Demonetization Question. Why 2000 instead of 1000?

Saturday, November 12, 201630comments

We all are clear and just appreciate and support the master stroke by our beloved PM on the demonetization project. However one puzzle that common people like us and dumb cry babies like (you know who) find difficult to understand is "How come having new 2K notes instead of 1K notes help in catching black money?" 
CA Mehul Shah has a probable answer. Though there may be better answers from the master visionary called NaMo.
Let's 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.
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of accounts submitted to Income Tax Department, he will show that he has deposited the same 10 New Notes which was withdrawn on Day 1 : Evening ( which is actually still lying in the Locker of House )
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.
Now the real Game starts.
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, 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.

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 !!!
Now Isn’t it really a Master Stroke by Mr. Narendra Modi, the beloved Prime Minister of our country ?
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 !!!!
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+ comments + 30 comments

November 12, 2016 at 11:08 AM

or he can just use 500 note .. end of story

November 12, 2016 at 11:29 PM

Hi Atom and Mehul, at least the old currency are replaced which in long term benefits. And there should be a cycles of checks every time while reconciling what bank receives with the currency note codes to impose proper tax.

November 13, 2016 at 1:31 PM

Werz is new 500 note? As far as i knw govt havnt issued it yet

November 14, 2016 at 12:27 AM

It was supposed to come today..aint it?

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January 2, 2017 at 2:36 PM

Sadly,bhakts can buy any argument and then create/support a false narrative. Why not 750 note,would have been a master stroke as well if this is the reason? When most countries in world are eliminating high valued notes,we are creating it fresh,indeed a master stroke...LOL.

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