The Vivad se Vishwas Scheme was introduced in the Union Budget 2020 to end all pending income tax litigations. In this article, we shall discuss:
What Is The ‘Direct Tax Vivad se Vishwas Act, 2020’ About?
The Vivad se Vishwas Scheme was initially introduced in the Union Budget 2020. Soon after the budget announcement, the Direct Tax Vivad se Vishwas Bill 2020 was introduced in the Lok Sabha on 05 February 2020. The parliament later passed the bill, after receiving the assent from the Honourable President of India. It was then enacted as ‘The Direct Tax Vivad se Vishwas Act, 2020’ on 17 March 2020.
This Act provides the taxpayers with an option to end the tedious litigation processes by paying the due tax on the disputed income and receive a full or partial waiver of interest or penalty, as applicable. The amount payable by the declarant under the Vivad se Vishwas scheme will be determined by the Designated Authority (DA) as per Section 5 of The Direct Tax Vivad se Vishwas Act, 2020 within fifteen days from the date of receipt of the declaration.
In other words, once a declarant/taxpayer submits the declaration under this scheme, the DA will issue a certificate within 15 days, stating the amount payable by the declarant.
The time available to make this payment is given here-in below:
|If the declaration has been filed on or before 31 January 2021
||The declarant should pay the amount payable on or before 31 March 2021.
|If the declaration has been filed on or after 01 February 2021
||The declarant should pay the amount payable within fifteen days of receipt of the certificate from the DA.
The declarant should also intimate the DA about the payment made in the prescribed form. The DA will then pass an order stating that the declarant has made the required payment of dues.
The Government has issued the following circulars and notifications answering various queries raised by stakeholders:
Circular No. 7/ 2020 dated 4 March 2020
Circular No. 9/ 2020 dated 22 April 2020
Corrigenda to Circular No. 9/ 2020 dated 27 April 2020
Circular No. 18/ 2020 dated 28 October 2020
Circular No. 21/ 2020 dated 4 December 2020
Notification No. 85/2020, F. No. IT(A)/1/2020-TPL
Notification No. 92/2020/F. No. 370142/35/2020-TPL
These circulars and notifications have been summarised in this article.
What Are The Objectives Of Vivad se Vishwas Scheme?
The prominent objectives of this scheme are:
- To reduce pending income tax litigations,
- To generate timely revenue for the government,
- To provide certainty and peace of mind to taxpayers,
- To save taxpayer’s time and money that would otherwise be spent on long and tedious litigation proceedings.
Which Cases Are Covered Under Vivad se Vishwas Scheme?
The following cases, pending as on 31 January 2020
, are covered under the Vivad se Vishwas Scheme:
- Appeals pending before the Appellate forum [Commissioner (Appeals), Income Tax Appellate Tribunal, High Court or Supreme Court].
- Writ petitions pending before the High Court or Supreme Court.
- Special Leave Petitions (SLP) pending before the Supreme Court.
- Cases where the order has been passed but the deadline for filing an appeal against the order has not yet expired.
- Cases where objections have been filed against draft order, which are pending/set aside with/by the Dispute Resolution Panel (DRP).
- Cases for which the DRP has given directions but are not yet passed by the Assessing Officer.
- Writ petition against an order passed by Principal CIT or CIT under Section 263 of the Income Tax Act, 1961 (which contains specific directions and the income is quantifiable).
- Cases where revision applications under Section 264 of the Income Tax Act, 1961 are pending before the Principal Commissioner or Commissioner.
- Cases where the declarant has initiated a proceeding or given notice for arbitration, conciliation, or mediation under Section 4 of the Direct Tax Vivad se Vishwas Act, 2020.
- Cases pending in arbitration.
- Writ petition against an order passed by AAR and is pending before the High Court provided that the AAR has determined the total income of the assessment year.
- Declarations covering the disputed interest provided that there is no dispute on the corresponding tax amount.
- Appeals where part or full payment of disputed demand has already been made to the Department.
- Cases, where the Income Tax Department has initiated a search and seizure action, provided that the disputed tax amount is not more than INR 5 crores during the assessment year.
- Appeals filed against imposition of fees under Section 234E and 234F of the Income Tax Act, 1961.
Note: Settlement of the disputed tax, will not settle the disputed fee and hence such disputed fee will have to be settled separately. For settlement, the amount payable under the scheme will be 25% or 30% of the disputed fee, as the case may be.
- Appeals relating to interest levied, due to delay in depositing TDS/TCS.
- Appeals where notice of enhancement has been issued by the Commissioner of Income Tax (Appeals).
- Cases where notice for initiation of prosecution has been issued.
- Cases pending in appeal or arbitration with an appellate authority as on 31 January 2020 or time for filing appeal had not expired on 31 January 2020 and the appeal is disposed of by the appellate authority before the filing of declaration, the taxpayer is eligible to file a declaration under the scheme regarding the position of the appeal or arbitration as on 31 January 2020.
- Miscellaneous applications pending in respect appeals which have been dismissed at the outset, before 31 January 2020.
- Cases where the Mutual Agreement Procedure (MAP) resolution is pending or the assessee has not accepted the decision.
