VIVAD SE VISHWAS
The ‘Vivad se Vishwas’ Scheme was announced during the Union Budget, 2020, to provide for dispute resolution in respect of pending income tax litigation. Pursuant to the Budget announcement, the Direct Tax Vivad se Vishwas Bill, 2020 (hereinafter called Vivad se Vishwas) was introduced in the Lok Sabha on 5th of February, 2020 and passed by it on 4th of March, 2020. The objective of Vivad se Vishwas is to inter alia reduce pending income tax litigation, generate timely revenue for the Government and benefit taxpayers by providing them peace of mind, certainty and savings on account of time andj resources that would otherwise be spent on the long-drawn and vexatious litigation process. Subsequently, based on the representations received from the stakeholders regarding its various provisions, official amendments to Vivad se Vishwas have been proposed. These amendments seek to widen the scope of Vivad se Vishwas and reduce the compliance burden on taxpayers.
After introduction of Vivad se Vishwas in Lok Sabha, several queries have been received from the stakeholders seeking clarifications in respect of various provisions contained in the Scheme. After considering various queries received from stakeholders, CBDT has clarified the same in the form of answers to frequently asked questions (FAQs) vide Circular No.7/2020 dated 04.03.2020. The FAQs contain clarifications on scope/eligibility, calculation of disputed tax, procedure related to payment of disputed tax and consequential benefits to the declarant.
FAQ
“QUESTIONS ON SCOPE/ ELIGIBILITY (Q. No.1 – 24)”
FAQ 1:- Which appeals are covered under the Vivad se Vishwas?
Answer:- Appeals pending before the appellate forum
- [Commissioner (Appeals),
- Income Tax Appellate Tribunal (ITAT),
- High Court or Supreme Court], and
- Writ petitions pending before High Court (HC) or Supreme Court (SC)
- Special leave petitions (SLPs) pending before SC as on the 31st day of January, 2020 (specified date) are covered.j
- Cases where the order has been passed but the time limit for filing appeal under the Income-tax Act, 1961 (the Act) against the order has not expired as on the specified date are also covered.
- Cases where objections filed by the assessee against draft order are pending with Dispute Resolution Panel (DRP) or where DRP has given the directions but the Assessing Officer (AO) has not yet passed the final order on or before the specified date are also covered.
- Cases where revision application under section 264 of the Act is pending before the Principal Commissioner or Commissioner are covered as well.
- Where a declarant has initiated any proceeding or given any notice for arbitration, conciliation or mediation as referred to in clause 4 of the Bill is also covered.
Note:- In the definition of Appellant
2(1)(a)(ii) a person in whose case an order has been passed by the Assessing Officer, or an order has been passed by the Commissioner (Appeals) or the Income Tax Appellate Tribunal in an appeal, or by the High Court in a writ petition, on or before the specified date, and the time for filing any appeal or special leave petition against such order by that person has not expired as on that date;
Thus where an order has been passed by HC in an appeal and time limit to file the appeal by the taxpayer or department has not expired, such taxpayer or the department will not be eligible for the scheme. It appears to be unintentional omission in drafting of amendment
NOTE 2:- The Issues which are pending with the AO e.g. Penny Stock Case F.Y. 2017-18 for which assessment is still to be made. Whereas for the same issue in earlier year assessment has been framed.(e.g. A.Y. 2015-16) The case of A.Y. 2015-16 is covered and case for F.Y. 2017-18 is not covered.
FAQ 2:- If there is no appeal pending but the case is pending in arbitration, will the taxpayer be eligible to apply under Vivad se Vishwas? If yes what will be the disputed tax?
Answer: – An assessee whose case is pending in arbitration is eligible to apply for settlement under Vivad se Vishwas even if no appeal is pending. In such case assessee should fill the relevant details applicable in his case in the declaration form. The disputed tax in this case would be the tax (including surcharge and cess) on the disputed income with reference to which the arbitration has been filed.
Note:- The assessee can opt for VSV even in a case where no appeal is pending but arbitration is pending.
FAQ 3:- Whether Vivad se Vishwas can be availed for proceedings pending before Authority of Advance Ruling (AAR)? If a writ is pending against order passed by AAR in a HC will that case be covered and how disputed tax to be calculated?
Answer: – Vivad se Vishwas is not available for disputes pending before AAR. However, if the order passed by AAR has determined the total income of an assessment year and writ against such order is pending in HC, the appellant would be eligible to apply for the Vivad se Vishwas. The disputed tax in that case shall be calculated as per the order of the AAR and accordingly, wherever required, consequential order shall be passed by the AO. However, if the order of AAR has not determined the total income, it would not be possible to calculate disputed tax and hence such cases would not be covered. To illustrate, if AAR has given a ruling that there exists Permanent Establishment (PE) in India but the AO has not yet determined the amount to be attributed to such PE, such cases cannot be covered since total income has not yet been determined.
Note:- 1. VSV is not available for disputes pending before AAR
2. If AAR is challenged in HC through writ and such order is pending in HC then in that case appellant will be eligible for VSV, but if the matter is related to permanent establishment in India and amount attributable to such PE is yet to be determined then in that case appellant cannot apply for VSV.
Disputed Interest and No Disputed Tax
FAQ 4:– An appeal has been filed against the interest levied on assessed tax; however, there is no dispute against the amount of assessed tax. Can the benefit of the Vivad se Vishwas be availed?
Answer: – Declarations covering disputed interest (where there is no dispute on tax corresponding to such interest) are eligible under Vivad se Vishwas.
