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We write you on behalf of professional colleagues, clients and also on behalf of the citizens of India at large.

We whole heartedly support the initiative of the Central Government for reducing the huge backlog of litigation by providing window

to the litigants to settle the matter by paying some amount of tax or penalty or interest and withdraw the pending appeal(s).

In principle, The Direct Tax Dispute Resolution Scheme, 2016, is a right step for achieving the stated objectives.

Salient Features of the Scheme:–

1. The scheme is applicable to tax arrears, which means, the amount of tax, interest or penalty determined under the Income-tax Act, 1961 or Wealth - Tax Act, 1951, in respect of which appeal is pending before the Commissioner of Income Tax (Appeals) or the before the Commissioner of Wealth Tax (Appeals) as on 29th February, 2016.

2. This scheme is also available for the appeals, writ or any other proceedings relating to retrospective tax issues pending as on 29th February, 2016

3. The pending appeal could be against an assessment order or a penalty order.

4. Under the Scheme, the declarant is required to pay whole of disputed tax plus interest on disputed tax up to the date of assessment in case where the disputed tax does not exceed ten lakh rupees.  However, in case where the disputed tax exceeds ten lakh rupees, 25% of the minimum penalty leviable shall also be required to be paid.

5. In case of pending appeal against a penalty order, 25% of minimum penalty leviable and the tax and interest payable on the total income finally determined shall be required to be paid.

6. In case of specified tax, the amount of such tax so determined.

7. Declaration to be made to Principal Commissioner of Income Tax, Commissioner of Income Tax in prescribed form.

Benefits

1. Prosecution: Immunity granted in certain cases.

2. Interest Payable: Payment up to the date of assessment.

3. Penalty: Pay 25% of Minimum Penalty provided the tax and interest payable on the total income finally determined is paid.

4. Finality: Disposal of Tax Dispute

5. Retrospective Resolution by paying taxes so determined.

The provisions of this Scheme shall not apply— [Section 208 of the Direct Tax Dispute Resolution Scheme, 2016 (Chapter 10 of the Finance Act, 2016) ]

1. In respect of tax arrears or specified tax,–

a. relating to an assessment year in respect of which an assessment has been made under section 153A or 153C or of  a search initiated under section 37A or requisition made under section 37B of the Wealth-tax Act if it relates to any tax arrears;

b. relating to an assessment or reassessment in respect of which a survey conducted under section 133A of the Income-tax Act or section 38A of the Wealth-tax Act;

c. relating to an assessment year in respect of which prosecution has been instituted on or before the date of filing of declaration under section 202;

d. relating to any undisclosed income from a source located outside India or undisclosed asset located outside India;

e. relating to 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 arrears;

2. To any person in respect of whom an order of detention has been made under the provisions of the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974:

3. To any person in respect of whom prosecution for any offence punishable under the provisions of the Indian Penal Code, the Unlawful Activities (Prevention) Act, 1967, the Narcotic Drugs and Psychotropic Substances Act, 1985, the Prevention of Corruption Act, 1988 or for the purpose of enforcement of any civil liability has been instituted on or before the filing of the declaration or such person has been convicted of any such offence punishable under any of those Acts;

4. To any person notified under section 3 of the Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992.

Compliance Window will be closed on 31st December, 2016 i.e. 20 days to go.

 Reference:

  1. Clarifications on the Direct Tax Dispute Resolution Scheme, 2016 - Circular No. 33/2016  dated 12th September, 2016
  2. CHAPTER X of the Finance Act, 2016 - The Direct Tax Dispute Resolution Scheme, 2016 
  3. Direct Tax Dispute Resolution Scheme, 2016 - Notification No.35/2016 dated 26th May, 2016
  4. Direct Tax Dispute Resolution Scheme, 2016 - Notification No.34/2016 dated 26th May, 2016 

The author is tax law professional and can also be reached at shreetaxchambers@bsnl.in

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