TMI BlogClarification on provisions of the Direct Tax Vivad se Vishwas Act, 2020X X X X Extracts X X X X X X X X Extracts X X X X ..... ese queries and had decided to clarify the same in form of answers to frequently asked questions (FAQs) vide circular no 7 of 2020 dated 4th March 2020 . These clarifications were, however, subject to approval and passing of the bill by the Parliament and receiving assent of the Hon ble President of India. 3. The Bill has since been passed by the Parliament and has also received the assent of the Hon ble President of India and has now been enacted as The Direct Tax Vivad Se Vishwas Act, 2020 ( Vivad se Vishwas ). The objective of Vivad se Vishwas is to inter ailia reduce pending income tax litigation, generate timely revenue for the Government and benefit taxpayers by providing them peace of mind, certainty and savings on account of time and resources that would otherwise be spent on the long-drawn and vexatious litigation process. 4. 55 questions contained in circular no 7 of 2020 are reissued under this circular with following modifications (i) Vivad se Vishwas referred to Direct Tax Vivad se Vishwas Bill, 2020 in circular no 7 . However, in this circular it refers to The Direct Tax Vivad Se Vishwas Act, 2020 ; (ii) Since clauses of the Bill have no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act is pending before the Principal Commissioner or Commissioner are covered as well. Further, where a declarant has initiated any proceeding or given any notice for arbitration, conciliation or mediation as referred to in section 4 of the Bill is also covered. Question No. Answer: 2 If there is no appeal pending but the case is pending in arbitration, will the taxpayer he eligible to apply under Vivad se Vishwas? If yes what will he the disputed tax? An assessee whose case is pending in arbitration is eligible to apply for settlement under Vivad se Vishwas even if no appeal is pending. In such case assessee should fill the relevant details applicable in his case in the declaration form. The disputed tax in this case would be the tax (including surcharge and cess) on the disputed income with reference to which the arbitration has been filed. Question No. Answer: 3 Whether Vivad se Vishwas can he availed for proceedings pending before Authority of Advance Ruling (AAR)? If a writ is pending against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs relate to an assessment made under section 143(3) or section 144 or section I53A or section 153C of the Act on the basis of search initiated under section 132 or section 132A of the Act are excluded if the amount of disputed tax exceeds five crore rupees in that assessment year. Thus, if there are 7 assessments of an assessee relating to search seizure, out of which in 4 assessments, disputed tax is five crore rupees or less in each year and in remaining 3 assessments, disputed tax is more than five crore rupees in each year, declaration can be filed for 4 assessments where disputed tax is five crore rupees or less in each year. Question No. Answer: 7 If assessment has been set aside for giving proper opportunity to an assessee on the additions carried out by the AO. Can lie avail the Vivad se Vishwas with respect to such additions? If an appellate authority has set aside an order (except where assessment is cancelled with a direction that assessment is to be framed de novo) to the file of the AO for giving proper opportunity or to carry out fresh examination of the issue with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons 234E or 234F of the Act, the appellant would be eligible to file declaration for disputed fee and amount payable under Vivad se Vishwas shall be 25% or 30% of the disputed fee, as the case may be. If the fee imposed wider section 234E or 234F pertains to a year in which there is disputed tax, the settlement of disputed tax will not settle the disputed fee. If assessee wants to settle disputed fee, he will need to settle it separately by paying 25% or 30% of the disputed fee, as the case may be. Question No. Answer: 11. In case where disputed tax contains qualifying tax arrears as also non-qualifying tax arrears (such as, tax arrears relating to assessment made in respect of undisclosed foreign income): (i) Whether assessee is eligible to the Vivad se Vishwas itself? (ii) If eligible, whether quantification of disputed tax can exclude/ignore non-qualifying tax arrears? If the tax arrears include tax on issues that are excluded from the Vivad se Vishwas, such cases are not eligible to File declaration under Vivad se Vish ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Are cases pending before DRP covered? What if the assessee has not filed objections with DRP and the AO has not yet passed the final order? Yes, a person who has filed his objections before the DRP under section 144C of the Act and the DRP has not issued any direction on or before the specified date as well as a person