NOTE:-It may be clarified that if there is a dispute on tax amount, and a declaration is filed for the disputed tax, the full amount of interest levied or leviable related to the disputed tax shall be waived.
FAQ 5:– What if the disputed demand including interest has been paid by the appellant while being in appeal?
Answer: – Appeals in which appellant has already paid the disputed demand either partly or fully are also covered. If the amount of tax paid is more than amount payable under Vivad se Vishwas, the appellant will be entitled to refund without interest under section 244A of the Act.
FAQ 6:- Can the benefit of the Vivad se Vishwas be availed, if a search and seizure action by the Income-tax Department has been initiated against a taxpayer?
Answer: – Case where the tax arrears relate to an assessment made under section 143(3) or section 144 or section 153A or section 153C of the Act on the basis of search initiated under section 132 or section 132A of the Act are excluded if the amount of disputed tax exceeds five crore rupees in that assessment year. Thus, if there are 7 assessments of an assessee relating to search & seizure, out of which in 4 assessments, disputed tax is five crore rupees or less in each year and in remaining 3 assessments, disputed tax is more than five crore rupees in each year, declaration can he filed for 4 assessments where disputed tax is five crore rupees or less in each year.
FAQ 7:– If assessment has been set aside for giving proper opportunity to an assessee on the additions carried out by the AO. Can he avail the Vivad se Vishwas with respect to such additions?
Answer: – If an appellate authority has set aside an order (except where assessment is cancelled with a direction that assessment is to be framed de novo) to the file of the AO for giving proper opportunity or to carry out fresh examination of the issue with specific direction, the assessee would be eligible to avail Vivad se Vishwas. However, the appellant shall also be required to settle other issues, if any, which have not been set aside in that assessment, and in respect of which either appeal is pending or time to file appeal has not expired. In such a case disputed tax shall be the tax (including surcharge and cess) which would have been payable had the addition in respect of which the order was set aside by the appellate authority was to be repeated by the AO. In such cases while filling the declaration form, appellant can indicate that with respect to the set-aside issues the appeal is pending with the Commissioner (Appeals). ( Refer FAQ 27)
| Authority | EXP A | EXP B | EXP C | EXP D |
| AO | X | X | X | X |
| CIT(A) | X | X | X | X |
| ITAT | Allowed | Sent back to AO | Sent Back to CIT | Sent Back to CIT |
| Disputed Tax | 50% | 100% | 100% | 100% |
- X means disallowed.
- The appeal must be pending on the other issues i.e. it should not be De Novo assessment.
- While Filling the form in respect of Expense B appellant can indicate that with respect to the set-aside issues the appeal is pending with the Commissioner (Appeals).
FAQ 8:– Imagine a case where an appellant desires to settle concealment penalty appeal pending before CIT (A), while continuing to litigate quantum appeal that has travelled to higher appellate forum. Considering these are two independent and different appeals, whether appellant can settle one to exclusion of others? If yes, whether settlement of penalty appeal will have any impact on quantum appeal?
Answer: – If both quantum appeal covering disputed tax and appeal against penalty levied on such disputed tax for an assessment year are pending, the declarant is required to file a declaration form giving details of both disputed tax appeal and penalty appeal. However, he would be required to pay relevant percentage of disputed tax only. Further, it would not be possible for the appellant to apply for settlement of penalty appeal only when the appeal on disputed tax related to such penalty is still pending.
| Quantum | Pending before ITAT | Amount required to be paid is only the disputed tax and no penalty and interest. The declarant is required to file a declaration form giving details of both disputed tax appeal and penalty appeal. |
| Penalty | Pending before CIT(A) |
FAQ 9:– Is there any necessity that to qualify under the Vivad se Vishwas, the appellant should have tax demand in arrears as on the date of filing declaration?
Answer: – Vivad se Vishwas can be availed by the appellant irrespective of whether the tax arrears have been paid either partly or fully or are outstanding.
FAQ 10:– Whether 234E and 234F appeals are covered?
Answer: – If appeal has been filed against imposition of fees under sections 234E or 234F of the Act, the appellant would be eligible to file declaration for disputed fee and amount payable under Vivad se Vishwas shall be 25% or 30% of the disputed fee, as the case may be. If the fee imposed under section 234E or 234F pertains to a year in which there is disputed tax, the settlement of disputed tax will not settle the disputed fee. If assessee wants to settle disputed fee, he will need to settle it separately by paying 25% or 30% of the disputed fee, as the case may be.
Note:- If appeal is related both for disputed tax and disputed Fees then in that case the appellant is required to pay
Disputed tax + Disputed Fees( i.e. 100%/125%/50%/62.5% and 25% or 30%)
FAQ 11:– In case where disputed tax contains qualifying tax arrears as also non-qualifying tax arrears (such as, tax arrears relating 10 assessment made in respect of undisclosed foreign income): (i) Whether assessee is eligible to the Vivad se Vishwas itself? (ii) If eligible, whether quantification of disputed tax can exclude/ignore non-qualifying tax arrears?
Answer:- If the tax arrears include tax on issues that are excluded from the Vivad se Vishwas, such cases are not eligible to file declaration under Vivad se Vishwas. There is no provision under Vivad se Vishwas to settle part of a pending dispute in relation to an appeal or writ or SLP for an assessment year. For one pending appeal, all the issues are required to be settled and if anyone of the issues makes the declaration invalid, no declaration can be filed.
NOTE:- Disputed Income = Indian Income and Foreign Income (Not allowed)
FAQ 12:- If a writ has been .filed against a notice issued under section 148 of the Act and no assessment order has been passed consequent to that section 148 notice, will such case be eligible to .file declaration under Vivad se Vishwas?
