THE DIRECT TAX VIVAD SE VISHWAS BILL, 2020 – AN OVERVIEW

[Mr. M. GOVINDARAJAN]

Introduction

In the last year the Central Government has brought Sabka Vishwas Scheme to reduce litigation in indirect taxes. It resulted in settling over 1,89,000  cases.  Now the Government wants to extend the said scheme to direct tax also.  The Finance Minister in her budget speech informed that currently, there are 4,83,000 direct tax cases pending in various appellate forums i.e. Commissioner (Appeals), ITAT, High Court and Supreme Court. She proposed to bring a scheme similar to the indirect tax SabkaVishwas for reducing litigations even in the direct taxes. 

Proposal for the scheme

Under the proposed ‘Vivad Se Vishwas’ scheme, a taxpayer would be required to pay only the amount of the disputed taxes and will get complete waiver of interest and penalty provided he pays by 31^st March, 2020.  Those who avail this scheme after 31^st March, 2020 will have to pay some additional amount. The scheme will remain open till 30^th June, 2020.  Taxpayers in whose cases appeals are pending at any level can benefit from this scheme.  Under the scheme, taxpayer would be required to pay only the amount of the disputed taxes and there will be complete waiver of interest and penalty provided they make payment by 31^st March, 2020. For disputed penalty, interest and fee not connected with the disputed tax, the taxpayer would be required to pay only 25% of the same for settling the dispute. A tax payer shall be required to pay 110% of the disputed tax (the excess 10% shall be limited to the amount of related penalty and interest, if any) and 30% of penalty, interest and fee in case of payment after 31^st March, 2020.

Bill

For the said purpose the Central Government introduced a Bill called as ‘The Direct Tax Vivad Se Vishwas Bill, 2020’,  (‘Bill’ for short) in the Lok Sabha on 05.02.2020,

Definitions

Disputed income

Clause 2(1)(g) of the Bill defines the expression ‘disputed income’  in relation to an assessment year as the whole or so much of the total income as is reasonable to the disputed tax.

Disputed tax

Clause 2(1)(j) defines the expression ‘disputed tax’ in relation to an assessment year as-

• the tax determined under the Income Tax Act, 1961 (‘Act’ for short)  in accordance with the following formula-

(A – B) + (C – D) where

A = an amount of tax on the total income assessed as per the provisions of the Act other   than provisions contained in section 115JB or section 115JC of the Act (general provisions);

B = an amount of tax that would have been chargeable had the total income assessed  as per the general provisions been reduced by the amount of income in respect of which the appellant has been filed by the appellant;

C = an amount of tax on the total income assessed as per the provisions contained in section 115JB or section 115JC of the Act;

D = an amount of tax that would have been chargeable had the total income assessed as  per the provisions contained in section 115JB or section 115JC of the Act been reduced by the amount of income in respect of which appeal has been filed  by the appellant.

Where the amount of income in respect of which appeal has been filed by the appellant is considered under the provisions contained in section 115JB or section115JC of the Act and under general provisions, such amount shall not be reduced from total income assessed while determining the amount under  item D.

In case where the provisions contained in Section 115JB or Section 115JC of the Act  are not applicable, the item (C – D) formula shall be ignored.

In case, where the amount of income, in respect of which appeal has been filed by the appellant has the effect of reducing the loss declared in the return or converting that loss into income, the amount of disputed tax shall be determined in accordance with the formula specified above with the modification that the amount to be determined  for item (A – B) in that formula shall be the amount of tax that would have been chargeable on the Income in respect of which appeal has been filed by the appellant had such income been the total income.

• The tax determined under section 200A or section  201 or sub-section (6A) of section  206C or section 206CB of the Act in respect of which appeal has been filed by the applicant.

Disputed interest

Clause 2(1)(h) of the bill defines the expression ‘disputed interest’ as the interest determined in any case under the provisions of the Act, where-

• such interest is not charged  or chargeable on disputed tax;
• an appeal has been filed by the appellant in respect of such interest.

Disputed penalty

Clause 2(1)(i) defines the expression ‘disputed penalty’ as the penalty determined in any case under the Act, where-

• such penalty is not levied or leviable in respect of disputed income or disputed tax, as the case may be;
• an appeal has been filed by the appellant in respect of such penalty.

Tax arrear

Clause 2(1)(o) of the Bill defines the expression ‘tax arrear’ as-

• the aggregate amount of disputed tax, interest chargeable or charged on such disputed tax  and penalty leviable or levied in such disputed tax; or
• disputed interest; or
• disputed penalty; or
• disputed fee.

Applicability

• Applicable to all appeals filed by the tax payer or the Government, which are pending with the Commissioner (Appeals), Income Tax Appellate Tribunal, High Court or  Supreme Court as on 31.01.2020;
• The pending appeal may be against the disputed tax, interest or penalty in relation to an assessment or re-assessment order or against disputed interest, disputed fees where there is no disputed tax.
• The appeal may be against the tax determined on default in respect of  TDS or TCS.

