Watch out tax evaders! Settlement with I-T has just got tough

The heat continues on tax evaders under the new government. Indians who have stashed their undisclosed income abroad or have undertaken benami transactions w be able to settle cases with the tax department by just paying a penalty. They will face prosecution.

The Central Board of Direct Taxes (CBDT) has issued new guidelines for compounding offences under the direct tax law, which will replace the old guidelines issued in 2014. The new guidelines will be effective from Monday (June17).

Under the new guidelines, offences if committed with respect to benami transactions, undisclosed assets abroad or wilfull tax evasion will not be eligible for compounding for second time. Similarly, offences that are compoundable such as tax collected at source (TCS), tax deducted at source (TDS) and non-filing of tax returns will not qualify for compounding, if committed more than thrice. Compounding means that the tax authorities agree to not prosecute offenders in return for a consideration as per laid-down guidelines.

As per the guidelines, finance minister may relax restrictions in deserving cases, but on consideration of a report from CBDT.

Tax experts believe that the new guidelines make life difficult for big tax evaders.

Amit Maheshwary , managing partner of Ashok Maheshwary Associates, says, "The revised compounding guidelines will make compounding for money laundering, black money act/non-disclosure of foreign assets and benami offences, an exceptional affair. This clearly shows the government's intent to not allow any breather to such erring tax payers"

But there may be practical difficulties too. DS Saksena, former principal chief commissioner of income-tax, Mumbai, says, "The guidelines issued are very comprehensive but a number of offences have now become non-compoundable. Also the compounding charges are very onerous. Looking to the lakhs of cases of the department pending before the courts for decades, a more liberal approach was required. To get rid of the bulk of the pending cases, a parallel approach of resolving small prosecution cases through Lok Adalats should also have been spelt out."

New guideline details exclusion provisions under Category-B under which offences committed under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, Benami Transactions (Prohibition) Act, 1988, will not be compounded in normal cases. Any offence which has bearing on an offence relating to undisclosed foreign bank accounts/assets in any manner or any offence under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, or any offence under the Benami Transactions (Prohibition) Act,1988 will not qualify for compounding.

Restrictions on compounding will also include offences committed by a person for which he was convicted by a court of law under direct tax-related laws, any offence in respect of which, the compounding application has already been rejected, the cases of a person as main accused where it is proved that he has enabled others to evade tax. If someone fails to produce books of accounts it will also come under non-compoundable offence category. Other offences that will not be normally compounded include Category 'A' offence on more than three occasions. Category-A offences include TDS- and TCS-related defaults, and failure to furnish return of income, among others.

The government has been tough all along on black money and tax evasion issues. It passed various laws to curb tax evasion including benami assets and assets parked overseas. It also passed laws to deal with fugitive economic offenders to give a tough message to those who have run away from India.

Under The Ambit

• Offences like benami transactions, undisclosed assets abroad or willful tax evasion will be eligible for compounding for second time
• Offences compoundable such as TCS, TDS & non-filing of tax returns will not qualify for compounding, if committed more than thrice

—Zee Media Newsroom