A FORTNIGHT after the Supreme Court asked the Centre to consider granting a window to those who have not been able to deposit demonetised Rs 500 and Rs 1,000 notes due to “genuine reasons”, the Centre on Monday said this would “defeat the very object of demonetisation and elimination of black money”. “If a window is opened for further period, persons who are in possession of the Specified Bank Notes (SBNs) would have had sufficient time and opportunity to carefully plan the reasons and excuses for not depositing the SBNs within the permitted period which was till December 30, 2016,” the Union Finance Ministry said in an additional affidavit filed in the Supreme Court on Monday.
“Any number of benami transactions and user proxies for the purpose of producing and depositing SBNs would then arise… the departments would have great difficulty in deciding any genuine case from the numerous bogus ones,” it said, including a detailed list of the various “malpractices” that came to light post-demonetisation. The affidavit was filed in response to a query from the court earlier this month. The court, on July 4, gave the Centre and Reserve Bank of India two weeks time to consider granting a window for “genuine reasons”. “You (Centre) cannot be allowed to deprive a person of his money if he couldn’t deposit it due to some genuine problems. Consider giving a window to a genuine problem,” a bench of Chief Justice of India J S Khehar and Justice D Y Chandrachud had said.
The court was hearing petitions challenging the government’s notification which disallowed people from depositing old notes after a prescribed time. In its affidavit, the Finance Ministry said that a window of 51 days, barring closed bank holidays, was provided for exchanging old currency — unlike in 1978, when there were only six days. During this time, anyone could have deposited the notes in their possession, either in person or through their authorised agents, said the ministry, citing clause 2 of the November 8 notification which permitted deposit of the SBNs through third-party authorisation.
The Centre also drew the court’s attention to post-demonetisation inputs from its various enforcement agencies. A Home Ministry communication citing intelligence agencies had referred to reports of “largescale misuse of the window for exchange of old notes”, said the affidavit. Cash seizure during November and December 2016 was to the tune of Rs 147.9 crore and Rs 306.897 crore respectively, and gold seizure was 69.1 kg and 234.267 kg respectively.
In Naxal-hit areas, contractors, jewellers, transporters, petrol pump owners, small businessmen, couriers, commission agents and tendu patta contractors were used for exchanging old notes, said the ministry, adding that currency was also moved across the border to Bhutan and Nepal for exchange. The CBI registered 63 cases relating to irregularities during this period, of which 10 were disposed of while the rest are still being investigated. The cases involve a total amount of Rs 395.19 crore.
According to a report from the Enforcement Directorate, the demonetised notes were traded like commodities, leading to police cases in many instances. “Based on such FIRs, the ED also registered money-laundering cases, and investigations conducted so far revealed that discounted price, varying from 25 per cent to 30 per cent, was given in exchange of new currency with old currency,” said the affidavit.
Giving details of the post-demonetisation crackdown on black money and tax evasions, the ministry said the Income Tax department conducted 1,100 raids/ surveys and issued 5,100 notices for verification of high-value cash deposits made in bank accounts, between November 9, 2016 and January 10, 2017. The raids revealed cash and valuables worth over Rs 610 crore, of which Rs 513 crore was in cash (Rs 113 crore in new currency), it said. Besides, undisclosed income of over Rs 5,400 crore was detected in the raids.
On January 31 this year, the department launched “Operation Clean Money” for e-verification of cash deposits made after November 8. More than 1.8 million persons who did not appear to be taxpayers were verified, and 0.378 million have been taken up for assessment and investigation, it said.