Cases relating to unexplained cash deposits during note ban to be settled under direct tax dispute resolution scheme
The direct tax disputes related to unexplained cash deposited in banks during the demonetisation period could be settled under the direct tax dispute resolution scheme. If the assessees opt for the scheme, they need to pay 75% of the unexplained cash deposited in banks as tax, finance minister Nirmala Sitharaman said on Friday in the Rajya Sabha. She added that the scheme was ‘not an amnesty scheme at all’ for cases involving unexplained cash deposit during November 8-December 31 in 2016.
FE had reported earlier demonetisation-related disputes worth as much as Rs 3 lakh crore may avail the scheme as the income tax department had completed the final assessment on all such cases, and many of them had already been challenged in the appellate forum.
Parliament on Friday approved the Direct Tax Vivad Se Vishwas Bill, which was passed by a voice vote and returned by the Rajya Sabha as it was a money Bill. It was approved by the Lok Sabha on March 4. Under the scheme, taxpayers willing to settle disputes would be allowed a complete waiver of interest and penalty if they pay the entire amount of tax in dispute by March 31 this year, following which an additional 10% disputed tax shall have to be paid over and above the tax liability. Further, where arrears relate to disputed interest or penalty only, 25% of disputed penalty or interest shall have to be paid if the payment is made by March 31, beyond which the same shall be enhanced to 30%. The scheme would remain open till June 30, 2020.
As many as 4.83 lakh direct tax cases worth Rs 9.32 lakh crore are locked up in various appellate forums such as commissioner (appeals), ITAT, high courts, the Supreme Court and debt recovery tribunals. The finance minister said that March 31 was the date given to pay dues without any additional penalty, whereas between March 31 and June 30, the dues can be paid with an additional penalty of 10%. However, eventually the end of the scheme date will be notified by the government, she added.
The Bill also restricts the amount of disputes that can be settled under the scheme to Rs 4 crore if they emanate from search and seizure operations. Sitharaman explained that cases above Rs 5 crore have been excluded from the scheme so that large evasion-related cases and fraud cases do not come into the scheme and take advantage of it. “That is why we have limited it to the topmost extent of Rs 5 crore and not beyond. So, we do not want disputes which involve larger sums to take advantage of the scheme much before we can even establish what is behind those kind of disputes,” the finance minister said.
The finance minister also clarified that only those disputes which pertain to or come under the Income Tax Act will be taken up under the scheme, not those which fall under the Wealth Tax Act. She added that the secondary adjustment to the provision only applies for assessment year 2017-18 and subsequent years. It does not apply to earlier years to which most of the transfer pricing cases pertain. For those who have paid part of the demand amount during the litigation process, the differential amount would be refunded, Sitharaman said.
Gokul Chaudhri, partner, Deloitte India, said, “The VSV scheme aims to rapidly settle pending disputes to enable companies to achieve a litigation-free status. The finally approved terms by Parliament reflect materially improved terms for taxpayers. The next several weeks will move the VSV scheme to operational level; time and efficiency of the engagement between taxpayers and the tax administration is crucial for success of the programme.”