Experts want settlement panel's powers restored

RUN-UP TO THE BUDGET 2008-09

Tax experts are looking forward to the finance ministry restoring some of the powers of the income tax settlement commission, whose role was drastically reduced in Budget 2007-08.

Finance Minister P Chidambaram withdrew a lot of powers from the body over the slow pace of settlement proceedings. Defending the move, Chidambaram had said the tightening was required to ensure that the comission settled cases within a year instead of the four to five years it was taking then.

"There is a great deal of uncertainity when cases go to court. We have to have an effective alternative forum to sort out matters amicably. If the old format of the commission was not good, the new format is worse. We need a new avataar of the commission, which should be also allowed to take up disputed income cases," said Gaurav Taneja, national tax director, Ernst & Young.

The commission offered a forum for admitting undisclosed income and paying tax. Besides securing revenue for the government, it helped reduce litigation and brought finality to complicated tax cases.

The institution also helped tax-payers, caught in search and seizures, to come out clean and get immunity from prosecution.

However, the powers of the commission to grant immunity from prosecution under any law other than the Income Tax Act, 1961, and Wealth Tax Act were taken away last year. This discouraged tax-payers from approaching the commission.

"There is a need to restore pre-2007 powers of the commission and ensure that people approach the body. For the government, the commission helps in unlocking revenue, while it saves tax-payers from harassment," Ashok Dhingra, partner and head of indirect taxes, Khaitan & Co.

As a consequence of the cut in the powers of commission, virtually no application has been filed before the commission after June 1, 2007, under Section 245 C of the Income Tax Act, 1961.

Another issue is how can the commisssion settle the 3,000 pending cases by March, 2008, which were filed prior to June 1, 2007. In a full year, the commission is able to settle only 100 to 150 cases on an average.