"Recent income-tax searches in Karnataka appear to indicate that one reason (for reported shortage of currency notes) is hoarding of cash by government contractors, the department said.
Intelligence collected by the state investigation unit indicated that many contractors were in possession of huge stocks of cash in the higher denominations of Rs 500 and Rs 2000, the agency claimed.
Searches were carried out between the April 24 and 26 and Rs 6.76 crore was seized from four contractors in the Mysuru area. The entire amount was in high denomination notes that was not reflected in the account books of the contractors, said a press release.
"Hoarding of huge stocks of cash by these persons at a time when cash shortages are reported in some areas in the state raises troubling questions," said the tax department, adding that bulk of the seizure was made from lockers held in the names of proxies.
The agency said its Karnataka investigation wing had so far seized cash worth Rs 10.62 crore and jewellery worth over Rs 1 crore as part of election-related surveillance.
The department had then clarified that the raids were conducted on some contractors. "No minister is covered as being reported by some media channels."
With the help of district election officers and superintendents of police, the election commission too has also been keeping a close eye on violations related to the model code of conduct.
Over Rs 40 crore in cash has been seized by the poll panel's surveillance teams and the police so far besides 1,500 litres of liquor and nearly 200 vehicles, the commission said, adding that over 350 people had been taken into preventive custody to maintain law and order.
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