEO

In the video, the BJP attempted to take a dig at corrupt politicians, who have been criticizing PM Modi’s Demonetisation move.

In the video, a woman, playing the character of a frustrated, corrupt politician can be seen going on a rant over PM Modi’s note ban initiative, which was aimed to combat black money, corruption, fake currency and terrorism.

The video ends with a voice-over saying demonetisation has not only brought out this frustration of corrupt citizens, but also black-money, claiming that almost 99 per cent cash which was previously lying hidden with people has now entered the banking system.

The one-minute video, which is now going viral on social media, has already been re-tweeted more than 2 thousand times since it was released on November 7, on the eve of demonetization move.

Ahead of the Demonetisation anniversary, the last few days have witnessed several leaders present their opinions on PM Modi’s demonetization move.

Finance Minister Arun Jaitley called PM Modi’s note ban initiative a ‘watershed moment’ while Piyush Goyal, Minister of Railways believes the move has pushed India towards a more transparent economy.

However, the move is being criticized by ex-Prime Minister Manmohan Singh calling it ‘irresponsible’. The opposition maintains that PM Modi’s note ban initiative has caused reckless damage to the country and the Indian economy.

On Demonetisation anniversary, the BJP is set to observe November 8 as ‘anti-black money day’, while opposition leaders are set to observe the day as ‘black day’ in protest against the note ban initiative.

Next Story

Delhi government’s liquor license scam exposed

AAP has turned Delhi into liquor den.

0
48
Delhi government's liquor license scam exposed
Arvind Kejriwaal,Delhi CM.Flickr
 • Illegal liquor licenses granted in shopping malls
 
• Swaraj India protests against illegal vends at Cross River Mall
 
• Illegal vends have turned the mall into a liquor den
 
• Liquor license scam, a perfect example of unholy collusion between AAP & BJP
 
• Arvind Kejriwal, who came to power on the promise of making Delhi addiction free, has today become the Badal of Delhi and Manish Sisodia another Majithia.
New Delhi, Nov 5: Newly formed political party, the Swaraj India has exposed a major scandal in the distribution of liquor licenses by the Delhi government. Party’s Chief National Spokesperson and Delhi State President, Anupam, said that the Delhi government is illegally distributing L10 category liquor licenses enabling dealers to open vends in shopping malls of the city.
The Delhi government offers licenses in the L-10 category to liquor vends in shopping malls of the city. Definition of shops operating from within a mall is clearly stated in the law and the rule mandates that all shops operating from within a mall should be opening up within the building only and cannot have an entrance towards the exterior side of the mall. But Delhi government and the mall management have created these liquor shops against the approved map of the mall. Every week, the Excise officials of Delhi Government are supposed to inspect liquor vends existing in the city, but not a single objection has been raised against these vends that are blatantly violating rules every single day.
And this has resulted in around a dozen liquor vends springing up in just the ground floor of the Cross River Mall. This has turned the shopping mall into a den of liquor vends leaving people living in nearby residential areas helpless. Neither the Delhi government nor the MCD and nor the Delhi police are even taking note of this broad daylight scam. “Is this not a direct sign that all the levels of the government and administration are complicit in letting this illegal trade grow?” Anupam asked.
Everyone in Delhi is well aware of how the employees of MCD don’t lose a moment to demand their share when any construction work begins anywhere. But when illegal constructions are done at such a large scale in a big mall, the MCD doesn’t even blink an eye.
Cross River mall is located in an area from where the Councillor, the MLA as well as the MP are from the BJP. The illegal license is being granted by AAP led Delhi government. It is surprising to see such a harmonious blend between the Aam Aadmi Party and BJP. Promoting liquor trade in Delhi seems to be such a profitable business for both the BJP as well as the AAP that it has brought together the two parties that are otherwise always at loggerheads. Are the black transactions involved in such liquor business the real reason why not a single question has yet been raised by anyone or any party?
Earlier in the last, the Delhi government has eased rules for granting the license to new liquor vends by reducing the minimum carpet area required from 1000 to 500 square feet. And now, in clear dereliction of rules, even vends are being run in the shopping malls.
 On Sunday, Swaraj India’s Mahila Swaraj Morcha protested against the numerous liquor vends in Cross River Mall of Delhi and demanded that the liquor shops be closed down. And in this mall in Shahdara, around a dozen liquor shops have been opened up by granting illegal licenses of the L10 category. And outside this mall, that has been turned into a den of liquor vends, a crowd of drunkards creating an atmosphere of hooliganism has become a daily affair. There has been a continuous increase in crime in the drunken state, where eve-teasing & snatching have become a regular affair.
Sarvesh Verma, President of the party’s Mahila Morcha, said that Arvind Kejriwal who rode to power on the promise of making Delhi an addiction-free city has today become the Badal of Delhi with Sisodia as another Majithia.
Anupam said that though the Delhi government’s anti-women policies will result in the promotion of alcohol addiction but Swaraj India will not let these nefarious plans succeed. The party has earlier as well launched mass agitations against the granting of liquor licenses in residential areas of Delhi, because of which the Delhi government was compelled to announce a ban on the distribution of new licenses. If the government does not immediately order an investigation into the illegal L10 vends and stop this unholy collusion, the Mahila Swaraj Morcha of Swaraj India will take this agitation ahead for the betterment of Delhi.

