Article summarises Provisions of Direct Tax Vivad Se Vishwas Act, 2020 and contains/Explains Introduction to Direct Tax Vivad Se Vishwas Scheme, Who Are Eligible To Avail Direct Tax Vivad Se Vishwas Scheme, Quantification Of The Disputed Tax, Computation Of The Amount Payable Under Direct Tax Vivad Se Vishwas Scheme, Procedure For Filing Declaration Under Direct Tax Vivad Se Vishwas Scheme and Some Other Important Aspects of Direct Tax Vivad Se Vishwas Scheme.
The Hon’ble Finance Minister Nirmala Sitharaman, on 01.02.2020 in her speech for Budget 2020, announced the Direct Tax Vivad se Vishwas Scheme.The reason for introduction of the Scheme is to reduce the pending income tax litigations at various appellate forums and timely collection of the revenue.The amended Bill was approved by the Lower House of the Parliament on 04.03.2020 and on the same day the Central Board of Direct Taxes [“the CBDT”] issued clarification vide Circular No. 7/2020, in the form of FAQ’s. Subsequently, the Bill became an Act upon getting assent of the President on 17.03.2020. The relevant Rules were prescribed on 18.03.2020.Further, the CBDT issued Circular No. 09/2020 vide dated 22.04.2020, with certain modification in the earlier Circular. For easy understanding the Scheme can be summarised in simple language as under:
2.1 The appeals pending as on 31.01.2020 before the appellate forum which consists of the Supreme Court, the High Court, the Income Tax Appellate Tribunal or the Commissioner (Appeals) shall be eligible for the Scheme. Such appeals can also be the appeals filed by the Income Tax Department.
2.2 Apart from the appeals pending at various levels, certain other proceedings which are not an appeal in the eyes of the Income tax Act, 1961[“the IT Act”]are specifically covered under the Scheme. They are as follows:
i) Writ Petitions
ii) Revision applications u/s 264
iii) DRP related proceedings
iv) Other proceedings like matter set aside to the assessing officer by higher appellate authorities or arbitration, mediation or conciliation etc.
2.3 Some of the proceedings or the persons are specifically excluded u/s 9 of the Scheme/ Circular issued by the CBDT. They are as follows:
i) Appeals pending related to search u/s 132 or 132A of the IT Act, if the “disputed tax” exceeds rupees five crores.
ii) Writ Petition against:
– the notice u/s 148 of the IT Act and no assessment order is passed.
– order passed by the Authority for Advance Rulings [“AAR”] and no income determined in such order passed.
iii) Relating to any undisclosed income from a source located outside India or undisclosed asset located outside India
iv) 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 IT Act, if it relates to tax arrears.
v) Waiver application filed u/s 234A, 234B or 234C
vi) A person against whom the prosecution is already instituted.
2.4 Interestingly, the Scheme also covers deemed appeals that is a case where the time limit to file appeal against an order is not expired as on 31.01.2020.
2.5 There can be more than one appeals pending for the same assessment year. As the Scheme is qua appeal, the assessee may settle all the appeals or one of the appeals as per his own choice. Further, there can be situation where the assessee and Department both have filed appeal (cross appeals). In such a situation the assessee may settle both the appeals or any one of them as per his own choice.
