Officials Insist On Informal Clearance

Income-tax officials develop cold feet after eyebrows are raised over scheme
A tax department scheme that allows defaulters to pay a penalty to avoid legal tangles in cases of undisclosed foreign assets has barely made any headway and now appears to have stalled.

The compounding scheme introduced in 2015 was aimed at encouraging tax evaders to come clean on foreign bank accounts and declare undisclosed income. Now, after approving only one case of compounding, it's being said that tax officials have become extremely cautious about clearing other applications because “eyebrows are being raised“.

They insist on getting informal clearance or vetting from either the Central Board of Direct Taxes or the Special Investigation Team probing black money cases before approving compounding applications, officials told ET.

In July, the income-tax department approved the compounding application of Yashpal Kapur, managing director of New Delhi-based Everest Transmissions, a manufacturer of air blowers and mechanical vacu um boosters, said tax officials with knowledge of the matter.Kapur's was the first case to be approved and his prosecution withdrawn. He was on a list of people holding accounts at HSBC Geneva. Other applications have been pending before the department for over a year, including those of Pradip Burman, a former director at Dabur India, KL Madhok and Sanjiv Gupta, according to officials. All the applicants have paid taxes with interest, including penalty, but their cases haven't been compounded. A top business tycoon, whose name was on the HSBC list, came forward to declare undisclosed income but decided against filing for compounding, aware of the status of other applications, a senior I-T official told ET. According to the guidelines issued in September 2015, cases will be compounded only where individual account holders have cooperated with the authorities. The person should have paid the outstanding tax, interest, penalty and other amounts due, must undertake to pay the compounding charges including the fee and agree to withdraw appeals filed by him.

“We are cooperating with the department, but please don't treat us like criminals. If there is evasion, take taxes, penalty, whatever, but approve applications since we have adhered to all the conditions,“ one foreign account holder told ET.

“It's a long-drawn process,“ a commissioner-rank official said. “We understand the problem, but nothing much can be done. Nobody wants to touch compounding cases.Just one case of approval and eyebrows are being raised.“ Meanwhile, an applicant against whom prosecution was initiated, is believed to have told the tax department that he should be “allowed to die in peace and his application decided during his lifetime“.

On August 12 last year, ET first reported that SIT had approved compounding of offences under the Income-Tax Act for Indians holding accounts in foreign banks, many of whom are facing prosecution for tax evasion and concealment of income.

Economic Times New Delhi,22th October 2016