All about Direct Tax Vivad se Vishwas Act, 2020

The Author, Sneharghya Saha is a 3rd year, B.A.LLB(H) student of Amity University, Kolkata. He is currently interning with LatestLaws.com.

Introduction:

The much-anticipated rules setting out the forms and procedures for the Direct Tax Vivad se Vishwas Act, 2020 (the VsV Act) were published in connection with this scheme by the Central Government Via Notification of 18 March 2020. Such Laws are titled "The Legislation of Direct Tax Vivad se Vishwas, 2020" (the VsV Laws). The Rules laid down five forms for declaration, undertaking, certificate award, intimation of payment along with proof of withdrawal and issuance of order in numerical order. As planned, the forms must be sent electronically under digital signature or by electronic authentication code and hence taxpayers will still be able to settle their tax disputes within the first window, which ends under the VsV Act by 31 March 2020.
The Direct Tax Vivad se Vishwas Act, 2020 was brought forward in Lok Sabha by the Finance Minister, Ms. Nirmala Sitharaman on 5^th February, 2020. The bill was adopted for the dispute settlement scheme for tax cases pending relating to income tax and corporation tax that extended to all taxpayers' or income tax department's appeals/appeals pending before any appeal tribunal until 31 January 2020. Essentially, it gave full relief of interest and penalties provided the taxpayer agreed to pay the balance of the tax at issue by March 31, 2020.

The second window begins from 1 April 2020 before a date to be defined by the VsV Act (probably 30 June 2020 by the speech of the Union Budget 2020 of the Finance Minister) During this period, the taxpayer will also be able to resolve his disputes and seek a full waiver of interest and fine, subject to payment of an additional sum as defined in the VsV Act, which in most cases would be 10 per cent of the total.

Q1. What does Direct Tax Vivad Se Vishwas Act, 2020 account for?

'Direct Tax Vivad Se Vishwas Act, 2020' is a major dispute resolution-cum-amnesty scheme for the winding-up of previous Income Tax disputes. The new scheme is clearly a win-win situation for all involved as it provides substantial freedom from the cost of the charge, tax and liability in dispute.

Q2. Which appeals are covered under the Act?

Appeals pending before the appeals forum [Commissar (Appeals), Income Tax Appellate Tribunal (ITAT), High Court or Supreme Court] and written petitions pending before the High Court (HC) or Supreme Court (SC) or special leave petitions (SLPs) pending before the SC as of 31 January 2020 (specified date). Cases where the order has been passed but the time limit for filing the appeal pursuant to the Income-Tax Act, 1961 (the Act) against the order has not expired as is also covered on the specified date. Similarly, cases in which the assessee's opposition to the draft order is pending with the Dispute Resolution Tribunal (DRP) or where the Guidance has been issued by DRP but the Assessing Officer (AO) has not yet signed the final order on or before the date specified. Cases in which a appeal for amendment pursuant to section 264 of the Act is pending before the Principal Commissioner or Commissioner are also exempted. However, if a declarant has launched certain litigation or has given notice of arbitration, conciliation or consultation as alluded to in section 4 of the Act, it shall also be covered.

Q3. Who has the competent appellant authority to adjudicate cases which came under the purview of this Act?

The Act describes an appellant as the income tax regulator, or the individual or both whose appeal is pending as of January 31, 2020 before any appeal venue. Such avenues of appeals are the Supreme Court, the Lower Courts, the Judicial Tribunals for Income Tax and the Commissioner (Appeals).

Q4. How is the compensation measured for those willing to take advantage of this Act?

The amount owed by the claimant for dispute settlement is calculated on the basis of whether the case includes payment of tax or interest, fine, or compensation. Further, if any payment is made after March 31, 2020, he will be forced to pay an additional fee. The following table shows the amount payable to resolve disputes by the appellant.

Q5. What does the term ‘Resolution Mechanism’ talks about under the working of this Act?

The Act proposes a settlement process in which an appellant can file a declaration with the appointed authority to facilitate the settlement of direct tax disputes pending. The Central Government should inform the last date for filing such a statement. On the basis of the declaration, the appointed authority shall, within 15 days from receipt of the declaration, decide the amount payable by the claimant against the dispute and issue a certificate containing specifics of the amount payable. The appellant shall pay this amount within 15 days of receipt of the certificate and shall notify such payment to the designated authorities. The number won't be refundable.

The appeals pending before the Income Tax Appellate Tribunals and the Commissioner (Appeals) shall be deemed to be withdrawn once the designated authority issues the certificate. The applicant is expected to withdraw the appeal or petition in case of appeals or petitions pending before the Supreme Court and the High Courts. As the designated authority to manage the proposed resolution mechanism, the Principal Chief Commissioner will appoint an officer, not below the rank of an Income Tax Commissioner.

Q6. How could an eligible person benefit from this scheme?

An eligible person must file a statement, in the prescribed form, before the designated authority.

(i)Within 15 days of issuing the certificate, the designated authority shall assess the tax payable by the declarant and issue a certificate to the declarant stating the amount payable by him.

(ii)Declarant shall make payment to the designated authority within 15 days of issuing the certificate and intimate the payment information.

(iii)The Appointed Authority issues an order claiming that it has paid tax.

(iv)Any challenge pending before the arbitration court in support of the disputed profits or interest or the disputed fine or the challenged charge and tax arrears shall be dismissed upon submission of the document.

