One cannot hereafter wake up and seek the sanctuary of the Settlement Commission after the assessing officer has caught him with his pants down, vide his assessment order.
Critics have been rather harsh on the Finance Minister, Mr P. Chidambaram, for presenting what they perceive to be an insipid and lacklustre Budget with some even heckling him for being kind to dogs even while being impervious to the needs of the aam aadmi, whom the Congress party swears by.
As it happens, many things become clearer only on reading the fineprint contained in the Finance Bill accompanying the Budget. The Minister is guilty of excessive modesty in not taking credit for a seminal move he has made in the Budget:
Reading the riot act to the tax-evaders. With effect from June 1, 2007, the doors of the Settlement Commission would be open only once in a taxpayer's lifetime. As of now its doors are kept ajar for anyone with a prickly conscience or with a nose for sensing trouble ahead to come clean as many times as one wants. The Finance Minister has rightly said, there won't be second time. This is as it should be.
When VRS compensation gets exemption from tax only once in a person's lifetime, there is no reason why a habitual, chronic and couldn't-care-less defaulter should be humoured not twice but many times over.
There are other good changes as well in the scheme. Hereafter, one can come clean only if the tax sought to be volunteered to be coughed up is more than Rs 3 lakh the present threshold is Rs 1 lakh.
And, more important, one cannot hereafter wake up and seek the sanctuary of the Settlement Commission after the assessing officer has caught him with his pants down, vide his assessment order.
He can now approach the Commission only when his original assessment proceedings are pending with the assessing officer. He cannot in a manner of double take pre-empt or scupper appellate proceedings by throwing a spanner in the wheels of the appellate mechanism, which he can now.
As it is, the Commission can give immunity from prosecution under all the central laws to the person who comes clean.
Hereafter, no such freewheeling pardons pardon only from prosecution under the income-tax and wealth tax laws, period.
All these are salutary changes that would warm the cockles of all those who had frowned on indulgence being shown to tax evaders.
Justice Krishna Iyer should especially be pleased because in CIT vs B. N. Bhattacharjee (1979 118 IRR 461 SC), perhaps the first big case under the scheme to bear judicial scrutiny, he made no secret of his displeasure with the scheme. In his characteristic style, he lambasted it on the ground that it was based on "debatable policy fraught with dubious potentialities (which somehow assumed that) composition and collection of public revenue from tycoons is better than prosecution of their tax-related crimes."
He also chided the scheme as benefiting "ordinarily those whose tax liability was astronomical and criminal liability perilous".
Ushered into the statute in 1975 on the recommendations of the redoubtable Wanchoo Committee report in 1971, the permanent Settlement Commission mechanism was perceived to be a lot better than the off and on tax amnesty schemes.
But to the Committee's dismay, successive governments felt compelled to bring out amnesty schemes nevertheless.
One wishes the government is not hereafter constrained to bring an amnesty scheme, which makes mock of the honest taxpayer.
But if it does, the least it can do is close its doors to those who have already come clean before the Settlement Commission once or availed themselves of an amnesty scheme earlier.
A regime that countenances repeated confessions only encourages tax evaders to laugh up their sleeves.
S. Murlidharan (The author is a Delhi-based chartered accountant.)