The scheme provides that if a taxpayer avails it by March 31, 2020, then he would get complete waiver of interest and penalty.
The Direct Tax Vivad Se Vishwas Bill, 2020, tabled in the Lok Sabha on Wednesday seeks to cut down on nearly 4.8 lakh tax disputes involving an amount of Rs 9.32 lakh crore (up to November 30, 2019) by giving the taxpayers the facility to escape interest on the disputed tax amount and any penalty. All direct tax-related cases pending before the Commissioner (Appeals), Income Tax Appellate Tribunal, high courts or the Supreme Court as on January 31, 2020 are eligible for the scheme.
The scheme provides that if a taxpayer avails it by March 31, 2020, then he would get complete waiver of interest and penalty. However, a taxpayer who chooses the scheme post this cut-off date will have to pay the disputed tax and 10% of it extra.
Further, if the tax arrears relate to disputed interest or penalty only, then only 25% of disputed penalty/interest is payable if scheme is availed by March 31. Cases coming for resolution after this date would have to pay 30% of penalty and interest.
Introducing the Bill, finance minister Nirmala Sitharaman said it emphasises on trust building. The scheme, she said, would not be open-ended. The government will later notify the end date for the scheme.
Rakesh Nangia, chairman, Nangia Andersen Consulting, said: “This can be a very beneficial scheme for settlement for cases such as additions of unexplained cash deposited during demonetisation period, additions for penny stocks, etc. where factually the taxpayers have high exposures. It would be beneficial for such taxpayers, to pay the tax amount and settle the disputes without imposition of interest and penalty.”
However, certain cases including tax in arrears relating to undisclosed foreign income/asset, assessment or reassessment made on the basis of information received under DTAA are out of the ambit of the scheme. Further, cases where prosecution for any offence under the Indian Penal Code/Prevention of Money Laundering Act/Prohibition of Benami Property Transactions Act has been instituted or a person who has been convicted under the Acts can’t avail the scheme.
The exclusion from its ambit of cases involving either undisclosed foreign income or based on exchange of information with foreign tax authorities is not ideal,” Abhay Sharma, partner, Shardul Amarchand Mangaldas & Co, said.
The scheme is modelled on a similar scheme for indirect tax which was announced in last year’s Budget and the window to avail it closed on January 15 this year. The government has said that nearly 95% of 1.9 lakh outstanding cases were resolved resulting in over Rs 35,000 crore of revenue for the government. The total revenue stuck in such cases was, of course, estimated to be Rs 3.6 lakh crore.
Amit Maheshwari, partner, Ashok Maheshwary & Associates LLP said: “Under the scheme, the order passed by the designated authority determining the amount payable shall be final and no further recourse in terms of appeals, arbitration, mediation or conciliation shall be available to the taxpayer.”
Explaining the purpose of the Bill, the government said that disputed arrears constitute nearly one-year direct tax collection. Further, it added that tax disputes consume copious amount of time, energy and resources both on the part of the government as well as taxpayers.
Moreover, they also deprive the government of the timely collection of revenue. Therefore, there is an urgent need to provide for resolution of pending tax disputes. This will not only benefit the government by generating timely revenue but also the taxpayers who will be able to deploy the time, energy and resources saved by opting for such dispute resolution towards their business activities,” it said.
Meanwhile, PTI reported that CBDT on Tuesday wrote to all principal chief commissioners asking them to collate the data on pending appeals in high courts and send it to it by next week. “In order to implement the (Vivad Se Vishwas) scheme, the CBDT needs database on such litigations pending at high court level,” the communication to the commissioners read.
“It is therefore, requested that the data on pending appeals at high court level as on January 31, 2020, be obtained with the help of court registry and the same may be supplemented with the records of the field office,” it stated.
The CBDT also asked the regional Income Tax Department chiefs to “personally monitor” the exercise and submit the data by February 14 to it through e-mail, as per the communication.