CA Vidya Khanna
1.1 Guided by “Sabka Saath, Sabka Vikas, Sabka Vishwas”, the Finance Minister Smt. Nirmala Sitharaman had introduced a new No Dispute but Trust Scheme – ‘Vivad Se Vishwas’ in the Budget 2020. The new tax amnesty Scheme was on similar grounds as indirect tax Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 was, which ultimately resulted in settlement of about 1,89,000 cases. However, as per the PIB, the total number of settlements done under the Sabka Vishwas (Legacy Dispute Resolution Scheme, 2019) as on dated 05.02.2020 are 49,534 and amount involved in these cases is 24,970 crores [Posted On: 10 FEB 2020 5:25PM by PIB Delhi]. The new Direct tax scheme offers some tax forbearance in return for revenue and an assurance to reduce litigation in direct taxes.
1.2 Unlike the blanket tax amnesty, scheme is open only to tax assessees who have contested their dues in assorted tribunals. In the original proposal, the taxpayer would have to pay the full amount of the disputed tax in return of complete waiver of interest and penalty, if he opts for the scheme before the end of this fiscal year and those who avail this scheme after 31st March, 2020 will have to pay some additional amount.
1.3 But last week when the bill was introduced in Lok Sabha, Cabinet made some changes to make the scheme more attractive to taxpayers. Expectations are that the new scheme will work better than erstwhile similar scheme “The Direct Tax Dispute Resolution Scheme, 2016”, given the kind of cases that are in appeal. Disputed claims include cash deposits made by individuals during demonetization which was announced on November 8, 2016. The scrutiny of cash deposits of over Rs. 5 lakhs that came into banking system may have unearthed unaccounted incomes, unless proven otherwise by the depositor, as burden of proof rests with him. The taxpayer would prefer a one-time settlement option if he has cases related to alleged manipulation on conversion of black money into white. The Scheme intends to resolve pending disputes worth Rs. 9.32 lakh crore in over 4.8 lakh cases and has segregated the terms of payment on the basis of appeals having being filed by the tax department or by the taxpayer.
2. About Direct Tax Vivad se Vishwas Scheme
2.1 The Direct Tax Vivad se Vishwas Bill which was introduced in the Lok Sabha on 5th February, 2020 is expected to come up for passage in the next Parliament session beginning March 2, 2020.
2.2 Who can avail the benefit under this scheme?
A taxpayer can avail the benefit under the scheme in respect of Income-tax appeals pending before the appellate forum as on 31-01-2020. These appeals could be filed either by the taxpayer or by the Income-tax authority.
The following person shall also be eligible for the benefit under this scheme:
a) A person in whose case, writ petition is pending before the High Court or special leave petition is pending before the Supreme Court.
b) A person in whose case, an order has been passed by the Assessing Officer or appellate forum and the time limit for filing an appeal against such order has not expired on or before 31-01-2020.
c) A person who has filed an objection with the Dispute Resolution Panel (DRP) under section 144C and no direction has been issued by DRP on or before 31-01-2020.
d) A person against whom directions have been issued by DRP on or before 31-01-2020 but the Assessing Officer has not yet passed an assessment order in pursuance of such directions.
e) A person who has filed an application for revision under section 264 and such application is pending on or before 31-01-2020.
2.3 How much tax is payable under the scheme?
A summarized view of the provisions:-
|Tax payable till 31st March 2020
|Amount payable w.e.f. 1.4.2020 but before the last date
|Appeal filed by
|(100%+25% = 125%) of disputed tax
|100% of disputed tax
|(100%+35% =135%) of disputed tax
=110%) of disputed tax
|25% of disputed interest and penalty#
|30% of disputed interest and penalty#
|Tax De-partment or where I-T department has lost case
|(50%+12.5% = 62.5%) of
|50% of disputed tax
|(55%+12.5% = 67.5%) of disputed tax
|55% of disputed tax
|Tax De-partment or where I-T department has lost case
|12.5% of disputed interest and penalty#
|15% of disputed interest and penalty#
*Penalty and Interest will be waived.
# Rest will be waived off
The last date as announced in the Budget is 30th June, 2020.
3. Other Provisions
3.1 tax arrear means,—
i. the aggregate amount of disputed tax, interest chargeable or charged on such disputed tax, and penalty leviable or levied on such disputed tax; or
ii. disputed interest; or
iii. disputed penalty; or
iv. disputed fee,
3.2 How to file the declaration under the scheme?
3.3 When the benefit of the scheme is not available?
The provisions of this scheme shall not be applicable in respect of the following circumstances:
a) Tax arrears 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 (assessment in case of search or seizure). However, the taxpayer shall be eligible for the benefit of this scheme, where disputed tax does not exceed Rs. 5 crores,
b) Tax arrears relating to an assessment year in respect of which prosecution has been instituted on or before the date of filing of the declaration;
c) Tax arrears relating to any undisclosed income from a source located outside India or an undisclosed asset located outside India;
d) Tax arrears relating to 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;
e) Tax arrears relating to an appeal before CIT(A) in respect of which notice of enhancement under section 251 of the Income tax Act (powers of Commissioner(Appeals)) on or before 31st January, 2020.
f) Any person in respect of whom an order of detention has been made under the provisions of the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974 on or before the filing of declaration. However, if such detention order has been revoked by the Advisory Board or set aside by a court of competent jurisdiction then such a person can file a declaration under the scheme;
g) Any person in respect of whom prosecution for any offence punishable under the following Acts or such person has been convicted of any such offence:
h) Any person against whom enforcement of any civil liability has been instituted on or before the filing of the declaration; or
i) Any person notified under section 3 of the Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992 on or before the filing of declaration.
It must be noted that only those cases shall be excluded from this scheme where department has launched prosecution under IPC or for enforcement of any civil liability.
3.4 What shall be the effect of the scheme on pending appeals?
Once taxpayer files declaration under the scheme, any appeal pending before the ITAT or CIT(A), in respect of the disputed income or disputed interest or disputed penalty or disputed fee, shall be deemed to have been withdrawn from the date on which certificate is issued by the designated authority.
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 an order has been passed by the designated authority or the payment of a sum by the declarant has been made under the scheme.
3.5 The declaration made under the scheme shall be presumed not to have been made in the following circumstances:
a) If any material particulars furnished in the declaration is found to be false at any stage;
b) Taxpayer violates any of the conditions referred to in the scheme; or
c) Taxpayer acts in any manner which is not in accordance with the undertaking given by him while filing his declaration.
Once the declaration is presumed not to have been made, all the proceedings and claims which were withdrawn earlier shall be deemed to have been revived.
3.6 Another point is grant of immunity from institution of any proceeding for prosecution for any offence under the Income tax Act in respect of matters covered in the declaration and also provides immunity from imposition of penalty and levy of interest.
3.7 Taxpayers can get refunds if the amount in the settlement scheme comes to less than that already paid before availing the scheme. The scheme also gives clarity in cases where the assessing officer has reduced the returned loss, by making addition of income or by disallowing expenditure.
‘Vivad se Vishwas’ will undisputedly benefit the interest of taxpayers looking for an expeditious and rapid settlement of their tax claims raised by the department. A negotiated settlement – between the taxpayer and the CBDT- is a sensible way to resolve disputes without moving to court. It is an advantageous scheme for both the taxpayer and the revenue department. Hope this will work as intended.
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