Non applicability

Clause 9 of the Bill describes the categories for which the provisions of this Bill shall not be applicable.  The provisions of this Bill shall not be applicable-

• in respect of tax arrear-

• relating to an assessment year in respect of which an assessment has been made under section 153A or section 153C of the Act, if it relates to any tax matter;
• relating to an assessment year in respect of which prosecution has been launched on or before the date of filing the declaration;
• relating to any undisclosed income from a source located outside India or undisclosed asset outside India;
• relating to an assessment or re-assessment made on the basis of information received under an agreement  referred to in section 90 or 90A of the Act, if it relates to any tax arrear;
• relating to an appeal before the Commissioner (Appeals) in respect of which notice of enhancement under section 251 of the Act has been issued on or before the specified date.

• to any person in respect of whom an order of detention has been made under the provisions of Conservation of Foreign Exchange and Preservation of Smuggling Activities, 1974 on or before the filing of the declaration.

• Provided that such order of detention-

• being an order to which the provisions of section 9 or section 12A of the said Act do not apply, has not been revoked on the report of the Advisory Board under section 8 of the said Act on or before the receipt of the report of Advisory Board; or
• being an order to which the provisions of section 9 of the said Act shall apply, has not been revoked before the expiry of time for, or on the basis of, the review under section 9(3), or on the report of the Advisory Board under section 8 read with section 9(2) of the said Act; or
• being an order to which the provisions of section 12A of the said Act shall apply, has not been revoked before the expiry of the time for, or on the basis of, the review under sub (3) of that section, or on the report of the Advisory Board under section 8 read with section 12A of the said Act;
• has not been set aside by a Court of competent jurisdiction.

• to any person in respect of whom prosecution for any offence punishable  under the provisions of-

• the Indian Penal Code;
• the Unlawful Activities (Prevention) Act, 1967;
• the Narcotic Drugs and Psychotropic Substances Act, 1985;
• the Prevention of Corruption Act, 1988;
• the Prevention of Money Laundering Act, 2002;
• the Prohibition of Benami Property Transactions Act, 1988; or

for the purpose of enforcement of any civil liability has been instituted on or before the filing of the declaration or such person has been convicted of any such offence  punishable under any of those Acts.

• to any person notified under section 3 of the Special Court (Trial of the offences Relating to Transactions in Securities) Act, 1992 on or before filing the declaration.

Amount payable by the declarant

The amount payable by the declarant shall be as follows-

• In appeal related to disputed tax, the declarant shall only pay the whole of the disputed tax  if the payment is made before 31.03.2020 and the payments made after 31.03.2020 but on or before the date notified by the Central Government, the amount shall be payable shall be increased by 10% of the disputed tax.
• In appeals related to dispute penalty, disputed interest or disputed fee, the amount payable by the declarant shall be 25% of the disputed penalty, disputed interest or dispute fee as the case may be, if the payment is made on or before 31.03.2020.
• If the payment is made after 31.03.2020 but on or before the date notified by the Central Government, the amount payable shall be increased to 30% of the disputed penalty, disputed interest or disputed fee, as the case may be.

Filing of declaration

The declarant shall file declaration before the Designated Authority in such form and verified in such manner as may be prescribed.

Withdrawal of appeal

On receipt of the declaration by the declarant the appeal pending before the Income Tax Appellate Tribunal or the Commissioner (Appeals) in respect of such disputed income or disputed tax or disputed interest or disputed penalty or disputed fee shall be deemed to be withdrawn from the date on which the certificate is issued by the Designated Authority.

Where the declarant has filed any appeal before the Appellate forum or any writ petition before the High Court or the Supreme Court against any order in respect of the tax arrear he shall withdraw such appeal or writ petition with the leave of the Court wherever required.  He shall file proof of such withdrawal along with the declaration.

Where the declarant has initiated any proceeding for arbitration, conciliation or mediation or has given any notice thereof under any law for the time being in force or under any agreement entered into by India with any other country or territory outside India whether for protection of investment or otherwise he shall withdraw the claim, if any, in such proceedings or notice prior to making the declaration and furnish proof thereof along with the declaration.

Presumption as to non declaration

The declaration shall be presumed never to have been made if-

• any material particulars furnished in the declaration is found to be false at any stage;
• the declarant violates any of the conditions of the Act;
• the declarant acts in any manner which is not in accordance with the undertaken given by him.

Procedure

• The Designated Authority shall determine the amount payable by the declarant within a period of 15 days from the date of receipt of the declaration.
• The Designated Authority shall issue a certificate to the declarant containing particulars of the tax arrear and the amount payable after such declaration.
• The declarant shall pay the determined amount within 15 days from the date of receipt of the certificate issued by the Designated Authority.
• The declarant shall inform the Designated Authority about the payment made by him in such form prescribed.
• The Designated Authority shall pass an order that the declarant has paid the amount.
• The order issued by the Designated Authority shall be conclusive evidence.
• The case will not be re-opened by the Revenue under any of the provisions of the Act or under any other law for the time being in force.
• The Designated Authority shall not initiate any proceedings in respect of an offence or impose or levy any penalty or interest in respect of that tax arrears.
• No appellate forum or arbitrator, conciliator or mediator shall proceed to decide any issue relating to the tax arrear mentioned in the declaration in respect of which an order has been passed by the Designated Authority.

Refund

Any amount paid by the declarant in pursuance of the declaration made by him shall not be refundable under any circumstances.