3.1 After the identification of the eligible appeal the next step is to compute the disputed tax with respect to such appeal for which the declaration is filed under the Scheme. The provisions for computing ‘disputed tax’ as given in section 2 (1) (j) are tabulated in a simplified manner as under:
|Sr. No.||Particulars||Disputed Tax|
|A||Pending appeal / writ / SLP as on 31.01.2020||The amount of tax payable if such appeal / writ petition / SLP was to be decided against the assessee.|
|B||Where the time for filing appeal against the order of the appellate authority is not expired as on 31.01.2020 (deemed appeal)||The amount of tax payable as per the order giving effect to the appellate authority’s order.|
|C||Assessing officer passed an order on or before 31.03.2020 and the time for filing an appeal against such order has not expired as on that date (deemed appeal)||The amount of tax payable determined in accordance with such order.|
|D||Where the objections filed by the assessee are pending before the DRP as on 31.03.2020||The amount of tax payable as if the DRP was to confirm the variation proposed in the draft order.|
|E.||Where DRP has issued any direction u/s 144C (5) of the IT Act and the A.O. has not passed the order u/s 144C (13) of IT Act on or before 31.01.2020||The amount of tax payable as per the assessment order to be passed u/s 144C (13) of the IT Act.|
|F.||Where the application for revision u/s 264 of the IT Act is pending as on 31.01.2020||The amount of tax payable as if the revision application is not to be accepted.|
3.2 First proviso to section 2(1)(j) provides mechanism to compute ‘disputed tax’ in case of a pending appeal before CIT(A) as on 31.01.2020, where a notice proposing enhancement of income is already issued by CIT(A) before 31.01.2020. In such a case, for computing the disputed tax, the amount of tax payable shall be increased by the amount of tax on the disputed income for which the enhancement notice has been issued on or before 31.01.2020.
3.3 As per the Second proviso to section 2(1)(j), in a case where the dispute in relation to an assessment year results into reduction of tax credit u/s 115JAA or section 115D of the IT Act or any loss or depreciation computed thereunder, the appellant shall have an option, either to include the amount of tax related to such tax credit or loss or depreciation in the amount of disputed tax or to carry forward the reduced tax credit or loss or depreciation, in such manner as may be prescribed.
4.1 Section 3 can be regarded as the main enabling section of the entire Scheme. The computation of the amount payable under the Scheme is as follows:
|Sr. No.||Nature of Tax Arrear||Amount payable on / before 31.12.2020||Amount payable on / after 01.01.2021 but before last date [yet to be notified]|
|i)||Quantum appeals, writ, SLP, DRP objections, revision and specified proceedings
Where the ‘tax arrears’ is the aggregate amount of ‘disputed tax’, interest chargeable or charged on such disputed tax or penalty leviable or levied on such disputed tax
|Disputed tax (100%)||Disputed tax + Further 10% of Disputed tax
[if 10% of disputed tax exceeds aggregate amount of interest and penalty on such disputed tax, the excess shall be ignored for the purpose of computation of amount payable under this Act]
Where the tax arrears include the tax, interest or penalty determined in any assessment year on the basis of search under section 132 or section 132A of the Act
|125% of the disputed tax
[if 125% of the disputed tax exceeds the aggregate amount of interest and penalty on such disputed tax, the excess shall be ignored for the purpose of computation of amount payable under this Act]
|135% of disputed tax
[if 135% of the disputed tax exceeds the aggregate amount of interest and penalty on such disputed tax, the excess shall be ignored for the purpose of computation of amount payable under this Act]
|iii)||Only penalty or interest or fee appeals
Where the tax arrears are related to only
– ‘disputed interest’ or
– ‘disputed penalty’ or
– ‘disputed fee’
– disputed interest or
– disputed penalty or
– disputed fees
– disputed interest or
– disputed penalty or
– disputed fees
4.2 If the appeal / writ / SLP filed by the Income Tax Department, the amount payable on settlement of such appeal / writ / SLP will be fifty percent of the amount payable as stated in the above table.
4.3 In a case where an appeal is filed before the CIT(A) or objections are filed before the Dispute Resolution Panel (DRP) by the appellant on any issue on which he has already got a decision in his favour from the ITAT (not reversed by the HC or SC) or the HC (not reversed by the SC), the amount payable on settlement of such issue shall be fifty percent of the amount payable as per above table.
4.4 Further, in a case where the appellant has filed an appeal on any issue before the ITAT on which he has already got a decision in his favour from the High Court (not reversed by the SC), the amount payable shall be fifty percent of the amount payable as per above table.
