Summary: The Vivad Se Vishwas Scheme, 2024 has been introduced to expedite the resolution of tax disputes and reduce litigation, following the success of the first scheme launched in 2020. Despite resolving 1.46 lakh cases and recovering ₹0.54 trillion, in VsV 202, tax appeal pendency has risen again, with over 5.44 lakh cases pending before various appellate authorities, and a total disputed tax amount is at ₹10.40 trillion which is roughly 5.6% of India’s GDP. The 2024 scheme, announced in the Finance Bill (No.2) 2024, aims to address these growing disputes and provide a more efficient settlement process for taxpayers.
The author has summarised the scheme in the form of FAQs
Introduction:
The Income-tax Act, 1961 allows both taxpayers and the Department to file appeals against orders under the Act, through various appellate forums like the Joint Commissioner (Appeals), Commissioner (Appeals), Income Tax Appellate Tribunal, High Courts, and the Supreme Court. However, this tax litigation consumes a lot of resources, creates uncertainty and takes away focus away from day-to-day operations, for the taxpayers as well as of tax authorities.
To expedite the resolution of appeals, the Direct Tax Vivad Se Vishwas Scheme, 2024 was proposed in the finance bill (no.2) 2024.
Background of VsV 2024 :
The government launched first Vivad se Vishwas Scheme, 2020 that was applicable for appeals filed before 31st January 2020.
When the scheme VsV 2020 was launched around 4.83 lakh direct tax appeals were pending across different levels, including the Commissioner (Appeals), ITAT, High Courts, and the Supreme Court, with the unresolved disputed amount at ₹ 4.96 trillion. This received a very good response from the taxpayers. It helped to resolve 1.46 lakh appeals (i.e. about 30% of total pendency) and tax collected out of the settlement was at ₹ 0.54 trillion approximately.
The pendency of the appeal did not reduce subsequently and pendency started to rise again.
As per the data available, Appeals pending before Commissioner (Appeals) level is over 5.44 lakh, before ITAT about 20,266/-, before High Court about 37,436 and before the Supreme Court about 5,544. The amount of disputed tax is estimated at ₹ 10.40 trillion approximately, which is almost 5.6% of India’s GDP.
(Source for statistical data: https://www.pdicai.org & https://www2.deloitte.com/ )
Vivad Se Vishwas 2024
Looking at the good response in first VsV, the finance minister announced VsV, 2024 while presenting the Finance Bill (No.2) 2024. The notification for the scheme was issued on 20/09/2024. This scheme aims to settle disputed issues and reduce litigation efficiently.
This scheme is explained, as below, in the form of FAQs along with relevant Sections.
Q.1: Who are the eligible taxpayers to participate in VSV Scheme,2024?
Ans: As per Section 89(1)(a) following persons are eligible to participate:
(i) Taxpayers, in whose case any appeal is pending before CIT(A), ITAT, HC or SC including SLP before SC, filed either by the assessee or by the income-tax authority, before the specified date.
(ii) Taxpayers, in whose case an objection before the DRP is pending or the directions have been issued by the DRP, but no final order has been passed by the AO, before the specified date.
(iii) Taxpayers, in whose case the revision application u/s 264 of the Income-tax Act is pending before PCIT/CIT, before the specified date.
Q.2: What is the specified date in Q.1 above?
Ans: As per Section 89(1)(n) the Specified date is July 22, 2024.
Q.3: To which the authority the declaration is to be submitted?
Ans: Not below the rank of CIT, as specified by the PCIT (S. 89(1)(e))
Q.4: What is Disputed income?
Ans: Income related to the disputed tax. (S. 89(1)(g))
Q.5: What is the meaning of the tax arrears?
Ans: As per S.89(1)(o) the tax arrears means
(i) The total amount of disputed tax, interest on that tax, and any penalties.
(ii) Disputed interest.
(iii) Disputed penalty.
(iv) Disputed fee.
Q.6: What is the meaning of disputed tax?
Ans: The taxes that would be payable if the assessee loses the appeal, by any authority including the application made u/s 264. (S. 89(1)(j))
Q.7: What is the meaning of Disputed interest?
Ans: Interest determined under the Income-tax Act even when the same has not been charged or the interest is charged against which the assessee has filed an appeal. (S. 89(1)(h))
Q.8: What is the meaning of Disputed penalty?
Ans: Penalty determined under the Income-tax Act even when the same has not been levied or the penalty is levied against which the assessee has filed an appeal. (S. 89(1)(i))
Q.9: What is the meaning Disputed fee?
Ans: Fee determined under the Income-tax Act against which the assessee has filed an appeal. (S. 89(1)(f))
Q.10 How much amount is required to pay when the assessee wishes to make an application under the scheme?
Ans: The amount is payable as under: (S. 90)
| Sl. No | Nature of tax arrear | Amount payable under this Scheme on or before the 31st day of December, 2024 | Amount payable under this Scheme on or after the 1st day of January, 2025 but on or before the last date. |
| (1) | (2) | (3) | (4) |
| Appeal is filed after 31/01/2020 | Where the tax in arrear is the aggregate of
(i) Disputed tax, (ii) Interest chargeable/charged (iii) Penalty leviable/levied
|
Amount of the disputed tax. | Amount of disputed tax + 10% of disputed tax. |
| Appeal is filed before 31/01/2020 | Where the tax in arrear is the aggregate of
(i) Disputed tax, (ii) Interest chargeable/charged (iii) Penalty leviable/levied |
Amount of disputed tax + 10% of disputed tax. | Amount of disputed tax + 20% of disputed tax. |
| Appeal is filed after 31/01/2020 | Where the tax in arrear relates to
(i) Disputed interest OR (ii) Disputed Penalty OR (iii) Disputed fee |
25% of the disputed
Amount. |
30% of the disputed
Amount. |
| Appeal is filed before 31/01/2020 | Where the tax in arrear relates to
(i) Disputed interest OR (ii) Disputed Penalty OR (ii) Disputed Fee |
30% of the disputed
Amount. |
35% of the disputed
Amount. |
Q.11: Is there any relief for the assessee if they have won the appeal in a previous year on the same issue before any authority?
