Written on : July 28th 1997

In the previous article we saw that the VDIS is not a mere laundering scheme and that it offers many immunities to you from interest, penalties and prosecution which are truly invaluable. The immunities discussed by us are not the only ones available to you. There is one more that is perhaps as important, if not more.

Tax department being what it is, perhaps the best immunity that you can ask for will be is one from questions. VDIS offers this to you as well. The Scheme offers a perfect example of File, Smile and Go. You pay taxes and file a declaration. The Commissioner issues a certificate to you certifying the declaration made by you. That is it.

The Commissioner will not call you to ask a question. You can even avoid seeing a department official, if you wish, by sending the declaration by post. The Scheme does not have any mechanism under which the Commissioner can call you for any questioning or clarifications. Once the declaration is complete and properly filled and taxes paid, the Commissioner has nothing to do but issue the certificate to you.

Not just that - the Commissioners today are more than willing to ensure issuance of certificates at the earliest.

This simply means that the declaration filed by you will be accepted as it is, without any questions whatsoever. Whatever you declare, in whatever manner, will be accepted.

So, if you have not disclosed your correct incomes in the past, the no-questions policy of the department is something you will look forward to under VDIS.

How do you ensure that the declaration filed by you gets you the immunities you desire?

If you treat the Scheme as a mere money laundering offer, then you perhaps do not desire any immunities except acceptance of your declaration without questions. That is easy and does not need any discussion.

But if you wish that your declaration not only converts your unaccounted into accounted funds, but also immunises you from any questions from the department from your past actions, you need to plan your declarations methodically.

Suppose you make a declaration for assessment year 1990-91 of an income of Rs.10 lakhs. Some time afterward, during reassessment proceedings your officer finds that you have not disclosed your correct income in the return filed by you for that year. You now show the declaration filed and the Commissioner’s certificate and ask the officer to have his hands off you as the errors found by him have already been covered by your declaration.

Should he necessarily accept your requests and close the case? This question was answered by several High Courts while deciding similar issues under the earlier VDIS.

Our own High Court has held, very categorically, that it is for you, the declarant, to establish a nexus between your declaration and the amount being considered for addition by the officer. Unless you establish such a nexus - a link - your officer is not bound to automatically accept the declaration.

Now, such a nexus can only be shown by the manner in which you file the declaration. This calls for considerable care and thought in planning and preparing your declaration.

Your declaration should, as far as possible, identify the source and the amounts which were not disclosed in earlier years. This will be a great service to yourself, if you can do it.

Neither the Scheme nor the declaration form require you to identify the source and nature of your past income that remained undisclosed. In fact, there is not even a column in the declaration form asking you to identify the source of income.

However, it is extremely practical and advisable to do so - for your own benefit. Without this, you will remain vulnerable.

The same logic prompts me to repeat what I said earlier - make the declarations in the hands of the same person whose income was undisclosed. Again, for your own benefit and as effective insurance.

When you file a declaration, the Commissioners are not verifying whether you are eligible to claim the benefits of the Scheme. The department’s stand is that you are obliged to ensure your eligibility. Even after you receive the Commissioner’s certificate it is found that you are ineligible, you do not get immunity.

Let us understand this with an example. Suppose one of your business premises was surveyed in 1990 by the tax department. Nothing incriminating was then found and there were no adverse consequences. Either you were away at the time, or because of efflux of time, or for so many other reasons you have now forgotten that there was a survey. You now file a declaration of income of that year and pay taxes and get the certificate from the Commissioner.

Later on, the survey conducted gets discovered by your officer. What happens? Since you are prohibited from making a declaration for the year of survey, your declaration is invalid and you get no benefit of the Scheme whatsoever. This is despite the certificate from the Commissioner.

This means that you file the declaration and pay taxes at your own risk. It, of course, does not mean that you do not file declarations. It only means that you have to be more than certain that you are eligible to make a declaration and that your declaration is entirely correct without any doubt at all.