Before studying the pros and cons, effects and implications of the recently inserted section 134A on 'alternate dispute resolution' in the Income Tax Ordinance 1979 , it would be advantageous to look into the background of similar provision in India's income tax law.

The famous Wanchoo Committee, after making an inquiry into the ways of dealing in black money, had recommended formation of a settlement commission after a general amnesty in regard of the declaration of black money.

The committee found that such schemes gave an impression that they place a premium on fraud and were unfair to honest taxpayers. It also found that in the past such disclosures had proved to be quite disappointing.

The total income disclosed in all the three amnesty schemes put together was a mere IRs2.67 billion, which was only a small fraction of even the most modest estimate of concealed income for the period stretching from 1951 to 1965.

Against that, cases detected during a period of five years (1965 to 1969) were worth IRs1.61 billion and the taxes and penalties were worked out to Rs1.05 billion or about 65 per cent of the income detected. Even the taxes realized out of such disclosures were quite unimpressive. The total tax-yield of all the three schemes put together was a mere IRs612.3 million.

It was in this background that the Wanchoo Committee was obliged to observe that the door for compromise with an errant tax payer should not be closed, for the primary object of such administrative laws remain the raising of revenue.

Hence the committee suggested that there should be a provision in the law for settlement with the taxpayer at any stage of the proceedings. It also suggested that the high-level administrative official be involved to ensure fairness.

It also said that settlement may be entrusted to a body to be called the 'direct taxes settlement tribunal', with its members enjoying the same status and emoluments as the members of the Central Board of Direct Taxes (CBDT).

The tribunal in the committee report was re-christened as the 'settlement commission' in the Act when passed by Parliament. The commission was vested with powers to investigate cases in its jurisdiction. The committee recommended conferment on the 'settlement commission' a discretion to 'grant immunity from criminal prosecution in suitable cases.'

However, in India in the year 1976 and in Pakistan in the year 1993, the suggestions made by the committee were found to be 'inadequate', in so much so that India had to launch an amnesty scheme in 1997 which yielded no insignificant amount of income of Rs300 billion and 30 percent, a substantial amount of tax of Rs100 billion as against the amnesty report in Pakistan in 2000 which yielded a sum of Rs90 billion as concealed income and equally lesser amount of tax at the rate of 10 per cent yielding only Rs9 billion.

The fact remains that there are so many vistas of legalizing black money and there are so many cheaper devices adopted by people who feel reluctant even to spend the paltry percentage of 10 per cent to the department. Though India, while hoping against hope, continues to keep 'settlement commission' on statute book, in Pakistan they rendered it ineffective on June 30, 2000.

It was under the above-mentioned background that the finance minister has created a new 'committee' to function under the CBR by inserting a new Section bearing # 134A under the heading 'Alternate Dispute Resolution' (ADR), to make up the demise of the 'settlement commission'. It is intended to democratise the administration of the income tax law by involving chartered or cost accountants, advocates, income tax practitioners and even taxpayers.

The government that fails to implement and enforce its own laws, amend and modify every now and then itself must, instead of delegating its authority and responsibility to any other person or agency, try to improve its own tools and instruments of administration.

Abandoning and failing a forum like the settlement commission and instead falling upon the ADR through the mechanism provided in section 134A, indeed reflects upon intellectual bankruptcy of Legislature.

The formal study of this Section 134A would reveal the quality and standard of making fiscal laws in our country. It may be observed at a glance as if the provision is made post-haste, under abrupt dictation, for the draughtsman does not appear to be convinced in his own mind as to what he honestly intends to attain out of this half-baked, misconceived, self-contradictory, ill-drafted piece of legislation.

It is also startling to note that this ADR simply duplicates the work of an external, independent organization of "tax ombudsman" who claims to be providing itself an alternate forum for 'resolution of disputes".

In spite of the committee's noble desires to mop up black money through the device of the commission, it is historically established in Pakistan and India that amnesty schemes have to be resorted to provide simple and short-cut measures to collect such taxes.

Unfortunately for other inherent reasons in the economy of both these and other developing countries, even such amnesty schemes fail to attract substantial, what to talk of entire, evaded tax and concealed income.

In a similar earlier amnesty scheme by virtue of insertion of Section 59D under the heading 'Tax on undisclosed income' in the year 1997 by making an amendment in the Finance Bill 1997, dated 23/06/1997, in spite of the very paltry rate of income tax at the rare of 7.5 per cent having been imposed, a still lesser amount of black money and undisclosed income was declared.

A futile attempt is now made to substitute that institution by inserting Section 134A for the first time, and also probably in India. The general economic survey for the purposes of documentation of economy was conducted under Army umbrella under the present finance minister.

In the meanwhile, let the government revert to 'settlement commission' and not to make abortive attempts in utilizing newly inserted Section 134A. Before doing such inappropriate patch-work year after year, does it not occur to the government to consult the draughtsmen of the original Income Tax Ordinance, 2001, to know whether it was designed to withstand and bear the brunt of such native barrage.