Direct Tax Vivad Se Vishwas Act, 2020

The Union Budget 2020-21 enacted the Direct Tax Vivad Se Vishwas Act, 2020 (hereinafter referred as “the scheme”), with the objective of providing an opportunity to taxpayers to settle the disputes/litigation relating to the Income Tax Act, 1961. By Notification No.18/2020 dated 18th March 2020, the Direct Tax Vivad se Vishwas Rules, 2020 were notified.

Once a taxpayer (hereinafter referred to as ‘declarant’ settles the dispute through this scheme, he will get the benefit of waiver from payment of consequential interest and penalty as well as immunity from prosecution (if not instituted). Even in cases where the penalty/interest/fee is itself in dispute, the declarant will get substantial amount of relief.

AMOUNT PAYABLE UNDER THE SCHEME

Notes:

The amount payable shall be half of the amount stated in the above table, in following case:

• In case of departmental appeals i.e. where an appeal or writ petition or special leave petition is filed by the income-tax authority.
• In case of assessee’s appeal (or objection before DRP) on an issue on which he has got a decision in his favor from a higher authority (which is not reversed by its superior authority) (i.e. covered matters)

ELIGIBLE CASES & MANNER OF COMPUTING THE DISPUTED TAX/ DISPUTED PENALTY/ DISPUTED INTEREST/ DISPUTED FEES

• Disputed Tax

Notes:

1. Notice of enhancement by CIT(Appeals):

   In a case where CIT(Appeals) has issued notice of enhancement u/s. 251 of the Income-tax Act on or before 31/01/2020, then the disputed tax shall be increased by the amount of tax pertaining to issues for which notice of enhancement is issued.

2. Where the dispute includes issues covered in favour of declarant, the disputed tax in respect of such issues shall be the amount, which bears to tax, including surcharge and cess, payable on all the issues in dispute, the same proportion as the disputed income in relation to issues covered in favour of declarant bear to the disputed income in relation to all the issues in dispute.
3. Dispute relating to reduction of loss/unabsorbed depreciation/tax credit:

In case where dispute relates to reduction of credit of Minimum Alternate Tax (MAT) or Alternate Minimum Tax (AMT) or reduction of loss or unabsorbed depreciation; declarant has following two options:

Option No.1:

Include the amount of tax payable on the amount of reduction in loss or depreciation or the amount by which such tax credit is reduced, in the disputed tax and declarant will be allowed to carry forward whole of the amount of loss or unabsorbed depreciation or credit of MAT/AMT, as if there was no such reduction.

Option No.2:

Declarant is not required to pay any amount of tax; however, he will have to carry forward the reduced amount of loss or unabsorbed depreciation or reduced amount of such tax credit of MAT/AMT. However, he shall be liable to pay tax, including surcharge and cess, along with interest, if any, as a consequence of carrying forward reduced loss or unabsorbed depreciation or MAT/AMT credit in subsequent assessment years. In eligible search cases, where the declarant opts for the second option, 125% of the reduction in loss or unabsorbed depreciation or tax credit shall be considered in determining the reduced amount of loss or unabsorbed depreciation or tax credit to be carried forward. Further, where the reduction relates to an issue on which declarant has got a decision in his favor from a higher authority (which is not reversed by its superior authority), only 50% of the reduction will be considered in determining the reduced amount of loss or unabsorbed depreciation or tax credit to be carried forward(62.5% in eligible search cases).

❖ Disputed Penalty

A declaration can be filed in respect of ‘disputed penalty’ when:

1. such penalty is determined under the Income Tax Act but which is not levied or leviable in respect of disputed income or disputed tax, and
2. an appeal has been filed in respect of such penalty.