What Amount Of Tax Is Required To Be Paid Under The Vivad se Vishwas Scheme?
As per Section 3 of the Direct Tax Vivad se Vishwas Act, 2020 (after incorporating the amendments as per Notification No. 85/2020):
- In case of appeals, writ, SLP, DRP objections, revision applications under Section 264, arbitration filed by the assessee:
- In case the payment is made by 31 March 2021:
- Normal case: 100% of the disputed tax;
- Search case: 125% of the disputed tax. The excess over and above 100% is limited to the interest amount and penalty levied or leviable;
- Other cases: 25% of the disputed penalty, interest, or fee when the dispute relates to penalty, interest, or fee only.
- In case the payment is made after 31 March 2021:
- Normal case: 110% of the disputed tax;
- Search case: 135% of the disputed tax. The excess over and above 100% is limited to the interest amount and penalty;
- Other cases: 30% of the disputed penalty, interest, or fee when the dispute relates to penalty, interest, or fee only.
- In cases where the Appellant has got a favourable decision from the Income Tax Appellate Tribunal (ITAT) or the High Court, and then the appeal is pending before the Commissioner (Appeals) or DRP or the ITAT, then the amount payable is half (50%) of the amount specified above.
- In case of appeals, writ, SLP filed by the department:
- In case the payment is made by 31 March 2021: -
- Normal case: 50% of the disputed tax;
- Search case:5% of the disputed tax;
- Other cases: 5% of the disputed penalty, interest, or fee when the dispute relates to penalty, interest, or fee only.
- In case the payment is made after 31 March 2021:
- Normal case: 55% of the disputed tax;
- Search case:5% of the disputed tax;
- Other cases: 15% of the disputed penalty, interest, or fee when the dispute relates to penalty, interest, or fee only.
Points To Remember: Vivad se Vishwas Scheme
- For cases where a rectification order is passed, the disputed tax will be calculated on the rectified income (Income arrived at as a result of the rectification order passed).
- In case of appeals where the part or full payment of disputed demand has already been made, and where the amount of tax already paid is more than the amount payable under the Vivad se Vishwas Scheme, the applicant will be entitled to a refund of such excess amount without interest under 244A of the Income Tax Act, 1961.
- Credit for taxes already paid before filing the declaration will be available to the declarant.
- For cases where the applicant settles the TDS liability as a deductor of TDS under the Vivad se Vishwas Scheme, the deductor will get a consequential relief for the allowable expenditure (under Section 40(a)(i)/(ia)) in the same year in which the tax was required to be deducted.
- In cases where:
- There is a substantive addition as well as protective addition, in the case of the same assessee for different assessment years; and
- There is a substantive addition in case of one assessee and protective addition on the same issue in the case of another assessee;
if the substantive addition is eligible to be covered under the Vivad se Vishwas Scheme, then on the settlement of dispute related to the substantive addition, the Assessing Officer will pass a rectification order deleting the protective addition related to the same issue (in the case of the assessee or in the case of another assessee).
- Every Appellant has the option to settle an appeal filed by them or appeal filed by the department or both. The declaration form should be filed assessment year wise.
- As per Section 6 of The Direct Tax Vivad se Vishwas Act, 2020, the DA will not carry out any proceedings in respect of an offence, or impose or levy any penalty, or charge any interest in respect of the tax arrears. The act also provides the declarant with immunity from prosecution for any additional demand on the case(s) in which the DA has passed an order under the Scheme. In case the declarant is a firm or company, the immunity from prosecution, concerning the issue,will also extend to the partner(s) or director(s) respectively.
- As per Section 5 of The Direct Tax Vivad se Vishwas Act, 2020, the DA, within their rights, can amend the order to rectify any error made by them.
- As per Section 4(7) of the Direct Tax Vivad se Vishwas Act, 2020, once an order has been passed by the DA or the amount payable has been determined by the DA, no appeal can be filed against such order in any appellate forum.
- Once a declarant has opted to take the benefit of the Vivad Se Vishwas Scheme, and due to financial difficulties, the payment is not made, then the declaration filed will become
- Once the declarant has filed the declaration, it can be revised any number of times by the declarant, before the DA issues a certificate under Section 5(1) of The Direct Tax Vivad se Vishwas Act, 2020.
- The settlement arrived at for a dispute under this scheme will not apply to any other similar cases that are under appeal with any other authority.
- If a declarant has been prosecuted in one assessment year, they can still file a declaration for any other assessment year, when
- Enhancement notice issued after 31 January 2020 but before the date of issue of circular (stating the applicability of enhancement notice), i.e., 4 December 2020, will be taken into consideration for computation of disputed tax. However, enhancement notice issued on or after the date of issue of circular, i.e., 4 December 2020 but on or before 31 December 2020 will not be taken into consideration for computation of disputed tax under Vivad se Vishwas scheme.
- In case of appeals pending against both assessment and reassessment (where addition is repeated on the same issue), the higher of the two tax liabilities (if there is a difference in the two tax liabilities) would be considered for computing the disputed tax.
- Once the declarant has paid the disputed penalty, interest relating to such penalty will be waived.