Answer:- The assessee would not be eligible for Vivad se Vishwas as there is no determination of income against the said notice.
NOTE:- If the appellant has challenged validity of notice issued u/s 148 in a writ and the HC has passed interim order for keeping the assessment in abeyance till finalization of writ. The appellant is not covered by VSV.
FAQ 13:- With respect to interest under section 234A, 234B or 234C, there is no appeal but the assessee has filed waiver application before the competent authority which is pending as on 31 Jan 2020? Will such cases be covered under Vivad se Vishwas?
Answer:- No, such cases are not covered. Waiver applications are not appeal within the meaning of Vivad se Vishwas.
Note:- Competent authority here means CCIT and DGIT
FAQ 14:- Whether assessee can avail of the Vivad se Vishwas for some of the issues and not accept other issues?
Answer:- Refer to answer to question no 11. Picking and choosing issues for settlement of an appeal is not allowed. With respect to one order, the appellant must chose to settle all issues and then only he would be eligible to file declaration.
Note:- According to the author pick and choose facility can be availed if the CIT(A)/ ITAT/ HC has passed the order on or before the specified date and time period for filing of appeal has not expired.(i.e. in case of deemed appeal). In this case the amount of disputed tax has to be calculated after giving the effect to the order so passed. Please Refer Section 2(j)(b) (e.g. Refer FAQ question No. 36)
FAQ 15:- Will delay in deposit of TDS/TCS be also covered under Vivad se Vishwas?
Answer:- The disputed tax includes tax related to tax deducted at source (TDS) and tax collection at source (TCS) which are disputed and pending in appeal. However, if there is no dispute related to TDS or TCS and there is delay in depositing such TDS/TCS, then the dispute pending in appeal related to interest levied due to such delay will be covered under Vivad se Vishwas.
NOTE:- 1) Dispute = TDS / TCS In this case the appellant is required to pay disputed tax and Interest and penalty will be waived.
2) Where dispute is regarding interest then appellant is required to pay 25%/30%)
FAQ 16:– Are cases pending before DRP covered? What if the assessee has not filed objections with DRP and the AO has not yet passed the final order?
Answer:- Yes, a person who has filed his objections before the DRP under section 144C of the Act and the DRP has not issued any direction on or before the specified date as well as a person in whose case the DRP has issued directions but the AO has not passed the final assessment order on or before the specified date, is eligible under Vivad se Vishwas. It is further clarified that there could be a situation where the AO has passed a draft assessment order before the specified date. Assessee decides not to file objection with the DRP and is waiting for final order to be passed by the AO against which he can file appeal with Commissioner(Appeals). In this situation even if the final assessment order is not passed on or before the specified date, the assessee would be considered as the appellant and would be eligible to settle his dispute under Vivad se Vishwas. Disputed tax in such case would be computed based on the draft order. In the declaration form, the appellant in this situation should indicate that time to file objection with DRP has not expired.
FAQ 17:– If CIT(Appeals) has given an enhancement notice, can the appellant avail the Vivad se Vishwas after including proposed enhanced income in the total assessed income?
Answer:- The amendment proposed in the Vivad se Vishwas allows the declaration even in cases where CIT (Appeals) has issued enhancement notice on or before 31 ,t January, 2020. However, the disputed tax in such cases shall be increased by the amount of tax pertaining to issues for which notice of enhancement has been issued.
FAQ 18:– Are disputes relating to wealth tax, security transaction tax, commodity transaction tax and equalization levy covered?
Answer:- No. Only disputes relating to income-tax are covered
FAQ 19:– The assessment order under section 143(3) of the Act was passed in the case of an assessee for the assessment year 2015-16. The said assessment order is pending with ITAT. Subsequently another order under section 147/143(3) was passed for the same assessment year and that is pending with CIT (Appeals)? Could both or one of the orders be settled under Vivad se Vishwas?
Answer:- The appellant in this case has an option to settle either of the two appeals or both appeals for the same assessment year. If he decides to settle both appeals then he has to file only one declaration form. The disputed tax in this case would be the aggregate amount of disputed tax in both appeals.
| Particulars | A | B | C | D | E | F |
| AO in 143(3) | x | x | x | x | Not Raised | Not Raised |
| CIT (A) | Allowed | Allowed | x | x | Not Raised | Not Raised |
| ITAT | Pending | Pending | Pending | Pending | Not Raised | Not Raised |
| AO in 147 | x | x | ||||
| CIT(A) | Pending | Pending | ||||
| VSV | 50% | 50% | 100% | 100% | 100% | 100% |
| In the given case the assessee has option to settle appeal filed against 143(3) order or 147 order. Therefore its optional to the assessee. | ||||||
FAQ 20:– In a case there is no disputed tax. However, there is appeal for disputed penalty which has been disposed off by CIT (Appeals) on 5th January 2020. Time to file appeal in ITAT against the order of Commissioner (Appeals) is still available but the appeal has not yet been filed. Will such case be eligible to avail the benefit?
Answer:– Yes, the appellant in this case would also be eligible to avail the benefit of Vivad se Vishwas. In this case, the terms of availing Vivad se Vishwas in case of disputed penalty/interest/fee are similar to terms in case of disputed tax. Thus, if the time to file appeal has not expired as on specified date, the appellant is eligible to avail benefit of Vivad se Vishwas. In this case the appellant should indicate in the declaration form that time limit to file appeal in ITAT has not expired.
