In what could be a respite for taxpayers, the government has opened a new window for them to escape penal action for alleged tax evasion until the final settlement of the case. Under a proposal in the recent Budget, companies and individuals facing search and seizure operations by the income-tax department can pay up a self-assessed amount, and then approach the Settlement Commission for a waiver from penal action. The Finance Bill 2010 proposes to enhance the commission?s powers in this respect.

Many tax experts think the new facility is tantamount to an amnesty scheme although the government is reluctant to call it so. According to the Bill, the commission can take up cases of search and seizure, a practice that existed until three years ago but discontinued by former finance minister P Chidambaram. It is reckoned that if the commission is empowered to decide on such cases, tax authorities can practically realise higher amounts than what they would have otherwise, as the demands usually get stuck in litigations.

The income-tax department conducts search operations in offices and premises of companies and individuals on tax evasion suspicion. The cases finally end up at the tax tribunals or courts. In a sizeable number of cases, neither does the revenue come to the exchequer, nor does the assessee enjoy the freedom to plough back the amount in his business due to the uncertainty over his final tax liability.

The latest among the searches conducted were those on builder Omaxe Constructions and steel manufacturer Bhushan Steel.

After the proposal was mooted by Pranab Mukherjee in Parliament, many termed the move as a backdoor amnesty scheme, but senior revenue officials won?t endorse that notion. Explaining as to why the move was needed and why there was no reason to call it a backdoor amnesty, an official associated with the matter said, ?All applications are not entertained by the Settlement Commission, only some are, on the basis of specified criteria Also, once rejected, no assessees can approach the Settlement Commission again.?

In fact, taxpayers cannot routinely evade tax and go to the commission for relief. Approaching the commission for waiver from penal action should be a one-off event.

The finance Bill tabled in Parliament said, ?It is now proposed to include proceedings for assessment or reassessment resulting from search or as a result of requisition of books of account or other documents or other documents or any assets.? The amendment is proposed to take effect from June 2010.

A similar change to the Act has been done with the Indirect Tax Settlement Commission, as the commission would also be able to take up cases that result from search and seizure operations conducted by excise and customs officials.