During the Speech of Budget 2020 our Finance Minister had announced this scheme saying that:
“In the past our Government has taken several measures to reduce tax litigations. In the last budget, Sabka Vishwas Scheme was brought in to reduce litigation in indirect taxes. It resulted in settling over 1,89,000 cases. Currently, there are 4,83,000 direct tax cases pending in various appellate forums i.e. Commissioner (Appeals), ITAT, High Court and Supreme Court. This year, I propose to bring a scheme similar to the indirect tax Sabka Vishwas for reducing litigations even in the direct taxes.
Under the proposed ‘Vivad Se Vishwas’ scheme, a taxpayer would be required to pay only the amount of the disputed taxes and will get complete waiver of interest and penalty provided he pays by 31st March, 2020. Those who avail this scheme after 31st March, 2020 will have to pay some additional amount. The scheme will remain open till 30th June, 2020.
Taxpayers in whose cases appeals are pending at any level can benefit from this scheme.
I hope that taxpayers will make use of this opportunity to get relief from vexatious litigation process.”
From the above speech its clear that the scheme is same as the one which running a few months ago for Indirect Tax. Also a new act has been announced for such dispute resolution scheme which is yet to be passed.
Now lets discuss the scheme:
Who can opt for the scheme: Any taxpayer whose appeal is pending before CIT(A), ITAT, High Court or Supreme court irrespective of the fact whether appeal has been filed by assessee or department irrespective of whether demand has been paid or not. The appeal should have been filed before 31st January 2020.
Therefore this scheme won’t be applicable on the person who haven’t still filed an appeal or whose appeal is not pending before any authority.
For eg: if a person who had filed an appeal before CIT(A) and same was decided by him on 20.01.2020 and assessee or department has not filed any appeal against such order then the assessee is not eligible for this scheme as no appeal is pending.
Also tax payers who have filed an appeal before Dispute Resolution panel (DRP) are not eligible for such scheme as DRP is not covered in the above definition.
The cases of search where assessment of prior 6 years is done u/s 153A or 153C is not covered under this scheme. Thus you can’t take benefit of such scheme for appeal filed against such assessment.
Also the cases where:
- prosecution has been instituted or
- any undisclosed income from a source located outside India or undisclosed asset located outside India;
- an assessment or reassessment made on the basis of information received under an agreement referred to in section 90 or section 90A of the Income-tax Act, if it relates to any tax arrear;
- an appeal before the Commissioner (Appeals) in respect of which notice of enhancement under section 251 of the Income-tax Act has been issued on or before the specified date; won’t be covered here.
To participate in the scheme taxpayer needs to file a declaration to the designated authority i.e. an officer not below the rank of a Commissioner of Income-tax notified by the Principal Chief Commissioner for the purposes of this Act.
Along with this the tax payer also need to file a declaration waiving his rights to file any appeal against the disputed demand in future and also withdrawing all his existing writ petition or appeal against such demand.
If he submits any document which is incorrect then he would loose his right for this scheme and all his previous proceedings shall resume.
The designated authority within 15 days of filing the above declaration shall issue an order u/s 5(1) determining the amount of tax/ interest/ fees etc payable by the assessee as per the provisions of Income tax and grant a certificate accordingly.
The declarant shall pay the amount within 15 days of receipt of such order and intimate the details of such payment to the authority. After receiving a receipt of payment from declarant the authority shall issue an order stating the declarant has paid the amount.
Payment of disputed amount:
A formula has been prescribed for computation of disputed tax, which includes both tax under normal provisions and under minimum alternate tax and even covers situations where there is reduction in tax losses.
The disputed amount i.e. tax or interest or fees or penalty needs to be paid in the below fashion:
||Amount payable on or before 31st March
||Amount payable after 31st march but before the last date
|Appeals related to disputed tax
||100% of disputed tax
||100% of disputed tax plus 10% of disputed tax.
In case 10% of such disputed tax is in excess of interest and penalty then such excess shall be ignored.
|Appeals related to interest, penalty or fees
||25% of disputed interest, penalty or fees
||30% of disputed interest, penalty or fees.
Issues involved: There are two major issues involved:
- There is no mechanism to file an application to rectify the mistake apparent on record regarding any arithmetical error, as the assessee needs to accept the entire disputed demand. There should be a provision for submitting a rectification application for such arithmetical or any other mistake apparent on record.
- It has been said that after filing the application the authority needs to pass an order within 15 days and within next 15 days payment needs to be made. As per above table the increase in payment of disputed demand would depend on when the payment of such disputed amount is made and therefore if one doesn’t wish to make any excess payment the last date for him to make an application would be 15.03.2020 and then he should be ready to make the payment on the date he receive the order i.e. 31.03.2020.
Amount paid above shall be non refundable.
Anyways let’s wait for the day this bill receives the assent of the President of India and become enforceable.
You can download the Bill from HERE.
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