Briefly what is proposed under the scheme is to give certain relief or waiver to the taxpayer in regard to disputed tax arrears outstanding on 31.03.1998. Therefore, this scheme is applicable only to those cases where additions made in assessments and demands raised thereon are disputed and the tax so disputed is outstanding on 31-03.1998. Thus, in those cases where the additions are disputed but taxes thereon are already paid or recovered by the department, the benefit of this scheme is not available. As usual, the correct or promptpayment of taxes is a cardinal sin. Tax arrears are defined to include;
Under Indirect Tax Acts, the duties, cesses, interest, fine or penalty due or payable but not paid till 31-03-1998.Under the scheme a person (which term is defined to include all categories encompassed under the Income Tax Act alongwith those covered under Customs and Excise Acts), whose taxes are outstanding on account of disputes and would like to obtain a waiver thereof under the scheme, he is required to file a declaration before a designated authority which is the commissioner of income tax for direct taxes, the commissioner of customs and the commissioner of central excise for indirect taxes, notified to be as such authority by the respective chief commissioners under the relevant enactment.
The form in which such a declaration is to be filed is yet to be prescribed. However, the declaration will be in respect of taxarrears outstanding on 31-03-1998.
On filing of the declaration, after 31-08-1998 but on or before 31-12-1998, the designated authority shall, within sixty days, determine the sum payable by the declarant at the rates prescribed in clause 91 and the declarant, on being intimated, has to pay the said sum within 30 days. The circumstance under which a declaration filed can be treated as invalid or not filed is where the declaration contains false statement as regards any material particulars. The word `material' indicates that minor mistakes not having a bearing on the facts or tax arrears will not make the declaration invalid.
The rates at which the amount payable by the declarant is mentioned in clause 91. The rates are different for each of the direct tax enactment but standard for the indirect tax enactment. In case of indirect taxes it is 50 per cent of tax arrears outstanding. In the case of income tax they are as follows; In respect of the tax arrears, the sum payable by a declarant company or firmis 35 per cent of the disputed income (and not the tax arrears). In the cases of other declarants it is 30 of the disputed amount.
To the extent the arrears (inclusive of tax, interest or penalty) pertain to assessments made in search cases (section 132) or where action for requisition u/s. 132A was taken, then the rate is 45 per cent of the disputed amount in case of a company or firm and 40 per cent of the disputed income in the case of an individual or HUF.
In respect of the tax arrears under the Wealth Tax Act, the amount payable is one per cent of the disputed wealth. In respect of the arrears under the Gift Tax Act, the amount payable is at the rate of 30 per cent of the disputed value of the gift and where the arrears include interest and penalty at the rate of 50 per cent of the arrears.
As per clause 91 (c)(ii) it is laid down that in case tax arrears include the gift tax, interest payable thereon or penalty levied the amount payable is at the rate of 30 per cent of arrears. It appears to be amistake since in respect of arrears under Expenditure Tax Act or Interest Tax Act the sum payable is at the rate of 10 per cent of chargeable expenditure and 50 per cent chargeable interest. Since the rate under all other enactment pertaining to direct taxes is with reference to the disputed additions made in the assessment, there does not seem to be any reason for making exception in the samadhan of gift tax cases. Moreover, in the memorandum explaining provisions relating to the scheme -- para 2 (a) (vi) the sum payable is referred to as 30 per cent of the disputed value of the gift. If this is a mistake it needs to be corrected immediately.
It must be noted that the above rates are applicable only when the tax arrears include the main tax besides interest or penalty. However, if the arrears consist of only interest or penalty levied then the amount payable is 50 per cent of the arrears. In short if the tax payer is clever enough not to have paid the tax or the department has failed to recover it then hehas to pay only the tax at the current rate on the disputed additions and he is not required to pay any interest or penalty at all. But if the tax payer is unlucky to have paid the tax leaving only the interest and/or the penalty unpaid then he has to pay 50 per cent of this amount. Surely the logic behind this seems strange. In the normal course, since assessments take a long time, sometimes interest charged is quite substantial and may even exceed the tax itself. Therefore to allow the benefit of the wavier of interest or penalty to those who have not paid the tax and deny it to those who have paid the tax is perhaps the most illogical provision in the scheme.
It is true that the scheme is to accelerate collection and reduce pending litigation but that cannot be an excuse for such a harsh treatment to the assesses who have cleared their taxes in preference to those who have not.There is another aspect to this matter that needs to be brought out. As discussed above the tax arrears which can be subject torelief under the scheme are those outstanding on 31.03.1998. It is also clear that such arrears will pertain mostly to assessments years prior to 1997-98. The assessments for AY 1997-98 would hardly have been taken up for scrutiny and completed by 31.03.1998.
(The author is presently the chairman of All India Federation of Tax Practitioners--west zone)
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
