The Hindu Business Line : Why settle for less?

NOT all can enter the portals of the Settlement Commission set up under the Income-Tax Act, 1961 (the IT Act). Only those who admit to having evaded tax to the tune of more than one lakh rupees can cry on its shoulders.

Justice Krishna Iyer of the Supreme Court castigated this requirement on the ground that it favoured tycoons and big fishes and gave a short shrift to lesser mortals.

But then one can empathise with the government — if all and sundry are allowed entry, the Settlement Commission would be flooded with confessions minor and major making its functioning difficult.

The second requirement is that a case — assessment, reassessment or appeal — relating to him must be pending before any income-tax authority. It is not clear whether the confession made must relate to and spring from the case pending before the tax authorities or can relate to any matter at all so long as a case is pending before any tax authority. That the confession should emanate out of the case pending before any tax authority is fortified by the language of Section 245C(1) which reads as follows:

"An assessee may at any stage of a case relating to him make an application... to the Settlement Commission to have the case settled... ."

But this impression, logical as it is, is dispelled by some of the other provisions. Section 245C (1B) (i) says if return has not been furnished for that year, tax shall be calculated on the income disclosed in the application.

In such a scenario, obviously, the confession will not relate to a case pending before the tax authority. Similarly, Section 245C (1D) permits an applicant to come clean on matters relating to more than one previous year without making it a precondition that in respect of all these years cases must be pending before the tax authorities.

In the event, the inescapable conclusion is that one can knock at the doors of the Settlement Commission in respect of any matter and not necessarily relating to the one pending before the tax authorities so long as any case at all is pending before any tax authority.

There is another bloomer. Proviso (a) to Section 245C (1) says that unless the assessee has furnished the return of income, his application for settlement will not be admitted. But there is a volte-face by Section 245C (1B) (i) according to which if the return was not filed, the tax shall be calculated on the income disclosed in the application.

The icing on the cake goes to Section 245K which permits one to sue for peace before the Settlement Commission any number of times except when he is found guilty of having obtained a settlement order by concealment of facts and so on.

This is of a piece with the numerous tax amnesty schemes the country has witnessed over the years. Each successive scheme has been availed of by almost the same set of people as bemoaned and testified by the Wanchoo Committee despite the routine admonition (or is it a rhetoric) "this is the last opportunity to return to the path of rectitude" invariably accompanying successive schemes.

Confession has meaning if it is made once in a lifetime. Countenancing confessions repeatedly amounts to height of indulgence shown to tax evaders with a concomitant marginalisation of the honest taxpayer.