NOTE:- 25% to 30%
Disputed tax in case of lack of jurisdiction
FAQ 21:– In a case ITAT has quashed the assessment order based on lack Of jurisdiction by the AO. The department has filed an appeal in HC which is pending. Is the assessee eligible to settle this dispute under Vivad se Vishwas and if yes how disputed tax be calculated as there is no assessment order?
Answer:- The assessee in this case is eligible to settle the department appeal in HC. The amount payable shall be calculated at half rate of 100%, 110%, 125% or 135%, as the case may be, on the disputed tax that would be restored if the department was to win the appeal in HC.
Prosecution Instituted
FAQ 22:– In the case of an assessee prosecution has been instituted and is pending in court. Is assessee eligible for the Vivad se Vishwas?
Answer:- No. However, where only notice for initiation of prosecution has been issued with reference to tax arrears, the taxpayer has a choice to compound the offence and opt for Vivad se Vishwas.
FAQ 23:– If the due date of filing appeal is after 31.1.2020 the appeal has not been filed, will such case be eligible for Vivad se Vishwas?
Answer: – Yes
FAQ 24: – If appeal is filed before High Court and is pending for admission as on 31.1.2020, whether the case is eligible for Vivad se Vishwas?
Answer: – Yes
“QUESTIONS RELATED TO CALCULATION (Q. No. 25-40)”
Rectification
FAQ 25:- In a case appeal or arbitration is pending on the specified date, but a rectification is also pending with the AO which if accepted will reduce the total assessed income. Will the calculation of disputed tax be calculated on rectified total assessed income?
Answer: – The rectification order passed by the AO may have an impact on determination of disputed tax, if there is reduction or increase in the income and tax liability of the assessee as a result of rectification. The disputed tax in such cases would be calculated after giving effect to the rectification order passed, if any.
FAQ 26:– Refer to question number 5. How will disputed tax be calculated in a case where disputed demand including interest has been paid by the assessee while being in appeal?
Answer: – Please refer to answer to question no. 5. To illustrate, consider a non search case where an assessee is in appeal before Commissioner (Appeals). The tax on returned income (including surcharge and cess) comes to Rs. 30,000 and interest under section 234B of Rs. 1, 000. Assessee has paid this amount of Rs. 31,000 at the time of filing his tax return. During assessment an addition is made and additional demand of Rs. 16,000 has been raised, which comprises of disputed tax (including surcharge and cess) ofRs. 10,000 and interest on such disputed tax of Rs.6000. Penalty has been initiated separately. Assessee has paid the demand of Rs. 14,000 during pendency of appeal; however interest under section 220 of the Act is yet to be calculated. Assessee files a declaration, which is accepted and certificate is issued by the designated authority (DA). The disputed tax of Rs 10,000 (at 100%) is to be paid on or before 31″ March 2020. Since he has already paid Rs. 14,000, he would be entitled to refund of Rs. 4,000 (without section 244A interest). Further, the interest leviable under section 220 and penalty leviable shall also be waived.
FAQ 27:– Refer to question no 7. How will disputed tax be computed in a case where assessment has been set aside for giving proper opportunity to an assessee on the additions carried out by the AO?
Answer: – Please refer to answer to question no. 7. To illustrate, return of income was filed by the assessee. The tax on returned income was Rs 10,000 and interest was Rs 1,000. The amount of Rs 11,000 was paid before filing the return. The AO made two additions of Rs 20,000/- and Rs 30,000/-. The tax (including surcharge and cess) on this comes to Rs 6,240/- and Rs 9,360- and interest comes to Rs.2,500 and Rs.3,500 respectively. Commissioner (Appeals) has confirmed the two additions. ITAT confirmed the first addition (Rs 20,000/-) and set aside the second addition (Rs 30,000/-) to the file of AO for verification with a specific direction. Assessee appeals against the order of IT AT with respect to first addition (or has not filed appeal as time limit to file appeal against the order has not expired). The assessee can avail the Vivad se Vishwas if declaration covers both the additions. In this case the disputed tax would be the sum of disputed tax on both the additions i.e. Rs. 6240/- plus Rs. 9,360/-. In such cases while filling the declaration form, appellant can indicate that with respect to the set-aside issues the appeal is pending with the Commissioner(Appeals)
FAQ 28:– What amount of tax is required to be paid, if an assessee wants to avail the benefit of the Vivad se Vishwas?
Answer:- Under the Vivad se Vishwas, declarant is required to make following payment for settling disputes:
A. In appeals / writ / SLP / DRP objections / revision application under section 264 / arbitration filed by the assessee –
(a) In case payment is made till 31″ March, 2020-
(i) 100% of the disputed tax (125% in search cases) where dispute relates to disputed tax (excess amount over 100% limited to the amount of interest and penalty levied or leviable), or
(ii) 25% of the disputed penalty, interest or fee where dispute relates to disputed penalty, interest or fee only.
(b) In case payment is made after 31 st March, 2020 –
(i) 110% of the disputed tax (135% in search cases) where dispute relates to disputed tax (excess amount over 100% limited to the amount of interest and penalty), or (ii) 30% of the disputed penalty, interest or fee in case of dispute related to disputed penalty, interest or fee only.
