CAG finds fault with VDIS-97

By Our Special Correspondent

NEW DELHI, AUG. 25. Two years after the closure of the Voluntary Disclosure of Income Scheme (VDIS), the Comptroller and Auditor General of India (CAG) has come down heavily on the scheme saying its complexities and several lacunae in the text and subsequent circulars and notification provided declarants with ``an opportunity for widespread misuse by undervaluation of jewellery, bullion shares and real estate and `creation' of capital loss to be set off against income in future years.''

In its report on the VDIS 1997, the CAG has said that ``ineligible persons were found to have taken advantage and their subsequent assessments were also accepted summarily, thereby affording the benefits of the scheme. The Central Board of Direct Taxes (CBDT) also created categories of eligible persons not envisaged in the Act such as minors whereby benami declarations were made possible. The net effect is that the immediate revenue gain would be completely wiped out in the next few years. Moreover, Parliament was not informed of the circulars and notifications though expressly required under the Act.''

The report also states that post-VDIS action was found missing in the Revenue Department which did not monitor the cases of declarations and the Commissioners of Income Tax failed to share information with the assessing officers. It was noticed during audit that most of the irregularities in the implementation of the scheme, such as multiple declarations, could not be rectified at the assessment stage during the last three years, enabling the declarants to reap unintended benefits.

The audit also found that the track records of the declarants showed a clear scenario where they were found to have taken advantage of earlier amnesty schemes too. ``A few business houses and family groups have declared huge unaccounted income which point towards the failure of the department to properly assess such high tax groups in their normal tax collection efforts.''

The CAG has, therefore, concluded that the scheme was not in the interests of revenue and in fact it ``provided one more opportunity to dishonest assessees to pay tax at a preferred rate and then retire to the old habit of concealing income.''

In its statistical audit of the VDIS, the CAG found that the total concealed income declared was Rs 33,679.32 crores on which tax paid amounted to Rs 9,729.02 crores and interest paid was Rs 74.44 crores. A total number of 4,75,477 declarants took advantage of the scheme which was in operation from July 1, 1997 to December 31, 1997. As expected, the maximum number of declarants were from Mumbai where some 71,011 declarants revealed income worth Rs 6,764.89 crores. Next was Calcutta with 49,894 declarants disclosing Rs 2,324.91 crores income, followed by Delhi with 38,217 declarants disclosing Rs 4,026.39 crores of income.

Chennai was next with 19,939 declarants disclosing Rs 1,613.08 crores of income, followed by Bangalore where 19,472 people disclosed Rs 1,748.23 crores income. In Ahmedabad, some 19,334 persons disclosed Rs 1,346.53 crores while 12,967 people took advantage of the scheme in Surat and disclosed Rs 1,074.14 crores. Hyderabad had 12,769 declarants who disclosed Rs 1,395 crores of income, followed by Ludhiana (Punjab) and Nasik (Maharashtra).

The audit found that there were 2,037 declarants who disclosed concealed income of Rs 1 crore or more, another 1,151 persons disclosed between Rs 75 lakhs and Rs 1 crore, some 3,242 persons between Rs 50 lakhs and Rs 75 lakhs and 12,477 people disclosed income between Rs 25 lakhs and Rs 50 lakhs. The statistics revealed that though only 0.43 per cent of the declarants made disclosures of Rs 1 crore and above, the amounts disclosed by them accounted for 18 per cent of the total amount declared under the scheme.

An analysis of the assets declared revealed that 23.26 per cent was in the form of jewellery (pre-assessment year 1987- 88), 13.67 per cent in the form of jewellery (from assessment year 1987-88), 5.07 per cent in the form of real estate, 0.87 per cent in the form of silver, 1.10 per cent in the form of gold, 50.09 per cent in the form of cash and the rest in terms of shares, stocks, debts due from others, vehicles, loans and advances and 1.90 per cent in terms of ``unusual items'' like shawls, furniture, carpets, revolvers, sarees, air-conditioners, TV sets, etc.

The CAG audit also found that some of the CBDT clarifications were not in accordance with the law or that circulars were contrary to the provisions of the scheme.

The CAG also found that the effective rate of tax on jewellery was only 16.32 per cent whereas the VDIS scheme envisaged tax to be paid at the rate of 30 per cent. This was because value of gold was taken as on 1.4.87 which was Rs 2,570 per 10 gms whereas the rate of gold on 1.4.97 was Rs 4,725 per 10 gms. Therefore on jewellery valued at the rate prevailing on 1.4.87 at the rate of 30 per cent was Rs 771 per 10 gms. which worked out to an effective rate of 16.32 per cent if the value of the gold was taken to be that prevailing on 1.4.97.

Send this article to Friends by E-Mail

Section  : Business
Previous : Ordinance on Companies Bill likely
Next     : 'Ford not to hike prices'