It is also common knowledge that the department (even the tribunal) in most cases, specially where the demand is large, insist on payment of at least 50 per cent of taxes pending appeals. In such cases the assessees are clearly at a disadvantage under the Kar Vivad Samadhan Scheme (KVSS). They will be liable to pay at the rate of 35 per cent or 30 per cent of the disputed amount once again though the taxes actually outstanding may be only 50 per cent of the demand raised. And it is not as if that such assessees will not come forward under the scheme, because the burden of interest and/or penalty will still be high and the waiver of prosecution is the most important carrot angled before them. But in their cases they will be paying more tax than originally demanded in order to get the interest, penalty and prosecution waived. Let is take anillustration.

Suppose in the case of a private ltd company, for AY 1993-94, additions made for Rs 1 crore are disputed. The tax on this amount will be Rs 57.5 lakhs. After paying 50 per cent of the disputed tax the outstanding will be Rs 28.75 lakhs. Let us presume that the assessing officer has levied a penalty of Rs 60 lakhs u/s 271(1) (c) of I-T Act. He has also levied interest of Rs 10 lakhs. Thus, the total demand outstanding is Rs 28.75 lakhs + Rs 10 lakhs (interest) + Rs 60 lakhs [penalty u/s. 271 (1) (c)] = 98.75 lakhs. If the company wants to avail of the benefits under the scheme it will have to pay Rs 35 lakhs (35 per cent of Rs 1 crore) to seek waiver of the balance demand. Thus, in effect it pays Rs 28.75 lakhs (earlier) and Rs 35 lakhs (now) aggregating to Rs 63.75 lakhs as tax though its liability for the tax as per the rates applicable for AY 1993-94 was only Rs 57.5 lakhs. It is true that the company gets a waiver of interest and penalty but so will another company which has not paid thetax at all. It will pay only Rs 35 lakh as tax as against Rs 57.5 lakhs payable originally. In the above case, if the taxes were fully paid then the company will have to pay a further amount of Rs 35 lakhs (50 per cent of interest of Rs 10 lakhs + 50 per cent of penalty of Rs 60 lakhs) totalling to a payment of Rs 92.5 (Rs 57.5 lakhs tax paid originally + Rs 35 lakhs paid now). Is it logical?

It would therefore be in the fitness of the things that in cases where only interest and/or penalty is/are outstanding, the rate of 50 per cent for interest and penalty be reduced to say 20 to 25 per cent. Similarly in cases where part of the taxes were paid the sum calculated at the rate of 35 per or 30 per cent of the disputed amount should be reduced by the amount of taxes already paid so that even their cases are brought on par with those who had not paid the taxes. The order passed by the designated authority is final and cannot be reopened in any proceedings or under any law. Similarly any appeal or referencefiled by the declarant before any authority or court pertaining to the relevant assessments covered by the scheme will be deemed to have been withdrawn. The deeming provision indicates that even if there is no withdrawal, such proceeding will abate. The only exception is for writ petitions filed before the high court / the Supreme Court, which have to be specifically withdrawn. Such withdrawal is required to be intimated along with the proof thereof to the authorities. The amount paid under the scheme is not refundable.

Lastly the scheme is specially excluded from application in the following cases : Under the direct tax enactments. p Where prosecution for concealment is launched under those enactments,