in whose case the DRP has issued directions but the AO has not passed the final assessment order on or before the specified date, is eligible under Vivad se Vishwas. It is further clarified that there could be a situation where the AO has passed a draft assessment order before the specified date. Assessee decides not to file objection with the DRP and is waiting for final order to be passed by the AO against which he can file appeal with Commissioner (Appeals). In this situation even if the final assessment order is not passed on or before the specified date, the assessee would be considered as the appellant and would be eligible to settle his dispute under Vivad se Vishwas. Disputed tax in such case would be computed based on the draft order. In the declaration in Form No 1, the declarant in this situation should indicate in the appro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Vishwas in case of disputed penalty/interest/fee are similar to terms in ease of disputed tax. Thus, if the time to file appeal has not expired as on specified date, the appellant is eligible to avail benefit of Vivad se Vishwas. In this case the declarant should indicate in the declaration Form No 1, in the appropriate schedule, that time limit to file appeal in ITAT has not expired. Question No. Answer: 21 In a case ITAT has quashed the assessment order based on lack of jurisdiction by the AO. The department has filed an appeal in HC which is pending. Is the assessee eligible to settle this dispute under Vivad se Vishwas and if yes how disputed tax be calculated as there is no assessment order? The assessee in this case is eligible to settle the department appeal in HC. The amount payable shall be calculated at half rate of 100%, 110%, 125% or 135%, as the case may be, on the disputed tax that would be restored if the department was to win the appeal in HC Question No. Answer: 22 In the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Appeals). The tax on returned income (including surcharge and cess) comes to ₹ 30,000 and interest under section 234B of ₹ 1,000. Assessee has paid this amount of ₹ 31,000 at the time of filing his tax return. During assessment an addition is made and additional demand of ₹ 16,000 has been raised, which comprises of disputed tax (including surcharge and cess) of ₹ 10,000 and interest on such disputed tax of ₹ 6000. Penalty has been initiated separately. Assessee has paid the demand of ₹ 14,000 during pendency of appeal; however interest under section 220 of the Act is yet to be calculated. Assessee files a declaration, which is accepted and certificate is issued by the designated authority (DA). The disputed tax of ₹ 10,000 (at 100%) is to be paid on or before 31 st March 2020. Since he has already paid ₹ 14,000, he would be entitled to refund of ₹ 4,000 (without section 244A interest). Further, the interest leviable under section 220 and penalty leviable shall also be waived. Question No. Answer: 27. Refer to question no 7. Ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0% of the disputed tax (135% in search cases) where dispute relates to disputed tax (excess amount over 100% limited to the amount of interest and penalty), or (ii) 30% of the disputed penalty, interest or fee in case of dispute related to disputed penalty, interest or fee only. However, if in an appeal before Commissioner (Appeals) or in objections pending before DRP, there is an issue on which the appellant has got favourable decision from ITAT (not reversed by HC or SC) or from the High Court (not reversed by SC) in earlier years then the amount payable shall be half or 50% of above amount. Similarly, if in an appeal before ITAT, there is an issue on which the appellant has got favourable decision from the High Court (not reversed by SC) in earlier years then the amount payable shall be half or 50% of above amount. B. In appeals /writ / SLP filed by the Department ‑ (a) In case payment is made till 31 March, 2020‑ (i) 50% of the disputed tax (62.5% in search cases) in ease of dispute related to disputed tax or (ii) 12.5% of the disputed penalty, interest or fee in case of dispute related to disputed penalty, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or disallowance under section 40(a)(i)/(ia) of the Act. The disallowance under section 40 is with respect to same issue on which order under section 201 has been issued. If the dispute is settled with respect to order under section 201, assessee will not be required to pay any tax on the issue relating to disallowance under section 40(a)(i)I(ia) of the Act, in accordance with the provision of section 40(a)(i)/(ia) of the Act. In case, in the order under section 143(3) there are other issues as well, and the appellant wants to settle the dispute with respect to order under section 143(3) as well, then the disallowance under section 40(a)(i)/(ia) of the Act relating to the issue on which he has already settled liability under section 201 