While the government expects the move will simplify tax administration, ease compliance and reduce litigation, tax experts claim any non-compliance would have severe cost and penalty implications.
Voicing their apprehensions concerning the Finance Bill 2021’s proposal to discontinue the ITSC from February 1, 2021, the Kolkata chapter of Income Tax Bar Association (ITBA) has, in a letter addressed to FM Nirmala Sitharaman, said applicants with cases pending for disposal at various levels of the settlement proceedings have been ‘left in the lurch’.
The proposal, the letter dated February 9, 2021, states, is ‘gross injustice to applicants whose cases are pending before ITSC as on January 31, 2021. The discriminatory treatment meted out to such applicants is impermissible under Article 14 of the Constitution, and goes against the very spirit of giving a person right to a fair and effective hearing and rebuttal.
Assessees who have filed applications before the Commission to settle their disputes by paying taxes and interest and in return, get immunity from penalty and prosecution, will now have to fight his case before multiple layers of appellate and judicial bodies.
“This will result in spurt of litigations and delayed collection of revenue. It will also ruin business of many entrepreneurs as they will be wasting their energy and resources in protracted litigations,” S K Tulsiyan, president, ITBA, Calcutta, said. ET has a copy of the letter.
According to a Mumbai based accountancy expert, scrapping of the 44-year old Commission may encourage taxpayers to become tax compliant and fulfil tax obligations as any non compliance would have severe cost and penalty implications. “Contrarily, it may compel many to find ways to wriggle out of it and evade levies,” he said.
Elaborating further, he said, ITSC’s image took a beating because of the wrong perception that it is a window for compulsive tax evaders. “It is for assessees who have been compelled to hide their income because of business or personal compulsions. Additionally, the Commission was not set up to deal with only search and seizures matters, but also for compliant assessees keen to pay up their tax liabilities at one go without any provocation from the department.”
Unlike his peers, S K Patodia & Associates’ Mihir Tanna feels the Settlement Commission had outlived its utility value with the government encouraging voluntary compliance. “Power of the Settlement Commission was challenged. The commission was also facing other administrative issues. Moreover, the government had invoked several other provisions and proposals to settle cases by reducing litigation through ‘Vivad Se Vishwas’ scheme.”
Some practitioners termed the Budget 2021-22 proposal ‘unconstitutional, as institutions like ITSC cannot be scrapped until the Bill is passed and becomes a law’.
“That apart, ITSC is a quasi-judicial body independent of CBDT and all applications filed till January 31, 2021, must be settled by the same body. How can the cases be brought under the purview of an interim board which reports to CBDT,” the practitioner argued on conditions of anonymity.
Keeping in mind the havoc Covid-19 pandemic has had on the financial health of the country and its economy, ITBA, Calcutta, has requested finance ministry to reconsider their decision of scrapping ITSC from February 1. “Alternatively, the government can contemplate allowing ITSC to receive fresh applications till March 31, 2021, and settle the pending cases within a stipulated time frame.”