All the forms under the Scheme have to be furnished electronically on the income tax e- filling portal. The procedure to file the declaration is as follows:
i) Filing of Declaration in Form – 1 and Form – 2: –
The declaration under section 4(1) of the Scheme shall be made in Form – 1. It consists of the details regarding the appeal to be settled. Undertaking in Form – 2 concerning the waiving his right to seek or pursue any remedy under any law is to be accompanied alon with Form – 1. The said forms have to be verified under the DSC, if the return of income is required to be filed under the DSC, in other cases, the declaration has to be verified through EVC. On receipt of the declaration the acknowledgement will be issued electronically.
ii) Certificate from the Designated Authority in Form 3: –
The Designated Authority (an officer not below the rank of Commissioner) within 15 days from the receipt of the declaration will issue the Certificate u/s 5 (1) of the Scheme determining the amount payable under the Scheme.
iii) Payment of taxes and withdrawal of appeal / writ / SLP: –
The declarant shall pay the amount(if not already paid) as determined in Form – 3 within 15 days from the date of receipt of such certificate. However, if the declarant fails to make payment within prescribed time or violates any conditions of the Scheme, then the declaration will be presumed to have been never filed and all the consequences under the IT Act against the declarant shall be deemed to have been revived. The declarant is required to withdraw appeal / writ / SLP, etc., for which the declaration is filed after receipt of the Certificate u/s 5(1).
iv) Intimation of payment of taxes in Form – 4: –
The declarant shall intimate the details of tax paid alongwith proof of the withdrawal of appeals.
v) Order of full and final settlement of tax arrears in Form – 5: –
Upon receipt of Form – 4 from the declarant, the Designated Authority shall pass an order for full and final settlement u/s 5(2).
6.1 Once a quantum appeal is settled then there is immunity from levy of corresponding penalty, interest and instituting prosecution. Any appeal concerning penalty and / interest in respect of such quantum appeal shall not be allowed to be settled independently but will be have to be settled compulsorily along with the pending quantum appeal. However, in such a case, no extra payment with respect to such penalty / interest appeal will be required.
6.2 Credit of the taxes already paid or adjustment of the refund u/s 245 against the outstanding demand will be given to the declarant while determining the amount payable under the Scheme.
6.3 Any amount paid in pursuance of the declaration filed under the Scheme shall not be refundable under any circumstances.
6.4 Where the declarant had, before filing the declaration u/s 4(1), paid any amount under the IT Act is respect of his tax arrear which exceeds the amount payable u/s 3 he shall be entitled to a refund of such excess amount, but shall not be entitled to interest on such excess amount u/s 244A of the IT Act
6.5 Making a declaration under the Scheme shall not amount to conceding the tax position.
6.6 Once the appeal is settled under the Scheme then it cannot be reopened under the IT Act or any other law for the time being in force. But it is important to mention, any other issues which are not covered under the appeal which is settled under the Scheme, no immunity to those issues under the Scheme.
6.7 Where only notice for initiation of prosecution has been issued without prosecution being instituted, the assessee is eligible to file declaration under the Scheme. If the prosecution is instituted with respect to an assessment year the assessee is not eligible to file declaration for that assessment year, unless the prosecution is compounded before filing the declaration.
6.8 In a case where pending rectification application will have an impact on the computation of the disputed tax then the disputed tax will be calculated after giving effect to the rectification order passed, if any.
6.9 When the assessee settles TDS appeal against order u/s 201 as a deductor of the TDS, in such a case the deductee will get the credit of the taxes in respect of which the deductor has availed the dispute resolution under the Scheme. The credit will be allowed as on the date of settlement of dispute by the deductor.
6.10 Where assessee settles TDS liability as deductor of TDS under the Scheme against order u/s 201, the assessee will get the consequential relief of expenditure allowance under proviso to section 40(a)(i)/(ia) in the year in which such tax was required to be deducted.
6.11 When an assessee (being a person receiving an income) settles his own appeal under the Scheme and such appeal is with reference to assessment of an income which was not subjected to TDS by the payer of such income (deductor in default) and an order u/s 201 of the IT Act has been passed against such deductor in default, then such deductor in default would not required to pay corresponding TDS amount. However, he would be required to pay interest u/s 201(1A).
It should be noted that the above is only a simplified summary of the Scheme. The Scheme contains various provisions, conditions, exceptions, restrictions, etc. for each of the above feature. As such, informed decisions should be taken only after studying the Scheme carefully, alongwith the circulars / rules / instructions issued.