However, if in an appeal before Commissioner(Appeals) or in objections pending before DRP, there is an issue on which the appellant has got favourable decision from ITAT (not reversed by HC or SC) or from the High Court (not reversed by SC) in earlier years then the amount payable shall be half or 50% of above amount. Similarly, if in an appeal before IT AT, there is an issue on which the appellant has got favourable decision from the High Court (not reversed by SC) in earlier years then the amount payable shall be half or 50% of above amount. B. In appeals/writ/SLP filed by the Department –
(a) In case payment is made till 31 “March, 2020-
(i) 50% of the disputed tax (62.5% in search cases) in case of dispute related to disputed tax or
(ii) 12.5% of the disputed penalty, interest or fee in case of dispute related to disputed penalty, interest or fee only.
(b) In case payment is made after 31″‘ March, 2020 –
(i) 55% of the disputed tax (67.5% in search cases) in cases of dispute related to disputed tax, or
(ii) 15% of the disputed penalty, interest or fee in case of dispute related to disputed penalty, interest or fee only.
FAQ 29:- Whether credit for earlier taxes paid against disputed tax will be available against the payment to be made under Vivad se Vishwas?
Answer: – The amount payable by the declarant under Vivad se Vishwas shall be determined by the DA under clause 5. Credit for taxes paid against the disputed tax before filing declaration shall be available to the declarant. Please refer to example at question no. 26 above. If in that example against disputed tax of Rs. 10,000 an amount of Rs. 8,000/- has already been paid, the appellant would be required to pay only the remaining Rs. 2, 000/- by 31″‘ March 2020.
FAQ 30:- Where assessee settles TDS appeal or withdraws arbitration (against order U/S 201) as deductor of TDS, will credit of such tax be allowed to deductee?
Answer:- In such cases, the deductee shall be allowed to claim credit of taxes in respect of which the deductor has availed of dispute resolution under Vivad se Vishwas. However, the credit will be allowed as on the date of settlement of dispute by the deductor and hence the interest as applicable to deductee shall apply.
NOTE:- This clarification goes against the objective of the Scheme. The Scheme envisages that on payment of tax in dispute, the interest charged or chargeable will stand waived off. Thus, on payment of tax by the deductor, there should not be any liability on the deductee to pay interest. This is more so when an income is subject to TDS, the deductee is not required to pay such tax and consequently the interest thereon. It is because of the default of the deductor that such tax is in arrears in the hands of the deductee. In a reverse situation where the deductee is disputing its liability, the same gets waived off on payment of tax without any obligation to pay interest. Furthermore as per the author the deductee shall be allowed credit in respect of same F.Y. to which deductor has opted for VSV. The government need to clarify how the amount paid will be reflected in 26AS of deductee without revising the TDS returns of deductor. Even if the amount paid is reflected in 26As of deductee then as per FAQ the tax should be considered as paid as on the date of settlement of dispute which will raise interest demand.
FAQ 31:- Where assessee settles TDS liability as deductor of TDS under Vivad se Vishwas (i.e against order u/s 201), when will he get consequential relief of expenditure allowance under proviso to section 40(a)(i)/(ia)?
Answer:- In such cases, the deductor shall be entitled to get consequential relief of allowable expenditure under proviso to section 40(a)(i)/(ia) in the year in which the tax was required to be deducted.
To illustrate, let us assume that there are two appeals pending; one against the order under section 201 of the Act for non-deduction of TDS and another one against the order under section 143 (3) of the Act for disallowance under section 40(a)(i)/(ia) of the Act. The disallowance under section 40 is with respect to same issue on which order under section 20 I has been issued. If the dispute is settled with respect to order under section 20 I, assessee will not be required to pay any tax on the issue relating to disallowance under section 40(a)(i)/(ia) of the Act, in accordance with the provision of section 40(a)(i)/(ia) of the Act.
In case, in the order under section 143(3) there are other issues as well, and the appellant wants to settle the dispute with respect to order under section 143(3) as well, then the disallowance under section 40(a)(i)/(ia) of the Act relating to the issue on which he has already settled liability under section 201 would be ignored for calculating disputed tax.
If the assessee has challenged the order under section 201 on merits and has won in the Supreme Court or the order of any appellate authority below Supreme Court on this issue in favour of the assessee has not been challenged by the Department on merit (not because appeal was not filed on account of monetary limit for filing of appeal as per applicable CBDT circular), then in a case where disallowance under section 40(a)(i)/(ia) of the Act is in consequence of such order under section 201 and is part of disputed income as per order under section 143(3) in his case, such disallowance would be ignored for calculating disputed tax, in accordance with the proviso to section 40(a)(i)/(ia) of the Act.
It is further clarified that if the assessee wish to settle disallowance under section 40(a)(i)/(ia) in a search case on the basis of settlement of the dispute under section 201, he shall be required to pay higher amount as applicable for search cases for settling dispute in respect of that TDS default under section 201.
NOTE:- It may also be relevant to point out that in FAQ no 31, it has been stated that where the deductor settles its TDS liability under the Scheme, he shall be entitled to get consequential relief of allowable expenditure under proviso to section 40(a)(i)/(ia) in the year in which the tax was required to be deducted. This clarification in FAQ no. 31 gives credit in the year to which such tax pertains to in the hands of deductor. On this reasoning also, there is a need to revisit clarification in FAQ no. 30 so as to allow the credit of the TDS paid by the deductor under the Scheme to the deductee in the year to which it pertains without any obligation to pay further interest. In the absence of such clarification, there is no incentive as interest being waived off in the hands of the deductor is being recovered from the deductee. This also goes against the proviso of section 201(1A) read with proviso to section 201(1) whereby interest is required to be paid by deductor only upto the furnishing of return of income by the deductee.
FAQ 32:- When assessee settles his own appeal or arbitration under Vivad se Vishwas, will consequential relief be available to the deductor in default from liability determined under TDS order U/S 201?
