Good riddance

The Wanchoo Committee of yore, which found tax amnesty schemes morally reprehensible what with the same set of defaulters making use of them repeatedly and blithely unmindful of the admonition, strangely recommended the setting up of a Settlement Commission to which a tax defaulter could unburden his woes and get partial relief from tax and a complete reprieve from penalty and jail term.

That Settlement Commission mechanism was nothing but a permanent if quasi-amnesty scheme. Settlement smacks of the concept of plea bargaining that is alien to Indian criminal jurisprudence.

So much so that in 1979, in Commissioner of Income Tax vs BN Bhattacharjee & Anr, Justice VR Krishna Iyer of the Supreme Court made no secret of his displeasure with the mechanism and castigated it as serving the interests of tycoons and indulging in their tax offences.

Indeed, the Settlement Commission used to beckon those who were caught in an adversarial proceeding like income tax raid. The government closed this loophole with a salutary amendment that one cannot knock at the doors of the Commission once an income- tax search or raid has been carried out. To prevent people from knocking at the doors of the Commission repeatedly, the UPA II government rightly made the mechanism available only once in the lifetime of an assessee.

A hush-hush affair

The Commission proceedings are held behind closed doors and not reported so that no one gets a wind of how the compromise was reached between the Revenue Department and the tax defaulter, brokered and midwifed by the Commission. It is an anachronism in a milieu of transparency and openness. And, it is certainly at odds with faceless assessment and appeals. There is no reason why a defaulter should be indulged even once when the honest pay their taxes during their entire careers, be in employment or in business or profession. So, by saying that no one can file a fresh application after February1, 2021 and that all pending cases will be heard by an interim board, the Finance Bill 2021 has gone as far as it possibly could in giving the Settlement Commission provisions a burial.

A good riddance indeed that was perceived more as an insult to the honest taxpayer than as a shoulder to cry on for defaulters. There is no reason why defaulters should be indulged if they offer to pay up an additional income tax of ₹10 lakh — the entry level threshold to be eligible for knocking at the doors of the Commission — or more to the exchequer.

There can be compounding schemes for minor and administrative lapses like failure to file income tax return on time or company annual return on time, etc., but to allow defaulters to compromise or avail themselves of amnesty schemes under the pretence of remorse amounts to the state kowtowing to them.

The income-tax administration should improve tax compliance through better investigation and surveillance. Instead of foisting on tax deductors the responsibility of fostering the tax return filing habit, the tax sleuths must fan out to areas of opulence and accost them.

There should be greater scrutiny on people owning swanky cars and living in palatial bungalows. Wealth tax should be used in conjunction with income tax not only to garner more revenue but also to juxtapose one’s income in the context of one’s wealth. The Modi government has done well to send the signal that it is not going to indulge defaulters even once.

The writer is a Chennai-based Chartered Accountant