Officials said the searches were launched on the premises of two engineers, working with the state government, and some "connected persons".
A team of over 50 I-T sleuths and police personnel launched operations early morning and searched premises in Bengaluru, Chennai and Erode (Tamil Nadu).
"During the course of searches Rs 4.7 crore cash in new denominations of Rs 2000 and 0.3 crore in old/smaller denominations totalling Rs 5 crore and 7 kg bullion worth approximately Rs 2 crore were found in a flat owned by a civil contractor.
"The new notes and bullion are learnt to have been obtained by exchange of demonetised notes by payment of commission of an engineer and a contractor," the Central Board of Direct Taxes (CBDT), the policy-making body of the tax department, said in a statement here.
The sleuths also seized some notes of Rs 100, demonetised notes of Rs 500 and a few gold biscuits during the operation, it said, adding the department had to call in note counting machines and additional staff to ascertain the value of the cash.
What has surprised the tax authorities is the sheer amount of new currency stashed by these individuals at a time when new notes are not available to the common public which is queueing up to withdraw even small amounts from their accounts.
"This is the highest seizure of the new currency in the country post the currency ban on November 8. Some entry operators and bankers in Karnataka and Tamil Nadu are under the scanner. Such volume of new currency cannot be obtained without connivance of bank officials," a senior I-T department official said.
The department has also found a number of identity cards of various individuals from the searched premises which could have been used to illegally change the old currency with new ones.
Taxman has also seized documents of property purchase from the premises, even as they found a battery of luxury cars parked in these locations.
"The investigation is still in progress and the search action is still continuing in ten premises," the CBDT statement added.
Only yesterday, the Enforcement Directorate (ED) had seized Rs 10 lakh cash in new notes of Rs 2000 from the premises of a Kolkata-based doctor.
The agency conducted nationwide search operations yesterday at 40 locations and seized about Rs 1 crore in new notes.
Both the I-T department and the ED, along with other enforcement agencies and police, are undertaking these operations after reports of instances of illegal exchange of old currency and stashing of new currency notes to perpetrate hawala and money laundering like activities.
(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)