Cost of printing notes and errors in identifying tax evaders could be covered, says Shashi Kant Sharma

The Comptroller and Auditor General of India will soon begin an audit of various aspects of demonetisation announced by Prime Minister Narendra Modi on November 8 last year.

By this measure, the Centre had withdrawn Rs. 1,000 and Rs. 500 notes from circulation.

“Demonetisation per se is a banking and money supply issue and as such, outside the CAG’s audit jurisdiction. But the CAG is well within its rights to seek audit of fiscal impact of demonetisation, largely its impact on tax revenues. That way the issue gets linked with the public exchequer,” CAG Shashi Kant Sharma told The Hindu.

He pointed out that there are other linkages of demonetisation with the public exchequer that will also be covered by the audit. This would be “expenditure on printing of notes, RBI dividend to the Consolidated Fund, etc.” the CAG said.

The huge amount of data generated by banks and the Income-Tax Department in the wake of demonetisation would also be covered, he added.

“This banking transaction data and the follow-up by the Revenue Department can also be subjected to CAG audit. Audit can look into various risks, such as errors and omissions in identifying the potential tax evaders, failures to pursue the identified suspects, selective and arbitrary pursuance of leads and consequences thereof. Many of these issues will be covered in our audits which we propose to take up in the coming days,” Mr. Sharma said.

The CAG said he had conveyed to the government his stand on the recent move of the GST Council to delete section 65 of the preliminary draft that authorised CAG to audit GST (Goods and Services Tax).