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Carrots nearly over, tax authorities get stick ready

The finance ministry has drawn up an action plan, to be put in operation from January 1, 1999, to initiate action against tax defaulters who do not settle their disputes under the Kar Vivad Samadhan (Tax Disputes Resolution) scheme.

Official sources said action would be taken with "full judicial force".

The last date for filing applications under the scheme is December 31, 1998.

Contrary to speculation in some quarters, there will be no extension of the scheme, the sources said.

They said that while it is difficult to predict the exact quantum of disputed amounts for which applications are likely to be filed, it will not be less than Rs 40,000 million. This is likely to yield tax revenue of not less than Rs 15,000 million.

The sources said the scheme has elicited considerable interest from litigants in the last one month. So far, applications for settlement of disputes have been filed for an aggregate demand of Rs 13,000 million. The tax payable under the scheme on these declarations will be about Rs 5,200 million.

About 60 per cent of these applications were made in the first 10 days of December. "Any scheme like this sees a rush of applicants only in the closing phase," the sources said.

Under the Kar Vivad Samadhan scheme, after an application is filed, the department gets two months to process it and determine the tax payable. Thereafter, the assessee gets a month's time to pay the amount.

Most litigants prefer to delay their application till the last date so that they can make payment as late as possible. A similar trend was noted in the Voluntary Disclosure of Income Scheme, where 85 per cent of the applications were filed in the last fortnight, the sources said.

They said it is difficult to conceive of any further amendment to the scheme that can reasonably expand its scope without jeopardising the government's interests.

On the basis of feedback from litigants and tax consultants, two major amendments have been made to the scheme already. First, it has been made applicable to departmental appeals, which constitute a large percentage of pending cases. Secondly, it has been extended to co-noticees (directors and employees of firms against which the principal demand has been made), ensuring that all cases relating to a particular demand are closed in one sweep.

Referring to the demand from some quarters to also consider under the scheme any provisional payment that may have been made in pending disputes, the sources said the government might then end up paying money to litigants rather than collecting it.

They said the comparison being made between the KVS scheme and the VDIS is untenable. The VDIS targeted a 'large, almost unquantifiable ocean' of unaccounted funds. The scope of the KVS scheme is limited to amounts involved in disputes with assessees.

UNI

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