The judiciary on Friday looked askance at the government’s handling of the problems faced by the people after it abrogated the legal-tender status of R500 and R1,000 banknotes. While the Supreme Court said “it is a serious issue which requires consideration” and declined the Centre’s plea seeking a direction that no other court in the country should entertain petitions challenging the November 8 demonetisation notification, the Calcutta High Court observed that “the Centre has not applied its mind properly, every day they are changing procedures, means there was no homework”.
While this has added an element of uncertainty to the whole demonetisation process, the government firmly held its ground. The finance ministry issued a release calling black money “a crime against humanity” and warning that tax evasion activities such as using other persons’ bank accounts, including Jan Dhan accounts, to convert one’s black money into new notes would attract “income tax and penalty”. It added: “Also, the person who allows his or her account to be misused for this purpose can be prosecuted for abetment.” But the ministry iterated that “genuine persons” having their own household savings in cash and depositing it in bank would not be questioned.
Revenue secretary Hasmukh Adhia had earlier said that if more than R10 lakh is deposited in an account between November 10 and December 30 without matching income declared, tax plus penalty of 200% of the tax would be levied as per Section 270 (A) of the Income Tax Act.
Friday’s release by the ministry in fact went a step further, as it did not specify any threshold trigger. The government had earlier announced small deposits made in the banks by artisans, workers, housewives, etc, would not be questioned, given the exemption limit of R2.5 lakh. Official sources indicated that the facility for exchange of old notes up to a limit of R2,000 per person could be shut, as this continues to be exploited by back money holders.
Stating that people have a right to approach the courts and they cannot be stopped when they have grievances, the apex court bench led by Chief Justice TS Thakur hinted at an alternative of transferring all the public interest litigations pending before other high courts and civil courts to the Delhi High Court and also suggested that the government move a transfer petition in the Supreme Court. Attorney general (AG) Mukul Rohatgi had submitted that any matter relating to challenge to the demonetisation issue be heard by the apex court only.
While reports said that the Election Commission has expressed reservation about banks applying indelible ink on persons exchanging notes in the wake of the ongoing by-elections, official sources told FE that the commission’s concern was addressed with the assurance that ink would be applied only on the right-hand index finger, while electoral marking is done on the left hand index finger.
Government officials also said that the task force headed by Reserve Bank of India deputy governor SS Mundra was overseeing recalibration of an average of 10,000 ATMs a day. The modified ATMs with new Rs 2,000 and R500 notes can dispense R60 lakh against R4 lakh by others which only can release R100 notes. All 2 lakh ATMs would be recalibrated in 15 days, the sources added. To address the cash crunch, the government also opened cash dispensing facilities at 686 retail fuel outlets run by PSU oil companies by Friday.
Meanwhile, 10 days after the sudden decision immobilising 86% of the currency in value, economic activities across the farm sector, various industries and trade have stood crippled. In textiles, mining and plantation sectors, the cash crunch has almost brought things to a juddering halt while the real sector is also hit hard.
Demonetisation has also taken a toll on retail trade. “In the last one week, on average retail sales in Maharashtra including both mom-and-pop stores and brick-and-mortar stores had dropped by 50% and the loss per day is around R350 crore,” said Viren Shah, president of the Federation of Retail Trader Welfare Association said. Malls, however, have witnessed only a lower decline in sales and footfalls have improved from 5-8% in the first couple of days post-demonetisation to around 10% now. Hypermarkets like D’Mart, Big Bazaar, StarBazaar and Hypercity witnessed higher sales as customers rushed in to purchase essential items through non-cash transactions.
(With inputs from Mumbai bureau)