The Hon’ble Finance Minister while rendering the Budget 2020 on 1st February 2020 made an important announcement of reducing the pending litigation matters substantially, by introducing ‘Vivad se Vishwas Scheme’. Accordingly, on 5th February 2020, The Direct Tax Vivad Se Vishwas Bill, 2020 was introduced in the Lok Sabha, the provisions of which are explained herein under: –

A. Applicability:

Person in whose case an appeal is filed by him or by income tax department or by both against an assessment/reassessment order or in respect of TDS/TCS which is pending before Supreme Court/ High Court/ ITAT/ CIT(A) as on 31.01.2020 irrespective of whether the demand in such case is pending/ paid is eligible to make a declaration under this dispute resolution scheme.

B. Object:

To resolve the direct tax disputes and rest litigation by paying the disputed tax arrears with concession.

C. Amount Payable:

Sr. No Nature of Tax Arrear Amount payable on/ before 31st March 2020 Amount payable on/ after 1st April 2020 but before last date.
1. Where it is aggregate of disputed tax, interest, penalty Amount of Disputed Tax Disputed Tax + 10% of Disputed Tax
2. Where it related to Disputed interest/ penalty/ fees 25% of Disputed Interest/ Penalty/ Fees 30% of Disputed Interest/ Penalty/ Fees


(i) ‘Disputed Tax’ is the tax on additions which have been contested in appeal

(ii) ‘Disputed fee’ is the fee determined for which appeal is filed

(iii) ‘Disputed Interest / Penalty’ is the interest or penalty as the case may chargeable or charged for which appeal is filed

(iv) ‘Last date’ may be notified later although announced as 30th June, 2020 in the Budget Speech

D. Procedure:

i. Declarant is required to file a declaration in prescribed form before the Designated Authority (not below the rank of CIT)

ii. Upon filing such declaration, relevant appeal shall be deemed to have been withdrawn, from the date of certificate issued by the Designated Authority u/s. 5(1).

iii. An undertaking in the prescribed form shall be furnished by the Declarant waiving his rights (direct or indirect) to seek or pursue any remedy or any claim in relation to tax arrears otherwise available under any law.

iv. Designated Authority within 15 days from date of receipt of declaration; by order, determine the amount payable by the declarant and grant a certificate.

v. Declarant shall pay the amount determined within 15 days of receipt of such certificate and intimate the Designated Authority pursuant to which Designated Authority pass an order to that effect which will be conclusive.

vi. Consequent to such order being passed by Designated Authority, no proceedings of any offence, penalty or interest in respect of any tax arrears be instituted against the declarant.

vii. Any amount paid pursuance of such declaration shall not be refundable under any circumstances.

E. Exclusions

> In respect of Tax Arrears relating of Appeal:

1. Tax arrears arising out of order passed u/s. 153A or 153C.

2. Assessment Year in respect of which prosecution has been instituted on or before the date of filing the declaration.

3. Any undisclosed income from a source located outside India or undisclosed asset located outside India.

4. An assessment or reassessment made based on the information received under an agreement referred to in section 90 or 90A related to any tax arrears.

5. Any appeal before CIT(A) in respect of which notice of enhancement u/s. 251 has been issued on or before 31st January 2020.

> Any person in respect of whom an order of detention has been made under the provision of Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974 on or before filing of declaration, unless otherwise revoked/ set-aside subject to relevant conditions.

> Any person in respect of whom Prosecution or any offense punishable under IPC, the unlawful Activities (Prevention) Act, 1967, Narcotics Drugs & Preventions, PCA, PMLA, PBPT or for purpose of enforcement of any civil liability has been instituted on or before filing of declaration or such person has convicted of any such offence punishable under any of these Acts.

> Any person notified u/s. 3 of the Special Court (Trial of Offence) on or before the filing of declaration.

F. Issues to Ponder

1. Amount already paid earlier:

Payment prescribed in section 5(2) shall cover such cases where payment towards disputed taxes have already been made earlier and accordingly, the form so to be prescribed should provide for relevant disclosures/ adjustments and resultant refunds in cases where excess amount is already paid earlier.

2. Effect of reduction in losses or conversion of loss into Income:

Where the appeal is filed and pending before appellant forum in respect of additions resulting into reductions in losses or conversion of loss into income, then the disputed tax is defined to be the tax on such amount in respect of which appeal is filed had it been the total income. Hence, in such cases, there is no persuasive value.

3. Pick and choose facility not available:

Amount payable being the disputed tax is so defined that the said tax is to be computed for the whole of the additions in respect of which appeal is filed. Hence, one cannot go ahead to resolve litigation for certain issue and continue the litigation for other issues as such pick and choose option is not available.

