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CBDT issues further clarification on provisions of the Direct Tax Vivad se Vishwas Act, 2020

Posted on 18 May 2020

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1. During the Union Budget, 2020 presentation, the ‘Vivad’ se Vishwas’ Scheme was announced to provide for dispute resolution in respect of pending income tax litigation. Pursuant to Budget announcement, the Direct Tax Vivad Sc Vishwas Bill, 2020 (the Bill) was introduced in the Lok Sabha on 5th Feb, 2020. Subsequently, based on the representations received from the stakeholders regarding its various provisions, official amendments to the Bill were proposed. These amendments sought to widen the scope of the bill and reduce the compliance burden on taxpayers.

2. After introduction of the bill in Lok Sabha, several queries were received from the stakeholders seeking clarifications in respect of various provisions contained therein. Government had considered these queries and had decided to clarify the same in form of answers to frequently asked questions (FAQs) vide circular no 7 of 2020 dated 4Ih March 2020. These clarifications were, however, subject to approval and passing of the bill by the Parliament and receiving assent of the Hon’ble President of India.

3. The Bill has since been passed by the Parliament and has also received the assent of the Hon’ble President of India and has now been enacted as The Direct Tax Vivad Se Vishwas Act, 2020 ( Vivad se Vishwas). The objective of Vivad se Vishwas is to inter cilia reduce pending income tax litigation, generate timely revenue for the Government and benefit taxpayers by providing them peace of mind, certainty and savings on account of time and resources that would otherwise be spent on the long-drawn and vexatious litigation process.

4. 55 questions contained in circular no 7 of 2020 are reissued under this circular with following modifications

(i) Vivad se Vishwareferred to Direct Tax Vivad se Vishwas Bill, 2020 in circular no 7. However, in this circular it refers to The Direct Tax Vivad Se Vishwas Act, 2020;

(ii) Since clauses of the Bill have now become sections in the Vivad Se Vishwas, the reference to “clause” in circular no 7 has been replaced with “section”;

(iii) Reference to declaration form in circular no 7 has been replaced with referencing of relevant form, since rules and forms have now been notified; and

(iv) Answer to question no 22 has been modified to reflect the correct intent of the law. It has now been clarified that where only notice for initiation of prosecution has been issued without prosecution being instituted, the assessee is eligible to file declaration under Vivad se VishwasHowever, where the prosecution has been instituted with respect to an assessment year, the assessee is not eligible to file declaration for that assessment year under Vivad se Vishwasunless the prosecution is compounded before filing the declaration.

5. Section 10 and 11 of the Vivad se Vishwas empowers the Board or the Central Government to issue directions or orders in public interest or to remove difficulties. This circular is such direction/order issued under section 10 and section 11 of the Vivad se Vishwas. Thus answers to some of the questions in this circular extend the application of Vivad se Vishwas in public interest or to remove difficulties, under section 10 and section 11 of Vivad se Vishwas.

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