Article explains Direct Tax Vivad Se Vishwas Bill, 2020– Explaining Statement of objects and reasons, Resolution mechanism, Immunity from initiation of proceedings in respect of offence and imposition of penalty in certain cases, Definition of the term Appellant, Appeals covered under the Vivad Se Vishwas Scheme, Appeals not covered under the Vivad Se Vishwas Scheme, In case where disputed tax contains eligible tax arrears as also in-eligible tax arrears, Amount payable by declarant for resolution, Amount payable by the appellant under various circumstances, Refund under Vivad Se Vishwas Scheme, Revival of disputes and Filing of Declaration and particulars to be furnished under this Scheme.
Over the years, the pendency of appeals filed by taxpayers as well as Government has increased due to the fact that the number of appeals that are filed is much higher than the number of appeals that are disposed. As a result, a huge amount of disputed tax arrears is locked-up in these appeals. As on the 30th November, 2019, the amount of disputed direct tax arrears is Rs. 9.32 lakh crores. Considering that the actual direct tax collection in the financial year 2018-19 was Rs.11.37 lakh crores, the disputed tax arrears constitute nearly one year direct tax collection.
Tax disputes consume copious amount of time, energy and resources both on the part of the Government as well as taxpayers. Moreover, they also deprive the Government of the timely collection of revenue. Therefore, there is an urgent need to provide for resolution of pending tax disputes. This will not only benefit the Government by generating timely revenue but also the taxpayers who will be able to deploy the time, energy and resources saved by opting for such dispute resolution towards their business activities.
The bill aims at reducing litigations in the direct taxes payments. Under the “Vivad se Vishwas” scheme announced in the Union Budget, taxpayers whose tax demands are locked in dispute in multiple forums can pay due taxes by 31st of March or after 31st March but before the last date of this scheme with additional 10 percent of disputed tax amount and get complete waiver of interest and penalty.
Once the designated authority issues the certificate, appeals pending before the Income Tax Appellate Tribunals and the Commissioner (Appeals) will be deemed to be withdrawn. In case of appeals or petitions pending before the Supreme Court and High Courts, the appellant is required to withdraw the appeal or petition.
The Principal Chief Commissioner will designate an officer, not below the rank of a Commissioner of Income Tax, as the designated authority to manage the proposed resolution mechanism.
1) Once a dispute is resolved, the designated authority cannot levy interest or penalty in relation to that dispute.
2) Further, no appellate forum can make a decision in relation to the matter of dispute once it is resolved. Such matters cannot be reopened in any proceeding under any law, including the IT Act
The term “Appellant” ” means the person or the income-tax authority or both who has filed appeal before the appellate forum and such appeal is pending on the specified date;
1) 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) or special leave petitions (SLPs) pending before SC as on the 31st day of January, 2020 (specified date) are covered.
2) 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.
3) 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.
4) Further, 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.
1) 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.
2) In respect of tax arrears,—
a) relating to an assessment year in respect of which an assessment has been made under section 153A or section 153C of the Income-tax Act, if it relates to any tax arrears;
b) relating to an assessment year in respect of which prosecution has been instituted on or before the date of filing of declaration;
c) relating to any undisclosed income from a source located outside India or undisclosed asset located outside India;
d) relating to an assessment or reassessment made on the basis of information received under an agreement referred to in section 90 or section 90A of the Income-tax Act, if it relates to any tax arrears;
e) relating to an appeal before the Commissioner (Appeals) in respect of which notice of enhancement under section 251 of the Income-tax Act has been issued on or before the specified date;
f) Appeals in Case of search operation are not eligible if the amount of disputed tax exceeds 5 Crore.
g) Certain cases under the provisions of the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1971
h) Where prosecution has been initiated for offences committed in cases under Prevention of Corruption Act, 1988, Prohibition of Benami Property Transactions Act, 1988, etc.
i) Person notified under the Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992
j) Waiver application filed in respect of 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 (Waiver applications are not appeal within the meaning of this Scheme).
