Finance Minister Jaswant Singh on Thursday suspended the transfer orders of 54 senior income tax officials following the arrest of R Perumalswamy, personal assistant to Minister of State for Finance Gingee Ramachandran, for allegedly accepting a bribe of Rs 400,000 from Anurag Vardhan, a 1994 batch Indian Revenue Service officer.

Ramachandran was away in Chennai and could not be contacted. The Central Bureau of Investigation alleged that Vardhan had struck a deal with Perumalswamy through a Chennai-based chartered accountant, A Krishnamurthy, to arrange a transfer from Delhi to Mumbai.

Vardhan was one of the 54 officers who were transferred by the Central Board of Direct Taxes on May 21.

Investigations by the CBI had revealed that Vardhan had struck a deal with a 'contact' in the finance ministry to obtain a posting of his choice for which he would have to pay Rs 500,000.

The agency also found that the 'contact' would collect Rs 400,000 as part payment from the residence of the officer on Thursday.

Based on this information, the CBI mounted a watch on Vardhan's residence. As the events unfolded, the CBI identified the 'contact' as the first personal assistant to the minister of state for finance, the person responsible for clearing transfers and postings of all IRS officers.

The agency also raided Perumalswamy's chamber, adjoining the minister's office in North Block, and his residence on Thursday afternoon.

The CBI recovered cash worth Rs 305,000 from Vardhan's residence. They also found Rs 6.9 million in cash and cheques worth Rs 8.5 million at the residence of the chartered accountant, besides other incriminating documents.

The finance ministry, in a statement, said it had already initiated reforms in the transfers and postings process for revenue service officers.

Revenue Secretary C S Rao said the order was the first to be issued this year for officers in the deputy and assistant commissioners grade. However, it has been held back to enable the government address systemic concerns.

The transfers and postings of IRS officials are sanctioned by the finance minister but are routed through the minister of state for revenue.

Previous cases

2001: B P Verma, the then CBEC chairman, arrested along with three others for showing undue favours to Chennai-based AK Enterprises

2001: Someshwar Mishra, the then customs chief commissioner for the Delhi zone, was arrested while accepting bribe from Flex Industries chairman Ashok Chaturvedi.