India Today Business [ VDIS: Paying for Peace]

Faced with a real possibility of failure, the IT Department goes all to net new targets.

Now or never. The message couldn't have been clearer. In its quest for success in the Voluntary Disclosure of Income Scheme (VDIS), the Ministry of Finance (MOF) and the Revenue Department have virtually left no stone unturned. Faced with a possible flop-show, MOF mandarins have executed a well-orchestrated gameplan to drive reluctant tax dodgers into the VDIS net.

Given the fact that the scheme had virtually failed to take off in its first three months -- despite the catchy slogan "30 per cent tax, 100 per cent peace of mind" -- the blitz was only to be expected. But the sheer vigour of the drive unleashed has left even veterans in the Income Tax (IT) Department gasping. over the past four weeks, the department has conducted over 300 raids across the country, from Goa to Guwahati and Delhi to Dindigul.

In Mumbai, raiders cornered tax dodgers from every segment -- from jewellers to brokers to dream merchants from the television industry (see box); in Delhi they targeted real-estate developers, bureaucrats, advocates, entrepreneurs and farmhouse owners; in Goa they bracketed builders, while in Bangalore and elsewhere they picked up a mixed bag of tax evaders. Says it Department Chief Commissioner O.P. Srivastava: "It's a total offensive against those hiding incomes."

The raids followed a set gameplan: each raid was not only assessed for substance but also for impact (in the media and outside). For instance, the raid on some TV producers and small screen icon Shekhar Suman caused tremors in the industry. even those with purported political clout were not spared. The message was simple: pay up, or else.

Interestingly, the department has, perhaps for the first time, sought market intelligence and used it to the full. In the case of the raids on television bigwigs, it used costing formulas from within the industry, it sleuths put to use trade information to target tax evaders across business segments. Even the downtrend in the real estate has been put to good use. Those caught with unsold properties simply found themselves cornered.

Tax practitioners, though, aver that not all the methods used were above board. The TV industry is abuzz with rumours that those raided last week were "forced to declare concealed income". Tax advisers to Bollywood moguls reveal that they have been receiving "helpful hints" from the department, provoking a senior tax consultant to quip, the VDIS "should perhaps have been named Compulsory Disclosure of Income Scheme".

Rumblings apart, the twin-pronged approach has paid dividends. In Mumbai, the department had disclosures of Rs 400 crore and revenue of a little over Rs 125 crore till the second week of October. Come December, the figure is said to be rising by well over Rs 80 crore per day, and the current unconfirmed figures for Mumbai are: disclosures of over Rs 1,000 crore and revenue of around Rs 400 crore. Others aren't lagging either. Calcutta and Chennai fall in the range of Rs 25 crore to Rs 30 crore per day and Delhi Rs 50 crore. Collections at Ahmedabad, Hyderabad, Bangalore and Pune range from Rs 15 crore to Rs 20 crore per day. Says Revenue Secretary N.K. Singh: "Industrialists should gallop rather than canter to grab this golden opportunity."

The advice is open, but collection figures are not. The MOF and the Central Board of Direct Taxes (CBDT) are chary of revealing them. Finance Minister P. Chidambaram simply says the response "is overwhelming" and Ravi Kant, chairman, CBDT, chooses not to comment. Notwithstanding the reticence, the it department estimates that disclosures would cross Rs 7,000 crore and revenue Rs 2,100 crore.

The numbers would seem small if compared to the size of the parallel economy of the country -- reported to be over 40 per cent of the GDP. It would also appear to be far less than the euphoric estimates -- of over Rs 1,00,000 crore, of which Rs 30,000 crore would be the tax revenue -- experts had fed the ministry. But it is considerably larger than what was expected -- barely Rs 2,000 crore, with around Rs 600 crore as tax revenue -- just seven weeks back. In that sense, the department has truly succeeded.

And the success would be in no small measure due to what Vijay Kalantri of the All India Association of Industries calls "the carrot and stick approach" of the department. Witness the change of tone in its VDIS campaign. From cajoling potential applicants with a "30 per cent tax, 100 per cent peace of mind", the campaign moved to a harsher "this is your last chance. Declare your income before it becomes a lost chance". Indeed, the spin doctors of the it department even put the Sharjah one-day series to good use, interspersing cricket with VDIS ads that simply advised: now or never.

And the department has pulled out all the stops. Revenue Secretary Singh has been touring the country to prepare the department for the final rush expected in the last week of the scheme. Even the RBI has been roped in. On December 18, it directed all banks to mobilise their men and machinery for the purpose.

Although the department did sponsor VDIS action replays on TV for the Sharjah tournament, it realises -- thanks to a Supreme Court ruling -- there can be no replay for VDIS. In that sense, for both potential applicants of VDIS and the MOF it's now or never.

IT RAIDS: Telly Targets

Success has its pitfalls. Moguls of the small screen learnt it the hard way when the taxman came calling on some of them last Monday. On the list were some of television's big names: telestar Shekhar Suman, Dheeraj Kumar, producer of Om Namah Shivay, Cine Vista's Sunil Mehta and Prem Kishen, who put Junoon and Ghutan on the TRP charts, the Adhikari Brothers, producers of Commander and Damini, Himesh Reshamiyya of H.R. Enterprises and cine star Jeetendra, whose daughter, Ekta, puts out the popular Hum Paanch.
According to N.P. Sahni, director general, income Tax (IT), 90 officials of the department worked for over 48 hours covering 24 premises and "uncovered concealed income worth over Rs 3 crore, besides Rs 22 lakh in cash and several documents". Even as the raids jolted the television software industry -- which has been hitherto untapped by taxmen -- those targeted, according to it officials, admitted concealing incomes. Suman -- one of the highest-paid stars and reportedly earning nearly a lakh per episode -- admitted concealing Rs 51 lakh, Reshamiyya Rs 86 lakh, Kumar Rs 1.15 crore, Mehta Rs 25 lakh and Adhikari Television Network Rs 60 lakh.
Though producers dubbed the it swoop a pressure tactic to promote the failing VDIS, senior it officials rejected the charge, saying the raids were neither sudden nor a knee-jerk reaction. "We also watch television and read publications. If income is being generated, we naturally keep a watch on it, particularly on the lifestyles and acquisitive practices," says one tax sleuth. A set procedure is followed. Once they received what Sahni described as "specific and reliable" information, the department worked on it for over six weeks. During the course of the verification, the it team cross-checked their declarations using a number of parameters, including published information, interviews, and commercial data. The TRP ratings of the shows and the possible scope of concealment were significant parameters.
As it officials say, this is just the tip of the money mound. "Prima facie, we are convinced that the concealment of income is far larger than what even we had expected," says a senior official in the revenue department. Officials say what has been revealed so far could lead them to others in the industry, untouched so far. And the raids could well be just the first episode, in a series, or as one it official put it: "the pilot." The plot is sure to thicken in the next episode.

December 29, 1997