would be ignored for calculating disputed tax. If the assessee has challenged the order under section 201 on merits and has won in the Supreme Court or the order of any appellate authority below Supreme Court on this issue in favour of the assessee has not been challenged by the Department on merit (not because appeal was not filed on account of monetary limit for filing of appeal as per applicable CI3DT circular), then in a case wher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a case how disputed tax to be calculated? Please see question no. 8. Further, it is clarified that if the appellant has both appeal against assessment order and appeal against penalty relating to same assessment pending for the same assessment year, and he wishes to settle the appeal against assessment order (with penalty appeal automatically covered), he is required to indicate both appeals in one declaration form (Form No 1) for that year. Question No. Answer: 35. If there is substantive addition as well as protective addition in the case of same assessee for different assessment year, how will that be covered? Similarly if there is substantive addition in case of one assessee and protective addition on same issue in the case of another assessee, how will that be covered under Vivad se Vishwas? If the substantive addition is eligible to be covered under Vivad se Vishwas, then on settlement of dispute related to substantive addition AO shall pass rectification order deleting the protective addition relating to the same issue in the case of the assessee or in the case of anothe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... additions in the draft order and the AO has passed the order accordingly. The issues confirmed by DRP include an issue on which the taxpayer has got favourable order from ITAT (not reversed by ITC or SC) in an earlier year. The time limit to . file appeal in ITAT is still available. The taxpayer is eligible for Vivad se Vishwas treating the situation as taxpayer s deemed appeal in ITAT. In this case how will disputed tax be calculated? Will it be 100% on the issue allowed by ITAT in earlier years or 50%? In this case, on the issue where the taxpayer has got relief from ITAT in an earlier year (not reversed by HC or SC) the disputed tax shall be computed at half of normal rate of 100%, 110%, 125% or 135%, as the case may be. Question No. Answer: 40. Where there are two appeals filed for an assessment year- one by the appellant and one by the tax department, whether the appellant can opt for only one appeal? If yes, how would the disputed tax he computed? The appellant has an option to opt to settle appeal filed by it or appeal filed by the department or both. De ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mination of amount payable, then whether the appeals are automatically reinstated or a separate application needs to be .filed for reinstating the appeal before the appellate authorities Under the amended procedure no appeal is required to be withdrawn before the grant of certificate by DA. After the grant of certificate by DA under section 5, the appellant is required to withdraw appeal or writ or special leave petition pending before the appellant forum and submit proof of withdrawal with intimation of payment to the DA as per the same section. Where asscssee has made request for withdrawal and such request is under process, proof of request made shall be enclosed. Similarly in case of arbitration, conciliation or mediation, proof of withdrawal of arbitration/conciliation/mediation is to be enclosed along with intimation of payment to the DA. Question No. Answer: 44. Se ction 5(2) requires declarant to pay amount determined by DA within 15 days of receipt of certificate from DA. Clarification is required on whether declarant is to also intimate DA about fact of having made payment pursuant t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... swer: 50 Where the demand in case of an assessee has been reduced partly or fully by giving appeal effect to the order of appellate forum, how would the amount payable under Vivad se Vishwas he adjusted? In such cases, after getting the proof of payment of the amount payable under Vivad se Vishwas, the AO shall pass order under section 154 of the Act read with the relevant provisions of Vivad se Vishwas to create demand in case of assessee against which the amount payable shall he adjusted. QUES TIO NS R ELATE D TO CO NSEQUENCES (Q. No. 51- 55) Question No. Answer: 51 Will there be immunity from prosecution? Yes, section 6 provides for immunity from prosecution to a declarant in relation to a tax arrears for which declaration is filed under Vivad se Vishwas and in whose case an order is passed by the DA that the amount payable under Vivad se Vishwas has been paid by the declarant. Question No. Answer: 52 Will the result of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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