Answer:- When an assessee (being a person receiving an income) settles his own appeal or arbitration under Vivad se Vishwas and such appeal or arbitration is with reference to assessment of an income which was not subjected to TDS by the payer of such income (deductor in default) and an order under section 201 of the Act has been passed against such deductor in default, then such deductor in default would not be required to pay the corresponding TDS amount. However, he would be required to pay the interest under sub-section (IA) of section 201 of the Act. If such levy of interest under sub-section (IA) of section 201 qualifies for Vivad se Vishwas, the deductor in default can settle this dispute at 25% or 30% of the disputed interest, as the case may be, by filing up the relevant schedule of disputed interest.
FAQ 33:- Where DRP order passed on or after 1st July, 2012 and before 1st June, 2016 have given relief to assessee and Department has filed appeal, how assessed tax to be calculated?
Answer:- If department appeal is required to be settled, then against that appeal the appellant is required to pay only 50% of the amount that is otherwise payable if it was his appeal.
FAQ 34:- Appeals against assessment order and against penalty order are filed separately on same issue. Hence there are separate appeals for both. In such a case how disputed tax to be calculated?
Answer:- Please see question no. 8. Further, it is clarified that if the appellant has both appeal against assessment order and appeal against penalty relating to same assessment pending for the same assessment year, and he wishes to settle the appeal against assessment order (with penalty appeal automatically covered), he is required to give details of both appeals in one declaration fom1 for that year. However, in the annexure he is required to fill only the schedule relating to disputed tax.
FAQ 35:- If there is substantive addition as well as protective addition in the case of same assessee for different assessment year, how will that be covered? Similarly if there is substantive addition in case of one assessee and protective addition on same issue in the case if another assessee, how will that be covered under Vivad se Vishwas?
Answer:- If the substantive addition is eligible to be covered under Vivad se Vishwas, then on settlement of dispute related to substantive addition AO shall pass rectification order deleting the protective addition relating to the same issue in the case of the assessee or in the case of another assessee
NOTE:- However, there may be cases where substantive addition on the same issue may have been in the hands of two assessee’s. Take the case of a Company where share capital or unsecured loan received by the Company have been added as unexplained cash credit and same amount is added also in the hands of the director/shareholder as the creditor. Thus, same income stands assessed on substantive basis in the hands of two different persons. In such cases, there is no clarity whether the same benefit will be available or not. Accordingly, it need to be clarified in the FAQ’s that in case same income has been assessed in two different hands and tax is paid in one hand under the Scheme, the other addition will stand deleted. For implementing this, there can be another way whereby an assessee can make an application for rectification when same income has been assessed in two hands and the AO may rectify one order deleting the addition on the assessee paying tax under the Scheme in the other hand
FAQ 36:- In a case ITAT has passed order giving relief on two issues and confirming three issues. Time to file appeal has not expired as on specified date. The taxpayer wishes to file declaration for the three issues which have gone against him. What about the other two issues as the taxpayer is not sure if the department will file appeal or not?
Answer:- The Vivad se Vishwas allow declaration to be filed even when time to file appeal has not expired considering them to be a deemed appeal. Vivad se Vishwas also envisages option to assessee to file declaration for only his appeal or declaration for department appeal or declaration for both. Thus, in a given situation the appellant has a choice, he can only settle his deemed appeal on three issues, or he can settle department deemed appeal on two issues or he can settle both. If he decides to settle only his deemed appeal, then department would be free to file appeal on the two issues (where the assessee has got relief) as per the extant procedure laid down and directions issued by the CBDT.
100% Relief
FAQ 37:- There is no provision for 50% concession in appeal pending in HC on an issue where the assessee has got relief on that issue from the SC?
Answer:- If the appellant has got decision in his favour from SC on an issue, there is no dispute now with regard to that issue and he need not settle that issue. If that issue is part of the multiple issues, the disputed tax may be calculated on other issues considering nil tax on this issue.
FAQ 38:- Addition was made u/s 143(3) on two issues whereas appeal filed only for one addition. Whether interest and penalty be waived for both additions.
Answer:- Under Vivad se Vishwas, interest and penalty will be waived only in respect of the issue which is disputed in appeal and for which declaration is filed. Hence, for the undisputed issue, the tax, interest and penalty shall be payable.
FAQ 39:- DRP has issued directions confirming all the proposed additions in the draft order and the AO has passed the order accordingly. The issues confirmed by DRP include an issue on which the taxpayer has got favourable order from ITAT (not reversed by HC or SC) in an earlier year. The time limit to file appeal in ITAT is still available. The taxpayer is eligible for Vivad se Vishwas treating the situation as taxpayer’s deemed appeal in ITAT. In this case how will disputed tax be calculated? Will it be 100% on the issue allowed by ITAT in earlier years or 50%?
Answer:- In this case, on the issue where the taxpayer has got relief from ITAT in an earlier year (not reversed by HC or SC) the disputed tax shall be computed at half of normal rate of 100%, 110%, 125% or 135%, as the case maybe.
FAQ 40:- Where there are two appeals filed for an assessment year– one by the appellant and one by the tax department, whether the appellant can opt for only one appeal? If yes, how would the disputed tax be computed?
Answer:- The appellant has an option to opt to settle appeal filed by it or appeal filed by the department or both. Declaration form is to be filed assessment year wise i.e. only one declaration for one assessment year. For different assessment years separate declarations have to be filed. So the appellant needs to specify in the declaration form whether he wants to settle his appeal, or department’s appeal in his case or both for a particular assessment year. The computation of tax payable would be carried out accordingly.
