INTRODUCTION:

The scheme launched by Finance Ministry offers a complete waiver on interest and penalty to the taxpayers who pay their disputed taxes on or before 30th June 2020. This scheme inspired by success of the “Sabka Vishwash” Scheme.

  • Parliament gave its assent on 13th March 2020. The direct tax Vivad se Vishwash Bill 2020 would give tax payer an opportunity to settle their dispute by paying due taxes with complete waiver of interest or penalty until June 30.
  • CBDT Circular regarding “Vivad Se Vishwas” scheme – Amendment on 4th March 2020.
  • To make the process simpler for interested parties the form will specify the amount that the taxpayer has to pay by June 30.
  • The form designed assessment year-wise, where each year will show the disputed tax, the amount already paid and the balance whether refundable or payable.
  • The central Board of direct taxes has also directed its officers to be prepared with calculations for tax payers to ensure speedy execution of the scheme.

 

PURPOSE OF THE SCHEME

  • The key objective of the scheme is “To collect taxes and reduce the pending income tax litigation”.
  • To generate timely revenue to Govt. Of India.
  • To benefit the taxpayer with piece of mind certainty and time & resource saving.

 

APPLICABILITY OF THE SCHEME

1- The scheme shall be applicable U/s. 2(n) of Vivad Se Vishwas Act, to all the appeals / petition filed by the taxpayers or the Income Tax Department, which are pending on Jan 31, 2020 with the following forums:

  • Commissioner of Income Tax (appeals)
  • Income-tax Appellate Tribunal
  • High-Court.
  • Supreme-Court.

2- Further, the scheme is also applicable to the following cases where, as on the following cases where, as on Jan 31, 2020

  • Time limit for filing an appeal has not expired.
  • Cases are pending before the Dispute Resolution Panel (DRP) or where DRP directions have been passed but final assessment order is awaited.
  • Revision petitions are pending before the Commissioner of Income tax.
  • Search Cases where the demand is less than Rs.5 Crore.

 

ELIGIBILITY OF AN APPELLANT

Appellant Means:

  • In whose case an Appeal or Writ-Petition or SLP has been filed by him (Assessee) or by the Income Tax Authority or by both before an appellant forum and such appeal or petition is pending on the specified date.
  • In whose case an order has been passed by AO or CIT (A) or ITAT in an appeal or by the HC in a writ petition on or before the specified date i.e Jan 31, 2020 and the time for filing or SLP has not expired.
  • A person who has filed objections before DRP (relates to Transfer Pricing Matter U/s 144C of Income Tax Act- such kind of appellant or declarant can take advantage of this scheme) and DRP has not issued an directions or has issued the directions but AO has not the passed the order.
  • A person whose application U/s 264 is pending before CIT on the specified date.

 

MEANING OF “DISPUTED TAX”

Disputed Tax means Income Tax, including surcharges and cess payable by the appellant:

  1. In case an Appeal, WP, SLP is pending as on 31.01.2020: tax payable as if such appeal etc. was to be decided against the
  2. In case where an order in appeal or WP has been passed by the appellate forum on or before the specified date and time for filing appeal has not expired as on 31.01.2020: tax payable after giving effect to the order so passed.
  3. In case the order has been passed by AO on or before the specified date and time for filing appeal has not expired on 31.01.2020: tax payable in accordance with order of AO.
  4. Where the revision application U/s 264 is pending before CIT on 31.01.2020: the amount of tax payable as if revision was not to be accepted.
  5. In case where CIT (A) has issued notice of enhancement U/s 251 on or before 31.01.2020: the disputed tax shall be increased by the amount of tax retaining to the issue for which notice of enhancement has been issued.
  6. Where the dispute in relation to a related to reduction of tax credit U/s 115JAA /115JB or any LOSS or DEPRICIATION the appellant shall have an option:
  7. To include the amount of tax related to such tax credit or loss or depreciation in the amount of disputed tax or
  8. To carry forward the reduced tax credit or loss or depreciation in the prescribed manner.

‘TAX ARREAR’ MEANS:

  • The aggregate amount of disputed tax, interest chargeable or charged on such disputed tax, and penalty leviable or levied on such disputed tax; or
  • Disputed interest; or
  • Disputed Penalty; or
  • Disputed fee, as determined under the provision of Income Tax Act;

 

CASES NOT ELIGIBLE:

  • Tax arrears relating to an assessment year in respect of which assessment U/s 143(3) / 144 / 147 / 153A or 153C is made on the basis of search initiated U/s 132 / 132A, if the amount of ‘disputed tax’ exceeds Rs. 5 crores.
  • Tax arrears relating to an AY in respect of which prosecution has been instituted on or before the declaration filing.
  • Tax arrears relating to any undisclosed income from a source located outside India or undisclosed asset located outside India.
  • Relating to assessment/re-assessment made on the basis of information received under an agreement referred U/s 90/90A.

 

AMOUNT PAYABLE IN THE SCHEME

Under the Scheme, taxpayers will be Appeals filed by the taxpayers:

Relevant Case Amount Payable on or Before 30 June 2020
Tax arrears are the aggregate amount of disputed tax, interest chargeable on such disputed tax and penalty leviable on such disputed tax. Amount of the disputed tax.
Tax arrears relate to tax, interest, penalty determined on basis of search U/s 132/132A. 125% of Disputed Tax
Where the tax arrears relates to disputed interest or disputed penalty or disputed fee 25% of Disputed Interest / Penalty / Fee

 

Appeals filed by Department:

Particular On or Before 30 June 2020
Search Cases 62.5% of Disputed Tax
Other than Search Cases 50% of Disputed Tax
Cases relating to only interest, penalty or levy 12.5% of Disputed interest, penalty or fee

 

CLARIFICATION

It is hereby clarified that making a declaration under this act shall not amount to conceding the tax position and it shall not be lawful for the income-tax authority or the declarant being a party in appeal or writ petition or special leave petition to contend that the declarant or the income-tax authority, as the case may be, has acquiesced in the decision on the disputed issue by settling the dispute.

