Income tax settlements

THE appointment of a special commission for the settlement of income tax disputes will be widely welcomed. The Wanchoo Commission on Direct Taxes had recommended the setting up of such a body in 1971. In the UK, the system has been in vogue since 1923. In the US, there is a provision for a compromise with the taxpayers. The Wanchoo Commission was of the opinion that the experiment would be well worth a trial in India too. It said: “In the administration of fiscal laws whose primary object is to raise revenue, there has to be room for compromise and settlement. A rigid attitude would not only inhibit a one-time tax evader or an unindenting defaulter from making a clean breast of his affairs, but would also unnecessarily strain the investigational resources of the department in cases of doubtful benefit to revenue, while needlessly prolonging litigation and holding up collection.” Only two members, Prakash Chopra and PC Padhi, dissented from this proposal. Chopra was not against settlements as such but he wanted them to be entrusted to income tax commissioners in their respective jurisdictions. Padhi had his own doubts about the success of such a scheme, having regard to his experience as Chairman of the Central Board of Revenues when the Income Tax Investigation Commission of 1947 was given powers to arrive at settlements with persons who made offers after making a full disclosure of their affairs. Padhi said that not a single assessee at that time came forward with a full disclosure, and even the so-called settlement cases which the commission dealt with were not different materially from other cases under investigation from the point of view of complexity of the probe or the degree of cooperation offered by the assessees.