“QUESTIONS RELATED TO PROCEDURE (Q. No. 41-50)”
FAQ 41:- How much time shall be available for paying the taxes after filing a declaration under the Vivad se Vishwas?
Answer: – As per clause 5 of Vivad se Vishwas, the DA shall determine the amount payable by the declarant within fifteen days from the date of receipt of the declaration and grant a certificate to the declarant containing particulars of the tax-arrear and the amount payable after such determination. The declarant shall pay the amount so determined within fifteen days of the date of receipt of the certificate and intimate the details of such payment to the DA in the prescribed form. Thereafter, the DA shall pass an order stating that the declarant has paid the amount. It may be clarified that 15 days is outer limit. The DAs shall be instructed to grant a certificate at an early date enabling the appellant to pay the amount on or before 31st March, 2020 so that he can take benefit of reduced payment to settle the dispute.
FAQ 42:- If taxes are paid after availing the benefits of the Vivad se Vishwas and later the taxpayer decides to take refund of these taxes paid, would it be possible?
Answer:- No. Any amount paid in pursuance of a declaration made under the Vivad se Vishwas shall not be refundable under any circumstances.
FAQ 43:- Where appeals are withdrawn from the appellate forum, and the declarant is declared to be ineligible under the Vivad se Vishwas by DA at the stage of determination of amount payable under section 5(1) or, amount determined by])A is at variance of amount declared by declarant and declarant is not agreeable to DA’s determination of amount payable, then whether the appeals are automatically reinstated or a separate application needs to be filed for reinstating the appeal before the appellate authorities.
Answer:- Under the amended procedure no appeal is required to be withdrawn before the grant of certificate by DA. After the grant of certificate by DA under clause 5, the appellant is required to withdraw appeal or writ or special leave petition pending before the appellant forum and submit proof of withdrawal with intimation of payment to the DA as per the same clause. Where assessee has made request for withdrawal and such request is under process, proof of request made shall be enclosed. Similarly in case of arbitration, conciliation or mediation, proof of withdrawal of arbitration/conciliation/mediation is to be enclosed along with intimation of payment to the DA.
FAQ 44:- Clause 5(2) requires declarant to pay amount determined by DA within 15 days of receipt of certificate from DA. Clarification is required on whether declarant is to also intimate DA about fact of having made payment pursuant to declaration within the period of 15 days?
Answer:- As per clause 5(2), the declarant shall pay the amount determined under clause 5(1) within fifteen days of the date of receipt of the certificate and intimate the details of such payment to the DA in the prescribed form and thereupon the DA shall pass an order stating that the declarant has paid the amount.
FAQ 45:- Will DA also pass order granting expressly, immunity from levy of interest and penalty by the A O as well as immunity from prosecution?
Answer: – As per clause 6, subject to the provisions of clause 5, the DA shall not institute any proceeding in respect of an offence; or impose or levy any penalty; or charge any interest under the Income-tax Act in respect of tax arrears. This shall be reiterated in the order under section 5(2) passed by DA
FAQ 46:- Whether DA can amend his order to rectify any patent errors?
Answer: – Yes, the DA shall be able to amend his order under clause 5 to rectify any apparent errors.
FAQ 47:- Where tax determined by DA is not acceptable can appeal be filed against the order of designated authority before ITAT, High Court or Supreme Court?
Answer: – No. As per clause 4(7), no appellate forum or arbitrator, conciliator or mediator shall proceed to decide any issue relating to the tax arrears mentioned in the declaration in respect of which order is passed by the DA or the payment of sum determined by the DA.
FAQ 48:- There is no provision for withdrawal of appeal/writ/SLP by the department on settlement of dispute.
Answer:- On intimation of payment to the DA by the appellant pertaining to department appeal/writ/SLP, the department shall withdraw such appeal/writ/SLP.
FAQ 49:- Once declaration is filed under Vivad se Vishwas, and for financial difficulties, payment is not made accordingly, will the declaration be null and void?
Answer:- Yes it would be void.
FAQ 50:- Where the demand in case of an assessee has been reduced partly or fully by giving appeal effect to the order of appellate forum, how would the amount payable under Vivad se Vishwas be adjusted?
Answer:- In such cases, after getting the proof of payment of the amount payable under Vivad se Vishwas, the AO shall pass order under the relevant provisions of Vivad se Vishwas to create demand in case of assessee against which the amount payable shall be adjusted.
“QUESTIONS RELATED TO CONSEQUENCES (Q. No. 51-55)”
FAQ 51:- Will/here be immunity from prosecution?
Answer:- Yes, clause 6 provides for immunity from prosecution to a declarant in relation to a tax arrears for which declaration is filed under Vivad se Vishwas and in whose case an order is passed by the DA that the amount payable under Vivad se Vishwas has been paid by the declarant.
FAQ 52:- Will the result of this Vivad se Vishwas be applied to same issues pending before AO?
Answer:- No, only the issues covered in the declaration are settled in the dispute without any prejudice to same issues pending in other cases. It has been clarified that making a declaration under this Act shall not amount to conceding the tax position and it shall not be lawful for the income-tax authority or the declarant being a part in appeal or writ or in SLP to contend that the declarant or the income-tax authority, as the case may be, has acquiesced in the decision on the disputed issue by settling the dispute.
FAQ 53:- If loss is not allowed to be adjusted while calculating disputed tax, will that loss be allowed to be carried forward?
