Karnataka State Chartered Accountants Association (KSCAA) has submitted suggestions and raised concerns regarding the Direct Tax Vivad Se Vishwas Scheme 2024 (VSVS) to the Central Board of Direct Taxes (CBDT). Key issues include the eligibility of taxpayers with pending appeals before the “specified date,” challenges related to remanded cases and ex-parte appeals, and the impact of high tax rates on the viability of settlements. KSCAA recommends clarifications on the scheme’s applicability, including for belated appeals, rectification applications, and additional grounds filed before the specified date. Further, they suggest extending the scheme to cases with unresolved disputes on tax credits, set-offs, and specific payment issues under the scheme. Concerns were also raised about the handling of rectification proceedings, the technical problems with form submissions, and the aggregation of payable amounts after the deadline.
Karnataka State Chartered Accountants Association (R)
To,
Shri Ravi Agarwal,
Chairperson,
The Central Board of Direct Taxes
Government of India.
Date: 10th December 2024
Ref No: 005/2024-25
SUBJECT: REPRESENTATION AND SUGGESTIONS ON THE DIRECT TAX VIVAD SE VISHWAS SCHEME 2024
The Karnataka State Chartered Accountants Association (R) (in short `KSCAA’)), established in 1957 and registered under the Karnataka Societies Registration Act, is dedicated to advocating for the welfare of Chartered Accountants. Our mission is to represent their interests before regulatory authorities and to address the professional challenges faced by both Chartered Accountants and the business community, endeavouring for effective resolutions.
Over the years, we have raised various concerns about the challenges and hardships faced by taxpayers and Chartered Accountants, along with proposed solutions. In this representation, we wish to draw attention to specific hardships encountered by taxpayers, and professionals regarding the Direct Tax Vivad Se Vishwas Scheme 2024 (VSVS/the Scheme) and the Frequently Asked Questions (FAQ’s) issued by the Central Board of Direct Taxes (CBDT) pursuant to the introduction of the scheme. In addition to the above, we have also listed out suggestions for effective implementation of the scheme
1. Hardships/Challenges – On the scope of the scheme
1.1. As per the FAQ’s, the Scheme shall not apply to a taxpayer, if an appeal pending on the `specified date’ is disposed off before the option available under the scheme is exercised by such taxpayer. In this regard, for the purposes of eligibility the FAQ’s recommend filing a further appeal. This recommendation may be counter-productive as the intent of the scheme focuses on reducing pending litigation before appellate forums. Hence, a clarification may be issued in this regard to consider all the appeals pending on the ‘specified date’ to be eligible for the scheme irrespective of whether an appeal has been disposed of before filing of form 1. To this extent, the Circular No.12/2024 dated 15.10.2024 issued by CBDT may be modified.
1.2. In cases where orders are passed and appeal is not filed, but time to file an appeal has not elapsed as on the ‘specified date’, it is recommended the Scheme be extended to such taxpayers/disputes. This case was specifically covered by the FAQ’s issued during VSVS 1.0. Accordingly, a similar clarification may be provided under the current Scheme.
1.3. The issues remanded by the ITAT to the file of the AO are not considered as pending disputes as per the FAQ and therefore such issues are not eligible for the Scheme. With respect to the cases where the matter is remanded in case of penalty proceedings or if the issue is not remanded for de novo assessments, it is recommended to extend the applicability of the Scheme to such taxpayers.
1.4. In cases where the CIT(A) has disposed of the appeal ex-parte and the ITAT has restored the matter to the Assessing Officer, these cases should be eligible for VSVS. A clarification to this effect would significantly contribute to achieving the objectives of the scheme.
1.5. Due to high tax rates along with surcharge and cess as per the provisions of section 115BBE of the Act, most of the orders passed for AY 2017-18 onwards are not viable under the above scheme. This undermines the intent of the scheme, as such disputes continue to clog the system. It is recommended to reduce the settlement amount in these cases to facilitate resolution.
1.6. The scheme should allow the set-off of refunds resulting from the scheme for one year against the tax payable for a different Assessment Year (AY) or dispute under the scheme.
2. Issues that require clarification
2.1. It is recommended that clarity be provided on the following points:
a) Settlement of belated appeal filed after the specified date, once delay has been condoned by appellate forum before date of filing declaration.
b) Where appeal, as also rectification application, is pending as of the specified date on the same issue, the disputed tax is to be calculated after giving effect to the rectification order passed by the tax authority.
c) Applicability of the Scheme for additional ground filed on or before the specified date.
d) There exists a discord between the parent legislation of the Scheme and FAQ No. 16. The parent legislation does not require payment of disputed tax pertaining to proposed enhancements. On the other hand, FAQ No. 16 as well as the format of Form No.1 require such enhancement to be considered in determining amount payable by taxpayer to settle the appeal. e) Issues have been noticed with regard to the challan used for payment of the disputed tax. It is noticed that incorrect challan particulars are not considered while giving credit while computing the tax payable. In addition, there is also uncertainty about the challan particulars for the purpose of payment under the Scheme.
3. Proceedings before appellate authorities
3.1. Considering that the scheme is open till 31.12.24 (and beyond; with additional tax implications), the Appellate authorities may be directed to keep the proceedings in abeyance to avoid redundancy. It is noticed that many CIT(A)s have passed orders without allowing the appellants to consider the benefit of the Scheme. In certain cases, the CIT(A)s are not granting adjournment (or granting short adjournment) without having regard to the time available under the scheme.
3.2. As per section 91(2) of the Finance Act, an appeal is deemed to have been withdrawn from the date on which Form 2 has been issued. Given the above deeming fiction, the requirement of subsection (3) of the said section to withdraw the appeal and furnish intimation along with form 3 may be avoided.
4. Recertification Proceeding
4.1. There is no clarity on the amount to be settled in case the rectification application is pending before the Assessing Officer/other authorities on the following issues:
a) TDS credit as claimed in the return of income which is not allowed while passing the assessment order needs to be considered as the amount paid for the purpose of VSVS settlement
b) Denial of set-off of undisputed brought-forward losses.
c) In case of rejection of the form for technical reasons, the Appellant may be allowed to resubmit the application with the correct particulars.
d) It is noticed that Form 2 has not been issued within the time prescribed under the statute. Further, delay in payment or filing of form 3, if any, may be condoned to avoid rejection and refiling/reissue of the form under the said scheme.
4.2 A speedy disposal of the rectification application should be ensured before filing Form 1 or before processing Form 2.
5. Technical issues
5.1. There is an issue with respect to the aggregation of the amount payable before 31 December 2024 and the amount payable after 1 January 2025. Ideally the same should not be aggregated leading to confusion.
5.2. Though most of the clauses/schedules inform 1 under the Scheme are not applicable to all the taxpayers, the same is populated in the form, leading to unnecessary confusion. It is recommended to collapse/hide the same in the final form.
5.3. In Part B of Form 1, the schedules are not clearly titled to distinguish between disputed taxes, penalties, interest, etc. Multiple schedules with the same title lead to confusion while selecting the correct option. 5.4. There is no provision to claim TDS credit if the same has not been claimed in the Income tax return (ITR) or if the ITR has not been filed. Similarly, there is no provision to claim other tax credits, such as TCS or relief under sections 91/90 etc of the Act.