4. Hearing is concluded/ but order is not passed

In cases where hearing is concluded but order is not passed, appellant should immediately move an application to the relevant appellant forum about their willingness to avail the benefit under this scheme and that no order be passed until the order u/s. 5(2) is passed by the Designated Authority.

5. Timeline for carrying out pending rectification be given:

There may be cases where rectification as regard to non- granting of proper set-off of brought forward losses on account of computation error, etc. are pending at the end of the jurisdictional Assessing Officer/ CPC which have an impact in determining the correct tax on Total Income. In absence of carrying out such rectification in a timely manner, the amount payable for the disputed tax cannot be determined correctly u/s. 5(1).

6. No Option to challenge the arithmetical correctness of amount payable:

As per the section 5(1); the Designated Authority is required to determine the amount payable by the declarant and grant a certificate to the declarant containing particulars of the tax arrears and the amount payable after such determination, in such form may be prescribed. Here after such determination of amount payable; there is no option on the part of the declarant to either move a rectification application or challenge its arithmetical correctness before any higher authority.

7. Whether Writ petitions filed before courts covered?

Writs filed cannot be termed as an appeal filed but on reading the provisions harmoniously specifically section 4(3), it appears that any writ petitions before the High Court or Supreme Court are also covered.

8. Whether matter before the Dispute Resolution Panel (DRP) is covered?

There would be cases where an assessee may have filed objections before the DRP against a draft assessment order passed as per section 144C and consequential assessment order is pending as on 31.01.2020. Such cases are not eligible for the benefit under the scheme, although ideally, ought to have been considered.

9. Whether matter before the Commissioner of Income Tax in relation to Revision Petition u/s. 264 is covered?

There would also be certain cases where revision petition may have been filed by the assessee u/s. 264 of the Act, may be for the reason of delay in filing an appeal before the CIT(A). Certainly, such cases are not appeals filed before CIT(A) and hence, such assessees would also be deprived of any benefit under the scheme, although ought to have been covered.

10. Year of search is covered but not preceding 6 years

It is strange to note that the year of search is covered for obtaining the benefit of the scheme whereas the preceding six years are not covered as assessments made u/s. 153A or 153C are excluded.

In view of the above discussion, it is important that certain clarifications may be issued, or suitable modifications may be done in the said Bill before it becomes the Act. Nevertheless, it appears that the benefit under this Scheme would be taken by many litigants to buy peace of mind and avoid unwarranted litigations over the years. I hope that this results into a Win-Win situation to both – for the appellants as well as the government in their objective to resolve disputes.

About Author-

Rushabh MehtaMr. Rushabh Mehta is a Chartered Accountant and a fellow member of the Institute of Chartered Accountants of India having passed his CA in 2009. Presently, he is a partner in SGCO & Co. LLP, Chartered Accountants looking into the Direct Taxation matters.

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  1. Madhu says:

    Dear Sir,

    We have got a notice for compounding for late payment of TDS collected from employees. Can we avail vivad se vishwas scheme and pay 25% of compounding fee?
    Thanks and best regards

  2. JITENDRA SHAH says:


  3. Siddharth Jain says:

    Dear Sir,

    If, For any Assessment Year, we have deposited the disputed tax for all the grounds of appeal, can the same grounds be appealed in any other assessment year for which the normal litigations are continuing??

  4. SURANA says:

    There are cases where the Assessee received the ITAT Order in this hand in last week of Jan 2020 without his knowledge that the hearing is concluded as an exparte and order dated June 2019. Now this is due to non serving of notice and non serving of order…

    And there are cases where notice under section 251 for enhancement was issued by CIT(A) in May 2019 and the hearing was concluded in June 2019 but CIT(A) has not passed any order till date… now there is no default of assessee in such cases of delay by Department.

  5. M.Gopinath says:

    Thie Time for filing declaration & Issue of a Certificate in 15 days& Settlement in 15 days thereafter, is too tight a Schedule.Therefore,I suggest that:
    a.Give sufficient Time for the Processes to be completed, say- 15 days for filing Declaration, & thereafter, 30 days for mobilising Funds for full Settlement.
    b. Give full concession on Interest & Penalty,instead of 25%,so that the Scheme will be successful in true spirit of the OBJECTIVES.
    Best wishes,


    Dear Sir,

    Is interest income from Tax Free Bonds exempted from Tax under Budget 20-21? If yes, under which exemption?

    Thanking you. RAKESH

  7. Sunil Kumar says:

    Dear Sir,

    Request you to please guide regarding the applicability of this bill for section 276B (Compounding for TDS late payment)

    Thanks & Regards

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