What is Vivaad see Vishwaas Scheme?
The ‘Vivad se Vishwas’ Scheme was announced during the Union Budget, 2020, to provide for dispute resolution in respect of pending income tax litigation. Pursuant to the Budget announcement, the Direct Tax Vivad se Vishwas Bill, 2020 (hereinafter called Vivad se Vishwas) was introduced in the Lok Sabha on 5th of February, 2020 and passed by it on 4th of March, 2020. The objective of Vivad se Vishwas is to inter alia 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.
Under this scheme, taxpayers whose tax demands are locked in dispute in multiple forums, can pay due to taxes by March 31, 2020, and get a complete waiver of interest and penalty. If a taxpayer is not able to pay within the deadline, he gets a further time till June 30, but in that case, he would have to pay 10% more on the tax.
The Bill, which was introduced in the Lok Sabha during the just-concluded Budget session, is expected to come up for passage in the next session beginning March 2.
In case of appeals made by the taxpayer, the full amount of disputed tax will have to be paid till March 31, and 25% more in case of search cases. Penalty and interest will be waived. In case the amount of penalty, interest or fee is the matter of dispute, then only 25% of that amount will have to be paid, while the rest will .
After March 31, however, the taxpayer will have to pay 10% more on top of the full disputed tax amount, and 35% more in case of search cases. Similarly, in case the amount of penalty, interest or fee is the matter of dispute, 30% will have to be paid.
After March 31, 2020, however, the taxpayer will have to pay 55% of the full disputed tax amount, and 12.5% more in case of search cases. Similarly, in case the amount of penalty, interest or fee is the matter of dispute, only 15% will have to be paid.
Another key change that the amendments bring forth is grant of immunity from institution of any proceeding for prosecution for any offence under the Income Tax Act in respect of matters covered in the declaration and also provide immunity .
he Vivad se Vishwas Scheme aims to resolve 483,000 direct tax-related disputes pending in various appellate forums.
Central Board of Direct Taxes (CBDT) Chairman P C Mody on Tuesday said the direct tax dispute resolution scheme offers a fair deal to settle pending tax disputes as he urged people to come forward and avail the plan.
Currently, there are 4.83 lakh direct tax cases pending in various appellate forums — Commissioner (Appeals), Income Tax Appellate Tribunal (ITAT), High Court and Supreme Court.
In another amendment, taxpayers can get refunds if the amount in the settlement scheme comes to less than that already paid before availing the scheme. The scheme also gives clarity in cases where the assessing officer has reduced the returned loss, by making addition of income or by disallowing expenditure.
Ques1: Which appeals are covered under the Vivad se Vishwas?
Ans: Appeals pending before the appellate forum [Commissioner (Appeals), Income Tax Appellate Tribunal (ITAT), High Court or Supreme Court], and writ petitions pending before High Court (HC) or Supreme Court (SC) or special leave petitions (SLPs) pending before SC as on the 31,t day of January, 2020 (specified date) are covered. Cases where the order has been passed but the time limit for filing appeal under the Income-tax Act, 1961 (the Act) against the order has not expired as on the specified date are also covered. Similarly, cases where objections filed by the assessee against draft order are pending with Dispute Resolution Panel (DRP) or where DRP has given the directions but the Question No. Answer: Question No. Answer: Question No. Answer: Assessing Officer (AO) has not yet passed the final order on or before the specified date are also covered. Cases where revision application under section 264 of the Act is pending before the Principal Commissioner or Commissioner are covered as well. Further, where a declarant has initiated any proceeding or given any notice for arbitration, conciliation or mediation as referred to in clause 4 of the Bill is also covered.
Ques 2: If there is no appeal pending but the case is pending in arbitration, will the taxpayer be eligible to apply under Vivad se Vishwas? l.f yes what will be the disputed tax?
Ans: An assessee whose case is pending in arbitration is eligible to apply for settlement under Vivad se Vishwas even if no appeal is pending. In such case assessee should fill the relevant details applicable in his case in the declaration form. The disputed tax in this case would be the tax (including surcharge and cess) on the disputed income with reference to which the arbitration has been filed.
Ques 3: Whether Vivad se Vishwas can be availed for proceedings pending b~fore Authority of Advance Ruling (AAR)? l.f a writ is pending against order passed by AAR in a HC will that case be covered and how disputed tax to be calculated?
Ans: Vivad se Vishwas is not available for disputes pending before AAR. However, if the order passed by AAR has determined the total income of an assessment year and writ against such order is pending in HC, the appellant would be eligible to apply for the Vivad se Vishwas. The disputed tax in that case shall be calculated as per the order of the AAR and accordingly, wherever required, consequential order shall be passed by the AO. However, if the order of AAR has not determined the total income, it would not be possible to calculate disputed tax and hence such cases would not be covered. To illustrate, if AAR has given a ruling that there exists Permanent Establishment (PE) in India but the AO has not yet determined the amount to be attributed to such PE, such cases cannot be covered since total income has not yet been determined.
