The Direct Tax Vivad Se Vishwas Scheme’2020

March 24, 2020

Assurance Service, Compliance Audits & Certification, Blog, Compliance services, Corporates, Income Tax

SILENT FEATURES OF THE SCHEME

FAQ is silent on the coverage of genuine delay in filing of the appeal, which is pending for condonation of whether it should be covered considering the objective of the scheme.
FAQ is silent on the coverage of miscellaneous applications filed against the order of tribunal.
What still remains out of the ambit is cases pending before the AAR and settlement commission?
Disputed tax Rs.5 crore is considered for search and seizure cases . However if disputed amount is less and tax itself is Rs.5 Crore then such cases are not covered.
If we analyze the provisions of bill, we will appreciate the fact that the scheme will be opted only if tax, interest, penalty is disputed. There might be the cases where orders have been passed by income tax authorities, but the concern of aggrieved party is other than tax matters.

Some of the example are as follows –

Order to cancel the registration of charitable trusts.
Order for refusal of 80G registration to a charitable trust.
Order of Refusal to grant stay of demand

SCOPE & ELIGIBILITY

Appeals covered VVD

Appeals pending before CIT(A), ITAT, High Court & Supreme Court
Writ petitions pending before High Court or Supreme Court
Special Leave petitions (SLPs) pending before Supreme Court
Cases where the order has been passed but time limit for filing appeal is not expired as on the specified date
Cases where objections filed before DRP and pending with DRP
DRP has given the directions but the final assessment order yet to be passed
Cases where revision application U/s 264 is pending before Pr.CIT or CIT
Where a declarant has initiated any proceeding or given any notice for arbitration, conciliation or mediation as referred to in clause 4 of the Bill (either in India or abroad)
Where case is pending in arbitration which is eligible to apply for settlement even no appeal is pending
Writ petitions pending before High Court against AAR Order in which total income has determined
Where assessment has been set aside for giving opportunity/to carry fresh assessment (only the issues covered for set aside)
Cases pending before DRP & DRP issued the order but Assessing Officer has not passed the AO on or before the specified date
Draft AO passed and assessee waiting for final order with an intention to file appeal before CIT(A)
Notice for prosecution has been issued with reference to the tax arrears
Quantum appeal covering disputed tax before ITAT and appeal against penalty before CIT(A)

Appeals not covered VVD

Dispute pending before AAR
Writ filed against a notice u/s 148 but no order has been passed consequent to the notice U/s 148 – as total income is not determined
Interest U/s 234A, B & D filing application for waiving but no appeal filed
Delay in deposing of TDS/TCS
Disputes related to Wealth tax, security transaction tax, commodity transaction tax & equalization levy
Prosecution has been initiated and is pending in court

SEARCH & SEIZURE (ASSESSMENT U/S 143(3)/144/153A/153C ON THE BASIS OF SEARCH U/S 132/132A)

If the amount of disputed tax exceeds Rs. 5crores – not covered under VVD
Out of 7 assessment years in respect of search & seizure, 4 A Ys disputed tax is 5crores or less in each year & for 3 years disputed tax is exceeding 5 crores –

– for 4 years – covered under VVD

– for 3 years – not covered under VVD

Example

Year	D.Tax (in crores)	VVD	Year	D.Tax (in crores)	VVD
1	7.5	Not Covered	4	6.2	Not Covered
2	2	Covered	5	1.2	Covered
3	2.5	Covered	6	.50	Covered

SCOPE & ELIGIBILITY

Disputes covered under VVD

Disputed tax
Disputed interest (even assessed tax is not disputed)
Disputed penalty
Disputed TDS/TCS
Imposition of fees u/s 234E, 234F (25% or 30% of disputed fee has to be paid)
Appeal against interest levied on late payment of TDS/TCS
Where CIT(A) has issued the enhancement notice on or before 31.01.2020 (the disputed tax will be increased by tax related to enhancement)
Appeal against penalty/interest/fee disposed by CIT(A) and time to file appeal to ITAT has not expired as on specified date
Where disputed demand either partly or fully paid (appellant will entitled refund without interest U/s 244A)