 

FAQs:

Q 1. What if the disputed demand including interest has been paid by the appellant while being in appeal?

Ans. Appeals in which appellant has already paid the disputed demand either partly or fully are also covered. If the amount of tax paid is more than amount payable under Vivad se Vishwas, the appellant will be entitled to refund without interest under section 244A of the Act.

 

Q 2. Imagine a case where an appellant desires to settle concealment penalty appeal pending before CIT (A), while continuing to litigate quantum appeal that has travelled to higher appellate forum. Considering these are two independent and different appeals, whether appellant can settle one to exclusion of others? If yes, whether settlement of penalty appeal will have any impact on quantum appeal?

Ans. If both quantum appeal covering disputed tax and appeal against penalty levied on such disputed tax for an assessment year are pending, the declarant is required to file a declaration form giving details of both disputed tax appeal and penalty appeal. However, he would be required to pay relevant percentage of disputed tax only. Further, it would not be possible for the appellant to apply for settlement of penalty appeal only when the appeal on disputed tax related to such penalty is still pending.

 

Q 3. With respect to interest under section 234A, 234B or 234C, there is no appeal but the Assesses has filed waiver application before the competent authority which is pending as on 31 Jan 2020? Will such cases be covered under Vivad se Vishwas?

Ans. No, such cases are not covered. Waiver applications are not appeal within the meaning of Vivad se Vishwas.

 

Q 4. Whether assessee can avail of the Vivad se Vishwas for some of the issues and not accept other issues?

Ans. Refer to answer to question no 11. Picking and choosing issues for settlement of an appeal is not allowed. With respect to one order, the appellant must choose to settle all issues and then only he would be eligible to file declaration.

 

Q 5. Are disputes relating to wealth tax, security transaction tax, commodity transaction tax and equalization levy covered?

Ans. No. Only disputes relating to income-tax are covered.

 

Q 6. The assessment order under section 143(3) of the Act was passed in the case of an assessee for the assessment year 2015-16. The said assessment order is pending with ITAT. Subsequently another order under section 147/143(3) was passed for the same assessment year and that is pending with CIT (Appeals)? Could both or one of the orders be settled under Vivad se Vishwas?

Ans. The appellant in this case has an option to settle either of the two appeals or both appeals for the same assessment year. If he decides to settle both appeals then he has to file only one declaration form. The disputed tax in this case would be the aggregate amount of disputed tax in both appeals.

 

Q 7. In the case of an assessee prosecution has been instituted and is pending in court. Is assessee eligible for the Vivad se Vishwas?

Ans. No. However, where only notice for initiation of prosecution has been issued with reference to tax arrears, the taxpayer has a choice to compound the offence and opt for Vivad se Vishwas.

 

Q 8. In a case appeal or arbitration is pending on the specified date, but a rectification is also pending with the AO which if accepted will reduce the total assessed income. Will the calculation of disputed tax be calculated on rectified total assessed income?

Ans. The rectification order passed by the AO may have an impact on determination of disputed tax, if there is reduction or increase in the income and tax liability of the assessee as a result of rectification. The disputed tax in such cases would be calculated after giving effect to the rectification order passed, if any.

Q 9. In a case ITAT has passed order giving relief on two issues and confirming three issues. Time to file appeal has not expired as on specified date. The taxpayer wishes to file declaration for the three issues which have gone against him. What about the other two issues as the taxpayer is not sure if the department will file appeal or not?

Ans. The Vivad se Vishwas allow declaration to be filed even when time to file appeal has not expired considering them to be a deemed appeal. Vivad se Vishwas also envisages option to assessee to file declaration for only his appeal or declaration for department appeal or declaration for both. Thus, in a given situation the appellant has a choice, he can only settle his deemed appeal on three issues, or he can settle department deemed appeal on two issues or he can settle both. If he decides to settle only his deemed appeal, then department would be free to file appeal on the two issues (where the assessee has got relief) as per the extant procedure laid down and directions issued by the CBDT.

 

Q 10. Addition was made u/s 143(3) on two issues whereas appeal filed only for one addition. Whether interest and penalty be waived for both additions.

Ans. Under Vivad se Vishwas, interest and penalty will be waived only in respect of the issue which is disputed in appeal and for which declaration is filed. Hence, for the undisputed issue, the tax, interest and penalty shall be payable.

 

Q 11. Where there are two appeals filed for an assessment year– one by the appellant and one by the tax department, whether the appellant can opt for only one appeal? If yes, how would the disputed tax be computed?

Ans. The appellant has an option to opt to settle appeal filed by it or appeal filed by the department or both. Declaration form is to be filed assessment year wise i.e. only one declaration for one assessment year. For different assessment years separate declarations have to be filed. So the appellant needs to specify in the declaration form whether he wants to settle his appeal, or department’s appeal in his case or both for a particular assessment year. The computation of tax payable would be carried out accordingly.

 

Q 12. Whether DA can amend his order to rectify any patent errors?

Ans. Yes, the DA shall be able to amend his order under clause 5 to rectify any apparent errors.