Ques 4: An appeal has been filed against the interest levied on assessed tax; however, there is no dispute against the amount of assessed tax. Can the ben~fit o.fthe Vivad se Vishwas be availed?
Ans: Declarations covering disputed interest (where there is no dispute on tax corresponding to such interest) are eligible under Vivad se Vishwas. It may be clarified that if there is a dispnte on tax amount, and a declaration is filed for the disputed tax, the full amount of interest levied or leviable related to the disputed tax shall be waived.
Ques 5: What if the disputed demand including interest has been paid by the appellant while being in appeal?
Ans: Appeals in which appellant has already paid the disputed demand either partly or fully are also covered. If the amount of tax paid is more than amount payable under Vivad se Vishwas, the appellant will be entitled to refund without interest under section 244A of the Act.
Ques 6: Can the benefit of the Vivad se Vishwas be availed, if a search and seizure action by the Income-tax Department has been initiated against a taxpayer?
Ans: Case where the tax arrears relate to an assessment made under section 143(3) or section 144 or section 153A or section 153C of the Act on the basis of search initiated under section 132 or section 132A of the Act are excluded if the amount of disputed tax exceeds five crore rupees in that assessment year. Thus, if there are 7 assessments of an assessee relating to search & seizure, out of which in 4 assessments, disputed tax is five crore rupees or less in each year and in remaining 3 assessments, disputed tax is more than five crore rupees in each year, declaration can he filed for 4 assessments where disputed tax is five crore rupees or less in each year
Ques 7: If assessment has been set aside for giving proper opportunity to an assessee on the additions carried out by the AO. Can he avail the Vivad se Vishwas with respect to such additions?
Ans: If an appellate authority has set aside an order (except where assessment is cancelled with a direCtion that assessment is to be framed de novo) to the file of the AO for giving proper opportunity or to carry out fresh examination of the issue with specific direction, the assessee would be eligible to avail Vivad se Vis/mas. However, the appellant shall also be required to settle other issues, if any, which have not been set aside in that assessment and in respect of which either appeal is pending or time to file appeal has not expired. In such a case disputed tax shall be the tax (including surcharge and cess) which would have been payable had the addition in respect of which the order was set aside by the appellate authority was to be repeated by the AO. In such cases while filling the declaration fonn, appellant can indicate that with respect to the set-aside issues the appeal is pending with the Commissioner(Appeals).
Ques 8: Imagine a case where an appellant desires to settle concealment penalty appeal pending b~fore CIT(A), while continuing to litigate quantum appeal that has travelled to higher appellate forum. Considering these are two independent and different appeals, whether appellant can settle one to exclusion of others? If yes, whether settlement of penalty appeal will have any impact on quantum appeal?
Ans: If both quantum appeal covering disputed tax and appeal against penalty levied on such disputed tax for an assessment year are pending, the declarant is required to file a declaration fonn giving details of both disputed tax appeal and penalty appeal. However, he would be required to pay relevant percentage of disputed tax only. Further, it would not be possible for the appellant to apply for settlement of penalty appeal only when the appeal on disputed tax related to such penalty is still pending.
Ques 9: Is there any necessity that to qualify under the Vivad se Vishwas, the appellant should have tax demand in arrears as on the date of.filing declaration?
Ans: Vivad se Vishwas can be availed by the appellant irrespective of whether the tax arrears have been paid either partly or fully or are outstanding.
Ques 10: Whether 234E and 234F appeals are covered?
Ans: If appeal has been filed against imposition of fees under sections 234E or 234F of the Act, the appellant would be eligible to file declaration for disputed fee and amount payable under Vivad se Vishwas shall be 25% or 30% of the disputed fee, as the case may be. If the fee imposed under section 234E or 234F pertains to a year in which there is disputed tax, the settlement of disputed tax will not settle the disputed fee. If assessee wants to settle disputed fee, he will need to settle it separately by paying 25% or 30% of the disputed fee, as the case may be.
Ques 11: In case where disputed tax contains qualilYing tax arrears as also non-qualifying tax arrears (such as, tax arrears relating 10 assessment made in respect of undisclosedforeign income): (i) Whether assessee is eligible to the Vivad se Vishwas itse(f? (ii) If eligible, whether quantification of disputed tax can exclude/ignore non-qualifying tax arrears?
Ans: If the tax arrears include tax on issues that are excluded from the Vivad se Vishwas, such cases are not eligible to file declaration under Vivad se Vishwas. There is no provision under Vivad se Vishwas to settle part of a pending dispute in relation to an appeal or writ or SLP for an assessment year. For one pending appeal, all the issues are required to be settled and if anyone of the issues makes the declaration invalid, no declaration can be filed.
