The Income Tax department found new 2,000 rupee notes adding up to Rs 34 crore.
Tamil Nadu's sand mining baron J Sekhar Reddy, accused of money laundering by the Enforcement Directorate, paid state ministers and bureaucrats around 400 crores, sources said the Income Tax department have told the Tamil Nadu government.
It is now up to the state government to order a probe, sources added.
In December, the Income Tax department had recovered Rs 142 crore cash, including new 2,000-rupee notes adding up to Rs 34 crore, from the properties belonging to Mr Reddy. Days later, the CBI, which was carrying on the probe following the raids, had arrested Mr Reddy for tax evasion. He was given bail after spending 87 days in jail. But he was rearrested just three days later.
Mr Reddy allegedly has business links with Vikram Rao - the son of former Tamil Nadu chief secretary P Rama Mohana Rao. Mr Rao was removed from his post in December following Income Tax raids at his home and office in Chennai.
On Friday, the Enforcement Directorate provisionally attached properties worth Rs 33.74 crore of Mr Reddy and his associates under the Prevention of Money Laundering Act or PMLA.
According to the Enforcement Directorate, on examination under PMLA, Mr Reddy had stated that cash seized by the Income Tax department belongs to his SRS mining company and admitted that it was unaccounted money.
Sources in the Income Tax department say the huge amount paid to those in Mr Reddy's payroll could be sharing of the money he made in sand mining and PWD contracts with political patronage.
This comes as a huge embarrassment to the E Palaniswami government in Tamil Nadu. The I-T department has already recovered incriminating documents after Health Minister Vijaya Basker was raided, which they say proves a payment of 89 crores as cash-for-votes in the RK Nagar constituency. The by-polls were cancelled by the Election Commission; sidelined deputy general secretary of AIADMK TTV Dinakaran was the candidate then.
During Mr Reddy's arrest, photographs emerged of him in the company of former Chief Minister O Panneerselvam at the Tirumala Temple. Team OPS had then clarified that the sand mining baron had received him at the temple in his capacity as a board member.