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
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 (Designated Authority) shall pass an order stating that the declarant has paid the amount.
|S.No||Nature of tax arrear||Amount payable under this Act on or before the last date. March, 2020||Amount payable under this Act on or after 1st day of April, 2020 but on or before the last date|
|1||Where the tax arrears is the aggregate amount of dispute tax, interest chargeable or charged on such disputed tax and penalty leviable or levied on such disputed tax.||Amount of disputed tax.||The aggregate of the amount of disputed tax and ten percent of disputed tax:
Provided that where the ten percent of disputed tax exceeds the aggregate amount of interest chargeable or charged on such disputed tax and penalty leviable or levied on such disputed tax, the excess shall be ignored for the purpose of computation of amount payable under this Act.
|2||Where the tax arrears relates to disputed interest or disputed penalty or disputed fee.||Twenty five percent of disputed interest or disputed penalty or disputed fee.||Thirty percent of disputed interest or disputed penalty or disputed fee.|
In cases where an appeal or writ or SLP is filed by the tax authority on any issue before the appellate forum, the amount payable shall be 50% of the amount in the above table, calculated on such issue, in a manner to be prescribed.
Furthermore, in case of a taxpayer’s appeal, if the taxpayer has already got a decision on any issue in its favour by the appellate authority or the HC and the same has not been reversed by any higher authority or court, the amount payable is reduced to 50% of the amount stated above.
|S.No||Nature of case||Amount payable under the VSV Scheme (inclusive of surcharge and cess, but excluding interest)|
|1)||Where an order is passed by the assessing officer (AO) but the time limit for appeal has not expired on 31 January 2020||Amount of tax payable as
per AO’s order
|2)||Where appeal/writ/SLP is pending before any appellate forum||Amount of tax payable if such appeal/writ/SLP was to be decided against the taxpayer|
|3)||Where any appeal/writ is decided by the lower authority/HC but time limit for filing appeal/SLP has not expired on 31 January 2020||Amount of tax payable after giving effect to such order|
|4)||Where objections are pending before DRP as on 31 January 2020||Amount payable if DRP was to confirm variation proposed in the draft order|
|5)||Where DRP issued directions but AO has not passed the final assessment order on or before 31 January 2020||Amount of tax payable had the order been passed by AO|
|6)||Where CIT(A) has issued an enhancement notice under Section 251 on or before 31 January 2020||Disputed tax amount shall be increased by an amount of tax payable in respect of enhancement proposed|
Appeals in which appellant has already paid the disputed demand either partly or fully and 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 Income Act, 1961.
The declaration filed by an appellant will become invalid if:
1) Its particulars are found to be false,
2) He violates any of the conditions referred to in the IT Act, or
3) He seeks any remedy or claim in relation to that dispute. Consequently, all proceedings and claims withdrawn based on the declaration will be deemed to have been revived.
1) The declaration referred to in section 3 shall be filed by the declarant before the designated authority in such form and verified in such manner as may be prescribed.
2) In case of appeal is pending before ITAT or Commissioner (Appeals), in respect of the disputed income or disputed interest or disputed fee or disputed penalty shall be deemed to be withdrawn from the date on which certificate under sub section(5) is issued by DA (Designated Authority).
3) Where the declarant has filed any appeal before the appellate forum or any writ petition before the High Court or the Supreme Court against any order in respect of tax arrears, he shall withdraw such appeal or writ petition with the leave of the Court wherever required and furnish proof of such withdrawal along with the declaration referred to in sub-section (1).
4) Where the declarant has initiated any proceeding for arbitration, conciliation or mediation, or has given any notice thereof under any law for the time being in force or under any agreement entered into by India with any other country or territory outside India whether for protection of investment or otherwise, he shall withdraw the claim, if any, in such proceedings or notice prior to making the declaration and furnish proof thereof along with the declaration referred to in sub-section (1)
5) For the points supra (2), (3) and (4), the declarant shall furnish an undertaking waiving his right, whether direct or indirect, to seek or pursue any remedy or any claim in relation to the tax arrears which may otherwise be available to him under any law for the time being in force, in equity, under statute or under any agreement entered into by India with any country or territory outside India whether for protection of investment or otherwise and the undertaking shall be made in such form and manner as may be prescribed.