Disputes covered under VVD

Due date of filing of appeal is after 31.3.2020 and the appeal yet to be filed
Appeal pending before High Court for admission as on 31.03.2020
Department filed appeal against ITAT Order (by paying 50% of disputed tax)
Where the appeal is pending before ITAT against 143(3). Subsequently another order under section147/143(3) was passed for the same assessment year and that is pending before CIT(A) .Option to select either of two or both appeals for same assessment year.

Other Points:

Appellant can avail VVD irrespective of the tax arrears have been paid either partly or fully or are outstanding
For one pending appeal, all the issues will be covered under VVD i.e. disputed issues as well as undisputed issues. Picking and choosing issues for settlement of an appeal is not allowed.

CALCULATIONS

TAXES REQUIRED TO BE PAID UNDER VVD

Payment mad on or before	Appeal relates to disputed tax	Appeals relates only to disputed penalty or interest or fee
31st March 2020	100% of disputed tax (125% in search cases)	25% of disputed penalty or interest or fee
30th June 2020	110% of disputed tax (135% in search cases)	30% of disputed penalty or interest or fee

If the appeal is filed by the department – 50% of the aforesaid amounts

DISPUTED TAX CALCULATION

Appeal/arbitration is pending on the specified date but rectification order passed by the AO to increase/reduce the total assessed income and tax liability than-Disputed tax would be calculated after giving effect to the rectification order passed
Credit for taxes paid against disputed taxes shall be available

Example –

Particulars	Amount (Rs.)
Disputed tax	10,000
Less: Taxes already paid before filing declaration	8,000
Balance tax payable after declaration	2,000

DRP Order has been passed giving relief to the assesse and department has filed appeal
– 50% of the amount has to be paid to settle the department appeal

DISPUTED TAX CALCULATION

Calculation of Disputed tax along with interest paid by the assessee while being appeal:

Particulars	Amount (Rs.)
Tax at the time of filing of Return	30,000
Add: Disputed tax during assessment	10,000
Total Tax	40,000
Add: Interest U/s 234B at the time of filing of return	1,000
Disputed interest arise on disputed tax	6,000
Total tax along with interest	47,000
Less: Self assessment tax paid	31,000
Balance tax payable	16,000
Tax paid on Regular Assessment before filing appeal	14,000

The appellant is entitled to get refund on excess payment of disputed tax i.e. Disputed tax – Tax paid (10000-14,000 = 4000)

** Interest of Rs. 6000/-, interest U/s 220(2) and penalty levied will be waived.

DISPUTED TAX CALCULATION

Computation of disputed tax where assessment has been set aside for giving proper opportunity to an assessee on the additions carried out by the AO:

If appellant authority set aside the additions made by AO, the

Particulars	Addition 1	Addition 2
Additions made by the Assessing Officer	20,000	30,000
Tax on the above additions	6,240	9,360
Interest on tax	2,500	3,500

CIT(A) confirm the two additions. ITAT confirm addition 1 & set aside addition 2 and the assessee has time limit to file appeal on first addition against ITAT Order, the assessee can avail VVD by covering both additions and the disputed tax is sum of both the additions (i.e. 6,240 + 9,360) and interest waive off is (2,500+3,500).

DISPUTED TAX CALCULATION ON TDS ISSUES

Where the deductor settles TDS appeal or withdraws arbitration against order u/s 201,
-The deductee will be eligible to claim the credit of taxes in respect of such dispute resolution under VVD as on date of settlement of dispute by the deductor and hence the interest as applicable to deductee shall apply.
Where assessee settles his own appeal or arbitration in respect of assessment of income under VVD which is not subject to TDS by the payer of such income and an order u/s 201 has been passed against such deductor in default
-Then assessee need not pay the corresponding TDS after settlement.
However, the assessee would liable to pay interest U/s 201(1A) of IT Act

SUBSTANTIVE & PROTECTIVE ADDITION – VVD

If substantive addition is eligible to covered under VVD,

AO shall pass rectification order deleting the protective addition on same issue in which the settlement was done under VVD in the case of same assessee or in the case of another assessee.

