Direct Tax Vivad se Vishwas Scheme (DTVSV) 2020 for settling tax disputes

Image of two hands trying to join puzzle pieces representing the dispute settlement movtive behind the Direct Tax Vivad se Vishwas Scheme (DTVSV) 2020

Published: May 28, 2020 at 11:22 am

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The Government recently announced the Direct Tax Vivad se Vishwas Scheme (DTVSV) 2020 to reduce litigation related to direct tax matters and provide an opportunity to willing taxpayers to settle their outstanding tax disputes under very favourable terms without payment of any interest or penalty (in cases of disputed tax demand). Let’s have a closer look at the scheme.

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Another objective of the scheme is to generate additional tax revenue in the current unfavourable economic conditions. The DTVSV Bill was passed in March 2020 and originally envisaged payment of taxes under the scheme on or before 30.03.2020. The scheme is applicable till 31.12.2020 but those who avail the scheme after 31.03.2020 were required to pay 10% additional tax. But now, owing to the COVID-19 pandemic, the additional 10% tax payment requirement has been waived off and taxpayers can avail the scheme up to 30.06.2020 without any additional liability.

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Applicability of Direct Tax Vivad se Vishwas Scheme

All pending appeals before Commissioner Appeals {CIT(A)}, Income Tax Appellate Tribunal (ITAT), High Court and Supreme Court as on 31st January 2020 are eligible under the scheme. The appeals may be against the following:

  • Disputed Tax
  • Disputed Interest
  • Disputed Penalty
  • Disputed Fee
  • Disputed TDS/TCS

Eligibility Conditions

  • Appeals/writs filed on or before 31.01.2020 and pending.
  • Orders for which time for filing appeal has not expired on 31.01.2020
  • Cases pending before Dispute Resolution Panel (DRP) on 31.01.2020
  • Cases where DRP issued direction on or before 31.01.2020 but no order has been passed.
  • Cases where assessee filed a revision petition before the Principal Commissioner/Commissioner (Section 264) on or before 31.01.2020.
  • Search case if the disputed demand is less than Rs. 5 Crore for a particular financial year.
  • The appeals/writs filed by the taxpayers or the department are eligible
  • Disputes, where the payment has already been made, are also eligible.
  • Cases in arbitration in India or Abroad

Exclusions under the scheme

  • Search cases if disputed tax is more than Rs. 5 Crore.
  • Prosecution cases under the Income Tax Act or IPC filed by the Department.
  • Cases relating to undisclosed foreign income and assets.
  • Cases completed on the basis of information from foreign countries as per section 90 or 90A.
  • Cases covered under offence under IPC, the Unlawful Activities (Prevention) Act, 1967, NDPS Act, 1985, PC Act, 1988, PMLA Act, 2002, COFEPOSA Act, 1974, Prohibition of Benami Property Transactions Act, 1988 and Special Court Trial in Securities Act, 1992.

Payment terms

Payment made on or before The appeal relates to disputed tax The appeal relates only to disputed penalty or interest or fee
30.06.2020 100%* of the disputed tax (125% in search cases) i.e. entire interest and penalty portion is waived off. 25%* of the disputed penalty or interest or fee
*- If an issue in taxpayer’s pending appeal has been decided in his favour by any appellate forum in any previous year or if Department has filed an appeal on the issue, the amount payable is only 50% of the above amounts (i.e. 50% of disputed tax or 12.5% of disputed penalty or interest or fee)

Procedure

  • Taxpayer to file a declaration in the specified form before the designated authority.
  • Taxpayer to furnish an undertaking waiving his right to seek or pursue any remedy or claim in relation to the tax arrears under any law.
  • Designated authority within 15 days from the date of receipt of the declaration to determine the amount

payable by the Taxpayer and grant a certificate to the declarant containing particulars of tax arrears and the amount payable in the prescribed form.

  • Upon the filing of the declaration, the appeal is deemed to have been withdrawn from the date of issue of certificate U/s 5(1).
  • The taxpayer would be required to submit the proof of withdrawal of appeal/writ with the intimation of payment i.e. before the issuance of a final certificate for settling the dispute.
  • Taxpayer to pay the amount determined by the designated authority within 15 days from the date of receipt of the certificate and inform the designated authority of such payment made in the prescribed form.
  • The order passed under Section 5(1) by the designated authority to be conclusive as to matters mentioned therein and such matters cannot be reopened in any other proceedings.
  • No institution of any proceedings in respect of an offence, penalty or interest. [Section 6] (For the benefit of declarant)
  • Appellate forums/arbitrator, conciliator or mediator not to decide the issue in respect of cases where an order under clause 5(1) is passed by the designated authority [Section 4(7)]

Other features of the scheme

  • Refund of Excess Amount: If the amount paid by the taxpayer before filing declaration exceeds the amount payable under the Scheme, he would be granted the refund for such excess amount, but without any interest u/s 244A.
  • No Refund: Any amount paid in pursuance of the scheme shall not be refundable under any circumstances.
  • If there are more than one issues involved in the appeal, the taxpayer would be required to file declaration for all issues, he cannot file declaration for some issues and litigate the balance issues.
  • The department would also withdraw the appeal/writ before the issuance of a final certificate for setting dispute.
  • In a case where the Assessing Officer has reduced the returned loss by making the addition of income/disallowing expenditure, the taxpayer shall have an option to either pay the notional tax on the amount by which the loss has been reduced and carry forward the claimed loss without reduction or by accepting the reduced carry forward of loss without making any payment under the Scheme. The same mechanism would apply for a reduction in MAT credit.
  • The Scheme now provides that filing of the declaration will not set any precedence and it cannot be claimed in any other proceedings that the taxpayer or the Department has conceded its tax position by settling the dispute.

Various forms under the scheme

All forms under the scheme are to be filled through the e-filing portal of the Income Tax Department. The various forms under the scheme are:

  • Form 1- Form for filing declaration through the e-filing portal
  • Form 2- Undertaking by the taxpayer waiving his right to seek or pursue any remedy or claim in relation to the tax arrears under any law. To be filed through the e-filing portal.
  • Form 3- Certificate issued by the designated authority determining the amount payable by the taxpayer
  • Form 4- Intimation of payment made by the taxpayer
  • Form 5- Order for full and final settlement of tax arrears to be issued by the designated authority.

Final word

The DTVSV Scheme 2020 is a great opportunity for taxpayers to settle their litigations with the Income Tax Department. The payment terms are also quite favourable with a complete waiver of interest and penalty in cases of a tax dispute and also immunity from any prosecution proceedings. The scheme has now been extended till 30.06.2020 without payment of any additional tax. The Income tax department has also launched a wide publicity campaign and all taxpayers with pending litigations are being contacted personally to make them aware of the benefits & features of the scheme. With ample time available to make a decision, the litigant taxpayers should seriously think about availing the scheme and avoid the hassle of prolonged appellate proceedings.

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