Next Story

Demonetisation has Beneficiary Long Term Impact on Real Estate with Initiatives of RERA and GST

The transparency brought in by demonetisation, aided by RERA, GST reforms and liberalisation of FDI norms, has boosted the performance by fair Real Estate companies.

0
44
Long Term impact on Real estate
Long Term impact on Real estate has been depicted by Demonetisation.Wikimedia.

New Delhi, October 4: Though the government’s radical measure of demonetisation has disrupted the economy and has hit the real estate sector — already reeling under prolonged slowdown — it will turn out to be a blessing in disguise in the medium-to-long term.

As an asset class, real estate has been a big source of generating and consuming black money. The cash component in real estate has been there at various levels, beginning with land transactions where it amounts to 30-50 per cent. The cash payout is quite high in luxury housing too. The consumption of cash has been as high as 30 per cent in secondary market transactions.

The primary market transactions, however, are by far bereft of cash component as home purchases are financed through loans from banks and housing finance corporations. It is another matter that even in primary market deals, developers have been encouraging cash payouts by luring property buyers with good discounts on property price.

The speculative buying by investors through offerings like underwriting and pre-launches has also been involving cash payout, leading to artificial price hike and in turn making homes out of the reach of masses.

Demonetisation, coupled with the government’s move to check benami transactions through legislation and curbs on cash transactions, was meant to clean up the system.

This sudden ‘shake up’ was, however, not without its adverse impacts. Demonetisation badly affected the liquidity in the capital-intensive real estate sector, deepening the problem of massive fund shortage/cash crunch faced by developers reeling under delayed deliveries, which deterred buyers from purchasing property.

long term impact on Real Estate
There are long term impact on Real Estate due to Demonetisation. Pixabay.

The impact was more evident in markets like NCR and Mumbai which were largely investor-driven, compared to southern markets of Bengaluru and Chennai and even Pune in the west, which have been end-user driven. The premium/luxury residential segment, in which the cash component was more in transactions, got impacted by demonetisation.

Real estate experts’ belief that the impact of demonetisation is only short-term and will not have long-term impact, stems from the fact that developers who have been following transparent and fair practices have not been affected by demonetisation and instead it worked out to their advantage.

This also turned out to be a positive development for big global real estate consultants like JLL India which doubled its profits in 2016 over 2014-15, with 60 per cent revenue growth.

One key positive impact of demonetisation and RERA (Real Estate Regulation Act) has been that speculative investors deserted real estate and end-users/genuine buyers, who were all these years pushed to the sidelines, came out in large numbers. Now, it is the property consumers who are driving the real estate market, especially residential market, aided by the government’s pro-industry and pro-consumer initiatives.

The step to promote affordable housing and according real estate industry status for the purpose of making easy and cheap funds available to the sector also helps.

Demonetisation has particularly boosted foreign funding. The transparency brought in by demonetisation, aided by RERA, GST reforms and liberalisation of FDI norms, has boosted the confidence of foreign investors, which is clearly evident from the spurt in foreign investments, particularly from pension funds.

This will inject much needed liquidity in the sector starved of funds. Targeting consumers, the government under the Pradhan Mantri Awas Yojana (PMAY), is providing substantial interest subsidy to home buyers. The clampdown on floating cash in the system has contributed significantly to curbing inflation which, in turn, helped RBI in cutting interest rates, thereby boosting home buying.

The proposed measures to liberalise FSI norms and rationalise stamp duty, will give further fillip to the residential sector, particularly affordable housing.

Demonetisation had a salutary impact on property prices by curbing cash transactions and checking speculative pricing, in turn increasing affordability, which is a key to achieve the government’s flagship mission of ‘Housing for All’. RERA & GST are further aiding demonetisation to control prices.

long term impact on Real Estate
Demonetisation aided with RERA and GST will put long term impact on Real Estate. Pixabay.

The key provisions in RERA, to speed up project completion, by checking diversion of funds through mandatory escrow account, stringent penalties to check project delays, together with the government’s move to make all building sanctions online, will go a long way in checking time and cost overruns of real estate projects, thereby controlling home prices.

The ban on pre-launching of projects under RERA will also check artificial spurt in pricing. GST has come to tackle the flow of cash in the purchase of building materials by introducing input credit tax. Further, the government’s plans to liberalise FSI norms, especially for affordable homes, and rationalising stamp duty will have a sobering effect on property prices.

But for some little lingering effect, economists and real estate experts believe that the overall downside impact of demonetisation has faded and its impact is not going to be there in the next quarter.

Says Ashwinder Singh, formerly CEO of JLL India & now CEO of leading real estate consultancy, Anarock Consultants: “Other than in terms of the initial confusion-induced decline in sentiment, the trend that is emerging now, points towards a recovery in buying sentiment with serious buyers already returning to primary markets.”

The entire demonetisation exercise undertaken by the government and aided by other reforms, like Benami Property Act, RERA and GST, is to be looked at in the backdrop of the government’s multi-pronged policy to create institutional and regulatory framework for speedy and steady growth of the economy. And at the centre of all these initiatives is real estate, which is a key contributor to GDP. Going forward, these policy initiatives will help make real estate more organised, transparent, credible and affordable, making the sector investor and consumer friendly. (IANS)