RELIEF FROM SUPREME COURT – VVD

If the appellant got decision in his favour from the Supreme Court on an issue, there is no dispute with regard to that issue then assessee need not settle that issue.
If that issue is part of multiple issues, the disputed tax will be calculated on other issues considering nil tax on this issue.

DEEMED APPEAL

When time to file appeal has not expired then it is considered as deemed appeal.

ASSESSEE APPEAL AND DEPARTMENTAL APPEAL FOR ANY ASSESSMENT YEAR

Assessee having an option to file declaration –

 only for assessee’s appeal (or)

 only for departmental appeal (or)

 both

DRP has issued the direction confirming the additions and AO has passed the order accordingly. The issues confirmed by DRP include an issue on which taxpayer has got the favorable order from ITAT in an earlier year (not reversed by High Court or Supreme court)

– The disputed tax shall be computed at half of normal rate of 100%, 110%, 125% or 135%

If ITAT has passed order giving relief on two issues and confirming three issues. The time limit for filing appeal has not expired,

– Assessee have an option to file declaration either for confirming issues or both (i.e including issues on which relief is granted)

If assessee file declaration only for confirming issues, then the department is free to file appeal on other issues.

PROCEDURE

Time limit for paying taxes

Particulars	Time Limit
Declaration of tax payable by the assessee & granting a certificate for tax arrears & amounts payable.	Within 15 days from the date of receipt of declaration
Time limit for payment of tax	Declarant shall pay the tax within 15 days from the date of receipt of certificate.

Note: 15 days is outer limit, the DA shall be instructed to grant a certificate at an early to enable the declarant to pay tax on or before 31st March’ 2020.

The appeal/arbitration/conciliation/mediation is withdrawn after granting the certificate by DA.

Order passed by DA after payment of disputed taxes:

The DA pass an order after payment of taxes stating that the declarant has paid taxes.
The DA shall be able to amend his order to rectify if there is any apparent error
After passing the order the AO cannot institute any proceedings in respect of offence, or impose or levy any penalty, or charge any interest.
Once the tax paid under VVD scheme, which shall not be refundable under any circumstances
No appellate forum or arbitrator, conciliator or mediator shall proceed to decide any issue relating to tax arrears mentioned in the declaration in respect of which the order is passed by the DA or the payment of sum determined by the DA.
On intimation of payment to the DA by the appellant pertaining to department appeal/writ/SLP, the department shall withdraw such appeal/writ/SLP
The declaration will be null and void if the tax payment was not made under any circumstances, once declaration is filed under VVD.

CONSEQUENCES

Immunity from prosecution
Waive of interest & penalty
Result of VVD is not applied to the same issues pending before AO or subsequent assessments.
Secondary adjustments u/s 92CE is applicable. But if there is any primary adjustments for AY 2016-17 or earlier AY, It is not subject to secondary adjustments u/s 92CE of the act.
Where dispute in relation to the reduction of MAT credit/reduction of loss or depreciation, the appellant shall have an option –
Include the amount of tax related to such MAT credit or loss or depreciation; (or)
To carry forward the reduced credit or loss or depreciation.
CBDT will prescribe the manner of calculation in these cases.

Disclaimer:

The views in this VVD presentation are personal views of the Presenter. Further, the information contained is of a general nature for explaining the topics and issues. The VVD presentation is not intended to serve as an advice or address the circumstances of any particular individual or entity. No one should act on such / this information without appropriate professional advice which is possible only after a thorough examination of facts / particular situation.