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Key Highlights of Vivad Se Vishwas Scheme

CA Kushal Soni 
Updated on 23 March 2020

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Key Highlights of Vivad Se Vishwas Scheme

On 1st February 2020 Hon’ble Finance Minister in her Budget Speech announced the Vivad se Vishwas Scheme to settle long-pending tax disputes of an assessee. A dedicated legislature “THE DIRECT TAX VIVAD SE VISHWAS ACT, 2020” with a supportive Central Board of Direct Taxes Circular “CIRCULAR No. 7/2020” in the form of questions and answers, which addresses 55 questions in a highly constructive and explanatory manner, to give executory wheels to this welcome scheme. 

The complexity of taxation laws, specially Income Tax laws is sometimes beyond the understanding of common man, this leads to professionals, tax practitioners to play a critical role in making intent and spirit of the law to prevail. To the end-up the majority of tax litigation cases and to speed our recovery of tax revenue that got plugged due to the time-taking litigation process, this scheme of Vivad Se Vishwas is now before us.

It is imperative to have the insight into data of pending Income Tax law litigation at various levels:

Level at

No. of cases pending

CIT (Appeals)

3,41,000

ITATs

92,205

High Courts

43,224

Hon’ble Supreme Court

6,188

Total

4,82,617

Amount of Rs. 9.23 lakh crores stuck in these tax litigation cases.

Source: Economic Times

Eligibility of the Scheme:

-Cases where appeal pending as on 31st Jan 2020 before:

  • CIT (Appeal)
  • ITAT
  • High Court
  • Hon’ble Supreme Court

-Cases where the order has been passed but the time limit for filing an appeal as per the I.T. Act, 1961 has not expired as on 31st Jan 2020.

For Example:

All orders passed by Assessing Officers up to 1st Jan 2020 (considering 30 days time limit for filing an appeal before CIT(A))

All order passed by CIT (Appeals) up to 2nd December 2019 (considering 60 days time limit for filing an appeal before ITAT)

-Cases where objections filed assessee against draft order of DRP (Dispute Resolution Panel)

-Cases where DRP has issued directions but AO has not yet passed the order

-Cases where revision application u/s 264 of the I.T. Act, 1961 is pending before Pr. CIT or CIT

Benefit and amount payable under the Scheme with due dates:

(In case of appeals/writs/SLP filed by the assessee)

Nature of tax arrear

The amount payable on or before 31st March 2020

The amount payable after 31st March 2020

The benefit under the Scheme

Tax arrears are the aggregate amount of disputed tax, disputed interest or interest charged on disputed tax, and penalty on such disputed tax

100% of disputed tax (125% in search cases)

110% of disputed tax (135% in search case)

Complete waiver of disputed interest and disputed penalty which is connected with disputed tax. Complete immunity from future prosecution (like reopening u/s 148)

Tax arrears relate to disputed interest or disputed penalty or disputed fees

25% of disputed interest, penalty or fees

30% of disputed interest, penalty or fees

Waiver of 75% (70% if paid after 31st March 2020) of disputed interest, penalty or fees. Complete immunity from future prosecution (like reopening u/s 148)

 (In case of appeals/writs/SLP filed by department)

Nature of tax arrear

The amount payable on or before 31st March 2020

The amount payable after 31st March 2020

The benefit under the Scheme

Tax arrears is the aggregate amount of disputed tax, disputed interest or interest charged on disputed tax, and penalty on such disputed tax

50% of disputed tax (62.5% in search cases)

55% of disputed tax (67.5% in search case)

Partial waiver (50% or 45%) of disputed tax and Complete waiver of disputed interest and disputed penalty which is connected with disputed tax

Tax arrears relate to disputed interest or disputed penalty or disputed fees

12.5% of disputed interest, penalty or fees

15% of disputed interest, penalty or fees

Partial waiver (87.5% or 85%) of disputed interest, penalty or fees

Following are some cases/class of taxpayers who are kept outside the purview of this scheme:

Cases/Class of Taxpayers

Reason for keeping out of the Scheme

Search and Seizure cases where demand is more than Rs. 5 crores

These cases are high tax demand cases, the highest amount of tax revenue plugged in this category. Department may not want to lose the possibility of gaining revenue in such high tune cases.

Where the source of income located outside India or undisclosed assets located outside India.

In the majority of these cases provisions of The Benami Transactions (Prohibition) Amendment Act, 2016 may get attracted. This scheme does not provide immunity from the said Act. These cases are also high demand cases. Department has to put a lot of intelligence and resources in identifying such cases.

Prosecution initiated but pending for order

Quantification of a disputed amount not possible.

Important Points:

  • Where no appeal is pending but the case is pending in arbitration, such cases are also eligible in for the scheme. Disputed tax on the disputed income for which arbitration has been filed.
  • The scheme is not applicable to pending disputes before AAR (Authority for Advance Ruling). In case, the writ has been filed against an order of AAR, such cases are covered.
  • The excess amount in comparison to the amount payable under the scheme will be refundable
  • In case writ has been filed to challenge the validity of any notice, such cases are not covered as quantification of demand is not possible.

How to file a declaration under Vivavd se Vishwas? 

  • Login to income tax India e-filing portal
  • A new tab of Vivad Se Vishwas appears on the main dashboard.
  • Go to Prepare and Submit DTVSV Form, select AY and Filing type as Original or Revised
  • Fill Form-1 which is a declaration having Part A and Part B with Schedules A to F (last date to file is 30th June 2020)
  • Fill Form-2 which is and undertaking under the Act for final submission
  • You may require, Assessment Order with calculation of demand, Copy of appeal filed, challan of tax already paid towards recovery made for disputed amount
  • File it with DSC or EVC as the case may be
  • Within 15 days Form-3 issued by tax authority which states final amount payable by assessee to settle dispute.
  • Assessee have to make payment within next 15 days from the date of issuance of Form-3
  • Authority will issue final order under this scheme for settlement of dispute.

Conclusion:

To opt or not to opt for the scheme is a question depends on facts and circumstances of each case, it’s a subjective question. If a case is supported by any legal precedent in favor of assessee or assessee have strong evidence available or there is some technical default in the issuance of notice or in the conclusion of assessment by assessing officer. Carefully consider these points and think twice before availing of the scheme. A cost-benefit analysis needs to be conducted for both the options of availing the scheme and not availing the scheme. One must also consider liquidity position or ability to pay the amount required to settle the scheme in these challenging times of stock market crash, COVID-19 pandemic and economic slowdown.

By CA Kushal Soni

cakushalsoni@gmail.com

+91 94627 30437

The author is an expert in Direct Taxation litigation.


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