❖ Further, the term ‘Disputed Income’ is defined as

“In relation to an assessment year, it means the whole or so much of the total income as is relatable to the disputed tax.” It means that once a declaration is filed in respect of a disputed tax, no separate declaration needs to be filed in respect of penalty levied or leviable on such disputed income because such penalty is not covered in the definition of ‘disputed penalty’. Once the pending appeal in respect of disputed income is settled under the scheme, no separate penalty is payable on such disputed income.

❖ Disputed Interest

A declaration can be filed in respect of ‘disputed interest’ when:

1. such interest is determined under the Income Tax Act but which is not charged or chargeable on disputed tax, and
2. an appeal has been filed in respect of such interest.

❖ Disputed Fee

A declaration can be filed in respect of ‘disputed fee’ when such fee is determined under the Income-tax Act, 1961 in respect of which an appeal has been filed by the appellant.

PERSONS NOT ELIGIBLE TO OPT FOR THE SCHEME

1. Cases where assessment is made on the basis of search action u/s. 132 or 132A and the amount of disputed tax exceeds ₹ 5 Crore.
2. Cases relating to an assessment year in respect of which prosecution has been instituted on or before the date of filing of declaration.
3. Cases where any undisclosed income is from a source located outside India or undisclosed asset located outside India.
4. Cases where there is an assessment or reassessment based on the information received under an agreement referred to in section 90 or 90A of the Income Tax Act, 1961, if it relates to any tax arrear.
5. Cases where detention order has been made under the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974.
6. Cases where the person is notified u/s. 3 of the Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992.
7. Cases where prosecution has been instituted for any offense punishable under the Unlawful Activities (Prevention) Act, 1967, Narcotics Drugs & Psychotropic Substances Act, 1985, the Prevention of Corruption Act, 1988, the Prevention of Money Laundering Act, 2002, or the Prohibition of Benami Property Transactions Act, 1988 on or before the filing of the declaration or such person has been convicted of any such offence punishable under any of those Acts.
8. Cases where prosecution has been initiated by an Income-tax authority for any offence punishable under the provisions of the Indian Penal Code or for the purpose of enforcement of any civil liability, on or before the filing of the declaration or such person has been convicted of any such offence consequent to the prosecution initiated by an Income-tax authority.

PROCEDURE FOR FILING DECLARATION

1. The forms for filing declaration are provided in the income tax login of the E-filing website.
2. Declarant has to fill up various details relating to the dispute in Form-1. An undertaking for waiver of rights to any other remedy or claim in relation to the tax arrear, is to be made in From-2. These forms need to be signed and verified using DSC/EVC.
3. Thereafter, within 15 days, the designated authority (DA) shall determine amount payable under the scheme and grant a certificate in From-3 containing particulars of the tax arrear and the amount payable after such determination.
4. Once the certificate in Form-3 is issued the appeals pending before the Income Tax Appellate Tribunal or Commissioner (Appeals) for which the declaration is filed shall be deemed to have been withdrawn. In case of pending appeal or writ petition before the High Court or the Supreme Court against any order in respect of tax arrear, the declarant will have to withdraw such appeal or writ petition with the leave of the Court after issuance of certificate in Form -3 and furnish proof of such withdrawal along with the intimation of payment to the designated authority.
5. Within 15 days of the receipt of Form-3, the declarant has to pay the amount determined and intimate the DA in Form-4.
6. On receipt of the details of payment, DA shall pass an order in Form-5, stating that the declarant has paid the amount. Every such order shall be conclusive as to the matters stated therein and no matter covered by such order shall be reopened in any other proceeding under the Income-tax Act or under any other law for the time being in force or under any agreement.
7. The facility to revise the declaration is also available on the portal.
8. Any amount paid in pursuance of a declaration made under section 4 shall not be refundable under any circumstances. However, where the declarant had, before filing the declaration in Form 1, paid any amount under the Income-tax Act in respect of his tax arrear which exceeds the amount payable under section 3, he shall be entitled to a refund of such excess amount, but shall not be entitled to interest on such excess amount under section 244A of the Income-tax Act.