Writ against VDIS Squashed by HC

The court agreed with the submission of the Union Government that a premium or concession had to be given to attract tax evaders towards disclosing their unaccounted wealth which could be utilised for priority sectors.

The division bench relied on the Wanchoo Committee report which signified while a few individuals evade tax, the administration was efficient in dealing with them.

However, the court felt that the existing situation in the country was just the opposite, as a large section of the society indulged in tax evasion. The judges noted that it would be difficult to say whether it had effectively controlled the tax evasion or not.

The petitioner, the federation of All India Tax Practitioners’ Association, said that the union government had disclosed in its affidavit that an estimated Rs 500,000 crore were lying underutilised as `black’ money and that Rs 500 crore was expected to be garnered from VDIS-97. How can a scheme be termed as `fair’ if only one per cent was expected to be trapped, it was argued. Petitoner’s counsel S E Dastur contended that earlier schemes introduced by the government were mere failures, as negligible amount of black money had been disclosed.

Besides, the petitioner argued, a reasonable classification was one which treated every one alike. VDIS-97 discriminated between honest tax payers and tax evaders, and was therefore violative of Art 14 of the Constitution. The additional Solicitor Gen. of India, Rafiq Dada, refuted petitioner’s claim that earlier schemes were failures.

Referring to the `91 scheme and those introduced earlier, he said the economy then was controlled and tax rates were high, which discouraged tax offendersfrom disclosing their income.

Dada contended that although the Wanchoo Committee report had not talked in favour of amnesty schemes, it had pointed out that in future if the economy opened up and tax structure was brought down substantially, then such schemes might result in rich yields. He disclosed that Rs 5000 crore was realised in FOREX through two schemes introduced in 1991 — India Development Bonds and FOREX Remittances Scheme.