Letter to CBDT for comments / clarification sought for Regarding the Direct Tax Vivad Se Vishwas Bill, 2020

To,
Chairman CBDT
New Delhi

Subject :-  comments / clarification sought for Regarding the Direct Tax Vivad Se Vishwas Bill, 2020

Sir,

Govt of India has been very kind enough in introducing the bill The Direct Tax Vivad Se Vishwas Bill, 2020. We have gone through the bill and sought the clarification for better understanding and interest in public at large.

1. As per Section 2 (1) (a)  this scheme is applicable on the appeals which are pending on specified date. Section 2 (1) (n) further prescribes that “specified date “ means 31st  Day of January 2020. Now Clarification is sought regarding the various prepositions discussed as below:-

1.1 By putting the Specified date for pending appeals as on 31st January 2020 clearly indicates Govt’s  intention that, cases for AY 2017-18 which had been assessed upto 31st December 2019 against which appeal has been filed in ideal conditions within 30 days i.e. 31st January 2020, will be covered in the scheme. I humbly draw your kind attention that there are various assesses which were not registered at the Income Tax Portal and there Income tax assessment has been scrutinised u/s 143 (3) on face to face model and although assessment order was framed upto 31st December 2019 but order has been served by post and received by assessee in mid of January 2020 or near about period.  Section 249 (2) (b) provides that an appeal can be filed within 30 Days from the date of service of notice of demand relating to the assessment. In the impugned cases where  assessment order including notice of demand have been served for assessment year 2017-18 as completed upto 31st December 2019,   upon the assessee in mid of January 2020, say 15 January 2020 then assessee can file the appeal before the CIT appeal upto 15 Feb. 2020. Now suppose there are two different assesses of the same type then the assessee who has filed the appeal upto 31st January 2020 will get the benefit of the scheme and there is another assessee who has filed the appeal say 5th of Feb 2020 will not get the benefit of the scheme, although both have filed the appeal within statutory time frame. It is suggested that specified date of pending appeal should suitably be amended so as to covered the case of second type of assessee otherwise it will hit the constitutional right of Equality before Law.

1.2 Section 270AA has become applicable from AY 2017-18. As stated supra it is clear that Govt has intention to cover the disputed cases of AY 2017-18, and also assessed upto 31st December 2019, if the appeal has been filed upto  31st Jan 2020. Now Section 270AA provides that an assessee can make an application before AO for grant immunity from imposition of penalty with the condition that entire Tax and interest as arised in assessment order have been paid within 30days from date of notice of demand and application for immunity from imposition of penalty has been filed before AO with in 30 days from the end of the month in which order was served upon the assessee.  After receiving application, AO will pass the order either rejecting / accepting the application within 30 days from the date in which application is received. Till the time disposal of the immunity application assessee would not have any right to file appeal before Commissioner (Appeal). In all the cases where the order has been passed in last week of Dec 2019 and also has been served upon the assessee, the assessee who has opted for section 270AA for immunity of penalty and in case of application of immunity is rejected by AO then assessee would not be  in a position to file the appeal upto 31st Jan 2020 and he will loose the benefit of scheme although he has paid entire tax and interest of demand raised in assessment order.  Position can be summarised as under:-

Sr. no. Particulars Remark
1 Order passed u/s 143 (3)  AY 2017-18 in the last week of December 2019 Order received on 31st December.
2 Made the application u/s 270AA say on 15 January 2020 While filing the application entire tax and interest as raised in the order has been paid. The right of appeal relinquished.
3 AO decided the application say on 5th Feb 2020. As per section 270AA AO can pass the acceptance/ rejection within a month after the end of the month in which application was made by assessee. In our case date comes to 28 Feb 2020.
4 If AO accept the immunity application No matter
5 If AO does not accept the immunity application The right of appeal will again arise. Now assessee can file an appeal against original order passed in the month of December 2019.  In our case AO has decided  immunity order on 5th  of Feb 2020 now in this situation if assessee filed the appeal on 6th Feb, then still he will be out of the scope of Vivad Se Vishwas scheme as only on the simple ground that  his appeal is not pending on specified date 31st Jan 2020.

From the above you will find that the assessee who has been induced by the immunity provided in section 270AA and  has paid the entire Tax and interest within 30 days from the date of the order but his application was rejected filed u/s 270AA will loose its right to get benefit of Vivad se Vishwas Scheme whereas on the another side the assessee who has neglected provisions of section 270AA and also accordingly not paid tax and interest but simply filed the appeal upto 31st January 2020 will get the benefit of scheme. This is also an example of discrimination between the assessees. Due amendments should be made in the scheme to cover these assessee.

