This Scheme is intended to reduce tax litigation which has been tabled in the Parliament. The bill specifies tax, interest, and penalty to be paid if an appeal is filed by the taxpayer or the Income Tax Department.
• A taxpayer can opt for the Scheme in case there is an appeal pending as on 31 January 2020, before following appellate forums:
– Supreme Court (SC)
– High Court (HC)
– Income Tax Appellate Tribunal (ITAT) or
– Commissioner (Appeals) (CIT(A))
• The pending appeal can be in respect of:
– the tax arrear “the aggregate amount of disputed tax, interest chargeable or charged on such disputed tax and penalty leviable or levied on such disputed tax”
– disputed interest ( 234A/234B//220/201/206C ) etc
– disputed penalty ( 271A, 271B, 269SS, 269T )
– disputed fee (234E- fees for non-filing of TDS Return)
– tax determined on defaults in respect of tax deducted at source or tax collected at source.
• All pending appeals shall be deemed to have been withdrawn
• No future protection for a disputed amount under any statute or tax investment treaty.
As per Income Tax, there are 4 types of Assessments:-
• Scrutiny Assessment u/s 143(3)
• Best Judgment Assessment –u/s 144
• Re-assessment or Income escaping assessment –u/s 147
• Assessment in case of search –u/s153A (cannot opt the scheme)
The amount payable under the Scheme:
If the appeal was filed by a taxpayer:
• The individual will have to pay 100 % of the disputed tax, and the penalty and interest will be waived until March 31, 2020. After that, 110 % of the tax amount will have to be paid.
• In search cases involving recovery below Rs 5 crore, 125 % of the disputed tax will have to be paid; that will go up to 135 % after March 31.
• In the case of disputed penalty or interest, the taxpayer will have to pay 25 % till March 31 and 30 % after that.
If the appeal was filed by the income tax department:
• A taxpayer will have to pay 50 % of the disputed tax, and the penalty and interest will be waived until March 31, 2020. After that, the individual will have to pay 55 % of the disputed tax.
• In search cases, 62.5 % of tax will have to be paid by March 31 and 37.5 % after that.
• Against penalty and interest, an individual will have to pay 12.5 % till March 31 and 15 % after that.
For search cases, the limit of disputed tax of Rs. 5 crores will be computed on a yearly basis.
The excess amount will be refunded in cases where the tax paid before filing a declaration under the Vivad Se Vishwas scheme exceeds the liability under the proposed law.
EXAMPLE on Tax Disputed:
Suppose an assessee has filed a CIT(A) against an order to the AO having two grounds of appeal. On one ground the taxpayer is confident enough and expects that he will win, so in this case, it is not beneficial to opt for this scheme. One should opt for the scheme only if the taxpayer is not confident that he will not be paying any taxes and he is not having documents to prove anything i.e he will be liable to pay the taxes, then he can pay the disputed tax amount and opt for the scheme.
Computation of Amount Payable of X & Co. (Firm) for AY 2011-12
We have assumed that assessee has filed an appeal against the order issued under section 147 to CIT(A) which is pending as on 31st January 2020.
EXAMPLE on Penalty Disputed:
Suppose an assessee has filed a CIT(A) against an order to the AO for AY 2016-17 under section 269SS
Computation of Amount Payable of Mr. Z for AY 2016-17
Computation of disputed tax
The disputed tax will be calculated by a formula (A-B)+(C-D) where,
Aspects to be kept in mind while computing disputed tax
In a case where the MAT or AMT is not applicable, the item (C – D) in the formula should be ignored.
Where the amount of income in respect of which appeal has been filed by the taxpayer is considered both under the normal provisions of the Act and under MAT/AMT provisions, such amount shall not be reduced from total income assessed while determining the amount under item D.
Effect of reducing loss
In the case where the amount of income, in respect of which appeal has been filed by the taxpayer, has the effect of reducing the loss declared in the return or converting that loss into income, the amount of disputed tax shall be determined using modified formula.
In such cases, item (A – B) shall be the amount of tax that would have been chargeable on the income in respect of which appeal has been filed by the taxpayer had such income been the total income.
Computation of disputed penalty and disputed interest
Penalty determined in any case under the Act where:
• such penalty is not levied or leviable in respect of disputed income or disputed tax;
• an appeal has been filed in respect of the such penalty
Interest determined in any case under the Act where:
• such interest is either not charged or chargeable on disputed tax;
• an appeal has been filed in respect of such interest.
Cases where the Scheme is not applicable
It is proposed that the Scheme shall not be available in respect of tax arrears relating to:
• Assessment Year (AY) in respect of which prosecution has been instituted on or before the date of filing of declaration under this Scheme
• Search and seizure cases
• Any undisclosed income from a source located outside India or an undisclosed asset located outside India
• An assessment or reassessment made on the basis of information received under any Tax Treaty
• The appeal before the CIT(A) in respect of which notice of enhancement has been issued by the CIT(A) on or before 31 January 2020.
Persons who cannot avail the Scheme
The scheme cannot be availed by the following persons:
• The person in respect of whom an order of detention has been made under Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974 on or before the filing of declaration [subject to certain conditions].
• The person notified under section 3 of the Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992 on or before the filing of declaration.
• Person in respect of whom prosecution for any offense punishable under the Indian Penal Code, the Unlawful Activities (Prevention) Act, 1967, the Narcotic Drugs and Psychotropic Substances Act, 1985, the Prevention of Corruption Act, 1988, the Prevention of Money Laundering Act, 2002, the Prohibition of Benami Property Transactions 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 offense punishable under any of those Acts.
Filing of Declaration
Declaration to be filed before the Designated Authority
• The taxpayer is required to file a declaration with the designated authority. The designated authority has been defined to mean an officer not below the rank of Commissioner of Income-tax notified by the Principal Chief Commissioner.
• The declaration shall be presumed to have never been made in the following situations:
– any material particular furnished in the declaration is found to be false at any stage;
– the declarant violates any of the conditions referred to in the Scheme;
– the declarant acts in any manner which is not in accordance with the undertaking given by him.
In such cases, all proceedings and claims that were withdrawn shall be deemed to have been revived.
Withdrawal of appeals
• The taxpayer shall withdraw its appeal filed in the appellate forum or any writ petition before the HC or SC and furnish proof of such withdrawal along with the declaration.
• The taxpayer shall withdraw its claim in proceedings for arbitration, conciliation or mediation, prior to making the declaration and furnish proof thereof along with the declaration.
Undertaking for waiver of rights by the taxpayer
• The taxpayer shall furnish an undertaking, waiving his rights, whether direct or indirect, to pursue any remedy in relation to the tax arrear which may otherwise be available to him under any law or agreement.
• The manner of furnishing the undertaking shall be prescribed in due course.
Time and manner of payment
Determination of amount payable
The designated authority shall, within 15 days from the date of receipt of the declaration determine the amount payable and grant a certificate to the taxpayer containing particulars of the tax arrears and the amount payable.
Payment of amount
• The taxpayer shall pay the amount within 15 days of the date of receipt of the certificate and intimate the details of such payment to the designated authority.
• The authority shall pass an order stating that the taxpayer has paid the amount.
The scheme is time-bound till 30th June 2020.
Until now, the scheme is not finalized, the assessee can take the benefit of this scheme once it is applicable.