Answer:- As per the amendment proposed in Vivad se Vishwas, in a case where the dispute in relation to an assessment year relates to reduction of Minimum Alternate Tax (MAT) credit or reduction of loss or depreciation, the appellant shall have an option either to
- include the amount of tax related to such MAT credit or loss or depreciation in the amount of disputed tax and carry forward the MAT credit or loss or deprecation or
- to carry forward the reduced tax credit or loss or depreciation. CBDT will prescribe the manner of calculation in such cases.
FAQ 54:- If the taxpayer avails Vivad se Vishwas for Transfer pricing adjustment, will provisions of section 92CE of the Act apply separately?
Answer: – Yes, secondary adjustment under section 92CE will be applicable. However, it may be noted that the provision of secondary adjustment as contained in section 92CE of the Act is not applicable for primary adjustment made in respect of an assessment year commencing on or before the 1st day of April 2016. That means, if there is any primary adjustment for assessment year 2016-17 or earlier assessment year, it is not subjected to secondary adjustment under section 92CE of the Act.
FAQ 55:- The appellant has settled the dispute under Vivad se Vishwas in an assessment year. Whether it is open for Revenue to take a stand that the additions have been accepted by the appellant and hence he cannot dispute it in future assessment years?
Answer: – Please refer answer to question no 52. It has been clarified in Explanation to clause 5 that making a declaration under Vivad se Vishwas shall not amount to conceding the tax position and it shall not be lawful for the income-tax authority or the declarant being a part in appeal or writ or in SLP to contend that the declarant or the income tax authority, as the case may be, has acquiesced in the decision on the disputed issue by settling the dispute.
Issues not addressed by VSV
Issue No. 1
Dispute is regarding the year in which the income is to be taxable. For example: the department alleges to tax the income in A.Y. 2013-14 and the assessee has made the same as taxable income in the A.Y. 2015-16. This is due to the fact that assessee following completion method where as department is following percentage completion method.
Such issues may be more common in the real estate industry where the assessee are following percentage completion method and the dispute is often with regard to the year in which income is assessable. Department contests that the assessee has tried to defer the recognition of revenue in such cases and assesses the income from earlier years itself. In such cases, there is no clarity as to whether if an assessee settles the dispute in respect of the year i.e. A.Y. 2013-14 in which income has been assessed to tax by the Department, then if such income has been offered to tax in subsequent year i.e. in A.Y. 2015-16 by the assessee itself, whether the assessee will be allowed corresponding adjustment/deduction from the income of the subsequent years or not.
Issue No. 2
The dispute is in respect of capital expenditure Vs revenue expenditure. The AO has made the addition considering that the expenditure is in the nature of capital expenditure. Now if the assessee wants to settle the issue by opting VSV than whether the depreciation will be allowed in later years. This issue require clarification.
Issue No. 3
In search cases, where there dispute is on account of penalty u/s 271AAB i.e. the penalty should be levied at the rate of 10%/20%/30%/60% of undisclosed income but there is no dispute on account of disputed tax, whether Rs. 5 crore disputed tax ceiling will be applicable and if yes, then whether it is reference to disputed tax of quantum of penalty. In these cases clarification is required that the ceiling of Rs. 5 crore of disputed tax will be applicable. According to the author the assessee should be eligible as disputed tax is nil and the assessee could get benefit of the scheme by covering the same under disputed penalty.
Issue No. 4
As per the scheme if disputed tax is paid before 31st March 2020 then amount to be paid is 100% of disputed tax and where as if disputed tax is paid after 31st March 2020 then in that case 110% of disputed tax. But in case of disputed penalty, disputed fees and disputed interest the amount to be paid is 25% before 31st March 2020 and 30% after 31st March 2020. There is disparity in disputed tax paid after 31st March 2020 and Disputed Penalty paid after 31St March 2020. The disputed penalty rate after 31st March 2020 should be 27.5%(i.e. 110% of 25%)
Issue No. 5
As per section 9(a)(ii), the provision of the Direct Tax Vivad se Vishwas Bill, 2020 the benefit of the Scheme shall not be available relating to an assessment year in respect of which prosecution has been instituted on or before the date of filing of declaration. Thus, the restriction as per this clause is for the relevant assessment year and further where prosecution stands instituted on the date of filing declaration. Accordingly, an assessee is eligible to file declaration in respect of other assessment years for which prosecution has not been instituted and also for the assessment year for which prosecution show cause notice may have been issued but prosecution has not been instituted. However, in FAQ states that if prosecution has been instituted against the assessee then he is ineligible for VSV and the word for an A.Y. is missing. Furthermore the FAQ 22 talks about notice for initiation of prosecution has been issued with reference to tax arrears the tax payer has choice to compound the offence. According to the author only those case has been excluded where complaint has been in the court and not those cases where show cause notice is issued by the department. Therefore, the intent of VSV was not to restrict those cases where only show cause notice issued and no complaints was filed.
Issue No. 6
As per the Scheme, in case of assessed loss, the declarant has an option to either pay tax on the disputed additions or to reduce the carried forward loss. Further, it has been provided in the Scheme that in respect of appeal filed by the Revenue where the declarant has got decision in its favor from the higher forum, the tax payable shall be half of the normal tax. According, in the case of a assessed loss, if the taxpayer opts to make payment in respect of the disputed addition, he will be required to pay half of the normal tax payable on disputed addition. However, there is no clarity that in such case if the declarant instead of making payment in respect of disputed addition opts to reduce the carried forward loss, whether he will be required to reduce 50% of such loss or not. Thus, this issue need to be clarified.
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