2. Clarification sought regarding Formula for calculation of disputed tax :- As per section 2 (1) (j)  the disputed tax will be calculated as per the formula as provided in section 2 (1)(j) which simply states that disputed tax is a difference between A-B

A Tax on total assessed income
B Tax on accepted income, the income for which no appeal has been filed (in other word which has not a subject matter of appeal)
Therefore A-B = Disputed Tax

We understand that this formula has been framed looking to the situation where AO has made the additions in assessment order and appeal is pending before CIT (appeal). This formula also covers the situation where the addition has been made in the assessment order and the same is also confirmed by CIT (Appeal).

There may arise a situation where addition has been made by AO and which has been partly confirmed by CIT (Appeal).  In that situation both department as well as assessee went into appeal. Now question arise whose perspective disputed tax has to be calculated. Position is explained with example as under: –

Particulars Situation 1 Situation 2 Situation 3
Tax on Income declared in ROI filed by the assessee. Rs. 500000/- Rs. 500000/- Rs. 500000/-
Tax on Income assessed by AO Rs. 1100000/- Rs. 1100000/- Rs. 1100000/-
Tax on accepted income for which no appeal was filed Rs. 100000/- Rs. 100000/- Rs. 100000/-
Disputed Tax before CIT (Appeals) Rs. 500000/- Rs. 500000/- Rs. 500000/-
On appeal CIT (appeal) assessed it at Rs. 1100000/- Rs. 700000/- Rs. 700000/-
Matter is pending before ITAT as appeal filed by Assessee Matter is pending before ITAT as appeal filed by Assessee Matter is pending before ITAT as appeal filed by Department
Calculation of disputed Tax
As per formula “A” is total tax on  assessed Income Rs. 1100000/- Rs. 700000/- Rs. 700000/-
Calculation of B which is tax on total income
Total assessed tax Rs. 1100000/- Rs. 700000/- Rs. 700000/-
Less: Tax on income for which appeal has been filed Rs. 5,00,0000/- Rs. 1,00,0000/- Rs. 4,00,0000/-
Total “B” (Accepted Tax on Income) Rs. 6,00,0000/-  Rs. 600000/- Rs. 300000/-
Disputed Tax (A-B) Rs. 5,00,0000/- Rs. 1,00,0000/- Rs. 4,00,000/-

(*In the above case which disputed tax has to be considered, whether 100000, 400000, or total of both 500000)

3. Clarification is sought regarding the position of demand already paid as arising under the appeals pending on specified date 31st January 2020 :- In statement of object and reasons as attached to The Direct Tax Vivad Se Vishwas Bill 2020 in clause 3(a) it has been stated that provisions of this bill shall be applicable on the appeals pending as on 31st January 2020 irrespective of whether demand on such cases is pending or paid. Now looking to this provision following clarification is sought for: –

3.1 Whether the tax determined under section 5 (1) of bill will be paid by fresh payment of challan.

3.2 Whether the tax determined under section 5 (1) of bill will be allowed to be adjusted from the already paid tax and interest.

3.3 If the tax determined under section 5 (1) of bill is paid separately without adjustment of tax already paid then refund will be allowed to assessee immediately or some other time period as may be clarified.

4. On Going through the bill it is clear that The Direct Tax Vivad Se Vishwas Bill 2020 is applicable on all cases pertaining to all assessment years. And Scheme provides waiver of interest and penalty, not the disputed tax. The section 115BBE has been made effective w.e.f. 1.4.2017 proposing the income declare u/s 68,69,69A,69B,69C and 69D at the rate of 78% including surcharge and cess if paid and declared in the ROI. If not declared then a penalty of 10% leviable extra. Then total tax and penalty come to 88.4 %. If, for  example penny stock is added in the income of the assessee for AY 2017-18 then this disclosure scheme will not be much beneficial to him as he could have saved only 10% of penalty by adopting the scheme. If suppose a case of  penny stock is open and assessed for AY 2012-13, in that condition that defaulter assessee has to pay only tax, which is 30%. He will also get immunity of interest of 6 years. Looking a comparison between two assessment years the defaulter assessee of old assessment year will get much benefit as paying only 30% without interest whereas the assessee showing the same income in latest AY 2017-18 will get the much lesser benefit of only 10%. This will discourage assessee of  AY 2017-18  to adopt this scheme because by adopting the scheme they will be able to save only 10% whereas after depositing the tax if they fight the case with higher authorities and win then he will be able to save 75%. It is suggested that some steps should be taken to induce these assessee of AY 2017-18 having been taxed at 78%.

Thanking You,

Yours Faithfully
(ANIL KUMAR GUPTA)
LL.B., A.I.C.W.A., F.C.A., DISA, CISA (USA)
M.NO 072553

Reach me at anilkumargupta1@yahoo.co.in

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