 (v)The declarant shall provide an agreement that waives its right, direct or indirect, to obtain or enforce some redress or demand in respect of the tax arrears.

Q7. What if someone is making a false statement or breaking certain conditions?

A petition lodged by a claimant is void if:

1. The facts are found to be incorrect,
2. It violates either of the requirements set out in the IT Act, or
3. It requires some redress or argument in connection with that dispute.

The statement shall be considered never to have been made and in those cases shall be deemed to have resumed all the prosecutions and charges dismissed under the arrangement and all the consequences.

Q8. What is the mechanism of ‘Waiver of Rights’ under this Act?

For conflict settlement, the claimant is required to supply an undertaking waiving its rights under any statute, including the Income Tax Act, 1961 (IT Act), to try some relief or argument in respect of that conflict. Any those claims already made in favour of the case must be dismissed before the complaint is filed.

Q9. What are the immunities available to the appellant under this Act?

When a disagreement has been settled, the appointed jurisdiction is powerless to impose interest or liability in favour of the disagreement. Furthermore, until it is settled, no appeal court will make a judgement on the conflict issue. Under any statute, including the IT Act, these cases cannot be revived under any proceeding.

Q10. What are the disputes which are not covered under this Act?

The mechanism proposed won't cover certain disputes. This involves disputes:

1. Where litigation has been launched before the claim is filed,
2. Concerning people arrested or charged under other statutes (such as the Indian Criminal Code), or civil responsibility regulation, and
3. Concerning unreported foreign income or properties.

Q11. Are there any anomalies or the sort of situations that do not come under the Act?

In the following situations the value of this scheme shall not be available:

A. Regarding tax arrears—

(i) Relating to an income year during which an income was rendered pursuant to section 153A or section 153C of the Income-Tax Act, where it applies to any tax arrears;

(ii) Relating to the year of review for which litigation was initiated on or before the date of submission of the declaration;

(iii) Relating to any reported profits from outside India or non-disclosed properties outside India;

(iv) Relating to an appraisal or reassessment rendered on the basis of details provided pursuant to an arrangement referred to in section 90 or 90A of the Income Tax Act, as it applies to any tax arrears;

(v) Relating to an appeal to the Commissioner (Appeals) for which notice of change has been given pursuant to section 251 of the Income Tax Act at or before the date specified;

B. Any person for whom an arrest warrant was released in compliance with the provisions of the Foreign Exchange and Prevention of Smuggling Activities Act, 1974, on or before the filing of a declaration:

Provided that —

(i) The detention order, which is an order on which the provisions of section 9 or 12A of that Act do not extend, was not removed on the Advisory Board's report pursuant on section 8 of that Act or before the Advisory Board's report was received; or

(ii) The detention order, which is an order on which the provisions of section 9 of that Act extend, was not removed until the expiry of the time limit by, or on the grounds of, the review referred to in subparagraph (3) of section 9 or the opinion of the Advisory Board referred to in section 8, read in accordance with subparagraph (2) of section 9 of that Act; or

(iii) The detention order, which is an order on which the provisions of section 12A of that Act extend, was not removed before the expiry of the duration for, or on the basis of, the first inspection pursuant on subparagraph (3) of that act or on the basis of the opinion of the Advisory Board pursuant to section 8, read in accordance with subparagraph (6) of section 12A, of the said Act; or

(iv) This arrest warrant has not been set aside by the appropriate court;

C. Any person who is convicted for any offence punished under the provisions of the Indian Penal Code, the Illegal Practices (Prevention) Act of 1967, the Narcotic Drugs and Psychotropic Substances Act of 1985, the Prevention of Corruption Act of 1988, the Prevention of Money Laundering Act of 2002, the Prohibition of Benami Land Transactions Act of 1988 or for enforcement purposes.

D. Any person informed on or before the filing of a declaration under section 3 of the Special Court (Trial of Offenses Related to Securities Transactions) Act, 1992.

Q12. If no appeal is pending but the dispute is pending in arbitration, does the taxpayer count under Vivad ke Vishwas?

Even if no appeal is pending, an assesse whose case is pending in arbitration can apply for settlement under Vivad se Vishwas. In such a case, the assessee will fill in the declaration form with the necessary information appropriate in his case.

Q13. An appeal against the penalty levied on the assessed tax has been lodged; however, there is no disagreement about the amount of the assessed tax. Could Vivad se Vishwas use the benefit of the?

Response) Under Vivad se Vishwas, documents protecting contested interest (where there is no disagreement concerning tax relating to such interest) are valid. It must be explained that the entire rate of interest assessed or leviable relevant to the contested tax shall be suspended if there is a dispute on the tax sum and a claim is made on the contested tax.

Q14. What if the appellant had paid the contested demand including interest while in appeal?

It also includes cases of which the appellant has already met the challenged claim either in part or in full. Unless the amount of tax collected is higher than the amount due under Vivad se Vishwas, under section 244A of the Act the appellant would be entitled to refund without interest.

Q15 Can the Vivad se Vishwas prosper if the Income-Tax Department has launched a search and seizure action against a taxpayer?

Where tax arrears apply to an appraisal rendered pursuant to section 143(3) or section 144 or section 153A or section 153C of the Act on the basis of a request undertaken pursuant to section 132 or section 132A of the Act, they shall be exempt if the value of the challenged tax exceeds five crore rupees during that year.

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