Ques 12: If a writ has been .filed against a notice issued under section 148 of the Act and no assessment order has been passed consequent to that section 148 notice, will such case be eligible to .file declaration under Vivad se Vishwas?
Ans: If a writ has been .filed against a notice issued under section 148 of the Act and no assessment order has been passed consequent to that section 148 notice, will such case be eligible to .file declaration under Vivad se Vishwas?
Ques 13: With respect to interest under section 234A, 234B or 234C, there is no appeal but the assessee has filed waiver application before the competent authority which is pending as on 31 Jan 2020? Will such cases be covered under Vivad se Vishwas?
Ans: No, such cases are not covered. Waiver applications are not appeal within the meaning of Vivad se Vishwas.
Ques 14: Where there are two appeals filed for an assessment year-- one by the appellant and one by the tax department, whether the appellant can opt for only one appeal? If yes, how would the disputed tax be computed?
Ans: The appellant has an option to opt to settle appeal filed by it or appeal filed by the department or both. Declaration fonn is to be filed assessment year wise i.e. only one declaration for one assessment year. For different assessment years separate declarations have to be filed. So the appellant needs to specify in the declaration fonn whether he wants to settle his appeal, or department's appeal in his case or both for a particular assessment year. The computation of tax payable would be carried out accordingly.
Ques 15: Will delay in deposit of TDSITCS be also covered under Vivad se Vishwas?
Ans: The disputed tax includes tax related to tax deducted at source (TDS) and tax collection at source (TCS) which are disputed and pending in appeal. However, if there is no dispute related to TDS or TCS and there is delay in depositing such TDS/TCS, then the dispute pending in appeal related to interest levied due to such delay will be covered under Vivad se Vishwas.
Ques 16: Are cases pending before DRP covered? What if the assessee has not .filed objections with DRP and the AO has not yet passed the final order?
Ans: Yes, a person who has filed his objections before the DRP under section 144C of the Act and the DRP has not issued any direction on or before the specified date as well as a person in whose case the DRP has issued directions but the AO has not passed the final assessment order on or before the specified date, is eligible under Vivad se Vishwas. It is further clarified that there could be a situation where the AO has passed a draft assessment order before the specified date. Assessee decides not to file objection with the DRP and is waiting for final order to be passed by the AO against which he can file appeal with Commissioner(Appeals). In this situation even if the final assessment order is not passed on or before the specified date, the assessee would be considered as the appellant and would be eligible to settle his dispute under Vivad se Vishwas. Disputed tax in such case would be computed based on the draft order. In the declaration form, the appellant in this situation should indicate that time to file objection with DRP has not expired.
Ques 17: f CIT(Appeals) has given an enhancement notice, can the appellant avail the Vivad se Vishwas after including proposed enhanced income in the total assessed income?
Ans: Tbe amendment proposed in the Vivad se Vishwas allows the declaration even in cases where CIT (Appeals) has issued enhancement noticc on or before 31 ,t January, 2020. However, the disputed tax in such cases shall be increased by the amount of tax pertaining to issues for which notice of enhancement has been issued.
Ques 18: Are disputes relating to wealth tax, security transaction tax, commodity transaction tax and equalisation levy covered?
Ans: No. Only disputes relating to income-tax are covered.
Ques 19: The assessment order under section 143(3) of the Act was passed in the case of an assessee for the assessment year 2015-16. The said assessment order is pending with ITAT. Subsequently another order under section 147/143(3) was passedfor the same assessment year and that is pending with CIT (Appeals)? Could both or one of the orders be settled under Vivad se Vishwas?
Ans: The appellant in this case has an option to settle either of the two appeals or both appeals for the same assessment year. If he decides to settle both appeals then he has to file only one declaration fonn. The disputed tax in this case would be the aggregate amount of disputed tax in both appeals.
Ques 20: In a case there is no disputed tax. However, there is appeal for disputed penalty which has been disposed off by CIT (Appeals) on 5th January 2020. Time to file appeal in ITAT ugainst the order of Commissioner(Appeals) is still available but the appeal has not yet been filed. Will such case be eligible to avail the benefit?
Ans: Yes, the appellant in this case would also be eligible to avail the benefit of Vivad se Vishwas. In this case, the tenns of availing Vivad se Vishwas in case of disputed penaltylinterest/fee are similar to tenns in case of disputed tax. Thus, if the time to file appeal has not expired as on specified date, the appellant is eligible to avail benefit of Vivad se Vishwas. In this case the appellant should indicate in the declaration fonn that time limit to file appeal in ITA T has not expired.
Ques 21: In a case ITAT has quashed the assessment order based on lack Of jurisdiction by the AO. The department has filed an appeal in HC which is pending. Is the assessee eligible to settle this dispute under Vivad se Vishwas and if yes how disputed tax be calculated as there is no assessment order?