Ans: The assessee will be required to pay 50% of the respective amount as mentioned in columns (3) and (4) in the following cases:
When the appeal is filed by income tax authorities before ITAT, HC, SC (Including SLP)
- Appeal filed by the assessee is pending before CIT(A) where on similar issue the assessee has already won the appeal before ITAT, HC or SC
- Appeal filed by the assessee is pending before ITAT where on similar issue the assessee has already won the appeal before HC or SC
(As per the proviso to S. 90)
Q.12: What details and declarations need to be submitted?
Ans: As per S. 91, the assessee must comply/ submit the information in the prescribed form and manner.
(i) Once the declaration is submitted, any pending appeal before CIT(A)/ITAT will be deemed to have been withdrawn from the date of issue of a certificate under section 92(1).
(ii) Once the declaration is submitted, any pending appeal the High Court or Supreme Court must be withdrawn. Proof of withdrawal, along with payment details, must be submitted to the designated authority.
(iii) In addition, assessee must provide an undertaking for not pursuing any further legal action with reference to disputed tax.
Q.13: Under what circumstances the declaration will be considered as invalid?
Ans: As per Section 92(5), the declaration will be considered invalid if any information provided by the assessee is found to be false, or if the taxpayer violates any conditions.
Q.14: What could be the consequences if the declaration is considered as invalid?
Ans: The consequences under the income tax act against the assessee shall be deemed to have been reviewed. (S.92(5))
Q.15: what is the time limit for designated authorities to issue the certificate?
Ans: The designated authority will determine the tax payable and issue the dertificate to the assessee within 15 days of receiving the declaration (S. 92(1))
Q.16: What is the time limit for assessee to pay the taxes?
Ans: The assessee is required to pay the amount within 15 days of receiving the certificate. (S. 92(2))
Q.17: Whether the matters covered under VSV will be reopened again?
Ans: No. The matters covered by this order cannot be reopened again. (S. 92(3))
Q.18: What happens if the same issue arises in a subsequent year’s assessment?
Ans: Acceptance of the scheme does not bind either party to accept the resolution for similar issues arising in subsequent years (Section 92(4)).
Q.19: Can the department initiate penalty/prosecution against the tax arrears settled in VSV?
Ans: No legal proceedings will be initiated for the tax arrears covered under this Scheme. (S. 92(5))
Q.20: Is the assessee entitled to a refund if they withdraw the application?
Ans: Any payment made under a declaration as per section 91 is non-refundable. ((S. 94(1))
Q.21: Is the assessee entitled to a refund if they pay an excess amount?
Ans: Yes. Assessee is entitled to a refund of the excess amount. However, assessee is not entitled to receive any interest on such excess amount paid. ((S. 94(2))
Q.22: Who are the assessees not entitled to make declaration under the scheme?
- Where the tax arrears pertains to assessment completed in pursuance of action u/s 132
- If a prosecution has already been initiated before filing the declaration.
- If the undisclosed income or assets are located outside India.
- If the assessment or reassessment is based on information received under an agreement with another country (sections 90 or 90A of the Income-tax Act).
- Where the detention order against the assessee has been made under the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974 and the same has not been set aside.
- Tax payer is involved in cases under specific laws such as the Unlawful Activities (Prevention) Act, the Narcotic Drugs Act, the Prevention of Money Laundering Act, or the Prevention of Corruption Act, among others, and has been prosecuted or convicted before filing the declaration.
- If a prosecution has been initiated by an income tax authority against an assessee under the Bharatiya Nyaya Sanhita or any other law for enforcing civil liabilities before filing the declaration.
- Where the assessee is notified under the Special Court (Trial of Offences Relating to Securities Transactions) Act, 1992, before the declaration.
Q.23: What is the difference between new appellant and old appellant?
Ans: New appellant refers to the taxpayer where appeal has been filed after the 31st January, 2020 but on or before the specified date; and old appellant refers to the taxpayers where appeal has been filed on or before the 31st January, 2020. (Rule 2(e) and 2(f) of the notification 104/2024 in G.S.R 584(E) dated 20.09.2024)
The Scheme offers incentive to “new appellants” as compared to “old appellants” by way of lower settlement amount.
Q.24: What are the different forms prescribed under the scheme?
Ans:
| Form-1 | Declaration and undertaking by the taxpayer |
| Form-2 | Certificate issued by the Designated Authority |
| Form-3 | Intimation of payment by the taxpayer |
| Form-4 | Order for full and final settlement of tax arrears |
Form-1 must be filed separately for each dispute, unless both the assessee and the income tax authority have filed appeals against the same order, allowing for a single Form-1 submission in such cases.
Payment notifications should be submitted using Form-3, along with proof of withdrawal of any related appeals.
Forms 1 and 3 will need to be filed electronically and will be accessible on the Income Tax Department’s e-filing portal.
(Rule 4,5,6,7 of the notification 104/2024 in G.S.R 584(E) dated 20.09.2024)
Author Bio
Person Has Income from Penny Stock Sale during the FY 2015-16 & Reassement was done on 31-03-23, And Case in Under Appeal, IS ELIGIBALE FOR THIS SCHEME.