Ans: The assessee in this case is eligible to settle the department appeal in HC. The amount payable shall be calculated at half rate of 100%,110%, 125% or 135%, as the case may be, on the disputed tax that would be restored if the department was to win the appeal in HC.
Ques 22: In the case of an assessee prosecution has been instituted and is pending in court. Is assessee eligible for the Vivad se Vishwas?
Ans: No. However, where only notice for initiation of prosecution has been issued with reference to tax arrears, the taxpayer has a choice to compound the offence and opt for Vivad se Vishwas.
Ques 23: If the due date of filing appeal is after 31.1.2020 the appeal has not been filed, will such case be eligible for Vivad se Vishwas?
Ques 24: If appeal is .filed before High Court and is pending for admission as on 31.1.2020, whether the case is eligible for Vivad se Vishwas?
Ques 25: In a case appeal or arbitration is pending on the spec(fied date, but a rect(fication is also pending with the AO which if accepted will reduce the total assessed income. Will the calculation of disputed tax be calculated on rect!fied total assessed income?
Ans: The rectification order passed by the AO may have an impact on detennination of disputed tax, if there is reduction or increase in the income and tax liability of the assessee as a result of rectification. The disputed tax in such cases would be calculated after giving effect to the rectification order passed, if any.
Ques 26: Addition was made uls 143(3) on two issues whereas appeal.filed only for one addition. Whether interest and penalty be waived for both additions.
Ans: Under Vivad se Vishwas, interest and penalty will be waived only in respect of the issue which is disputed in appeal and for which declaration is filed. Hence, for the undisputed issue, the tax, interest and penalty shall be payable,
Ques 27: What amount of tax is required to be paid, if an assessee wants to avail the ben~fit of the Vivad se Vishwas?
Ans: Under the Vivad se Vishwas, declarant is required to make following payment for settling disputes: A. In appeals / writ / SLP / DRP objections / revision application under section 264 / arbitration filed by the assessee - (a) In case payment is made till 31" March, 2020- (i) 100% of the disputed tax (125% in search cases) where dispute relates to disputed tax (excess amount over 100% limited to the amount of interest and penalty levied or leviable), or (ii) 25% of the disputed penalty, interest or fee where dispute relates to disputed penalty, interest or fee only. (b) In case payment is made after 31 st March, 2020 - (i) 110% of the disputed tax (135% in search cases) where dispute relates to disputed tax (excess amount over 100% limited to the amount of interest and penalty), or (ii) 30% of the disputed penalty, interest or fee in case of dispute related to disputed penalty, interest or fee only. However, if in an appeal before Commissioner(Appeals) or in objections pending before DRP, there is an issue on which the appellant has got favourable decision from ITAT (not reversed by HC or SC) or from the High Court (not reversed by SC) in earlier years then the amount payable shall be half or 50% of the above amount. Similarly, if in an appeal before IT AT, there is an issue on which the appellant has got a favourable decision from the High Court (not reversed by SC) in earlier years then the amount payable shall be half or 50% of the above amount. B. In appeals Iwrit 1 SLP filed by the Department - (a) In case the payment is made till 31 "March 2020- (i) 50% of the disputed tax (62.5% in search cases) in case of dispute related to disputed tax or (ii) 12.5% of the disputed penalty, interest or fee in case of dispute related to disputed penalty, interest or fee only. (b) In case payment is made after 31"' March 2020 - (i) 55% of the disputed tax (67.5% in search cases) in cases of dispute related to disputed tax, or (ii) 15% of the disputed penalty, interest or fee in case of dispute related to disputed penalty, interest or fee only.
Ques 28: There is no provision for 50% concession in appeal pending in HC on an issue where the assessee has got relief on that issue from the SC?
Ans: If the appellant has got decision in his favour from SC on an issue, there is no dispute now with regard to that issue and he need not settle that issue. If that issue is part of the multiple issues, the disputed tax may be calculated on other issues considering nil tax on this issue.
Ques 29: Where assessee settles TDS appeal or withdraws arbitration (against order U/S 201) as deductor of TDS, will credit of such tax be allowed to deductee?
Ans: In such cases, the deductee shall be allowed to claim credit of taxes in respect of which the deductor has availed of dispute resolution under Vivad se Vishwas. However, the credit will be allowed as on the date of settlement of the dispute by the deductor and hence the interest as applicable to deductee shall apply.
Ques 30: Where DRP order passed on or after 1st July 2012 and before 1st June 2016 have given relief to assessee and Department has filed an appeal, how assessed tax to be calculated?
Ans: If department appeal is required to be settled, then against that appeal the appellant is required to pay only 50% of the amount that is otherwise payable if it was his appeal.