Advocate Shashi Bekal has conducted a review of the Vivad se Vishwas Bill and its latest amendments. He has explained the precise scope of the Bill and the amendments. He has opined that while the amendments does improve the situation and removes a lot of uncertainty in the minds of taxpayers, there is still room for improvement. He has offered suggestions in that behalf
The Direct tax Vivad se Vishwas Bill, 2020 (‘Scheme’) (2020) 420 ITR 146 (St) Para 126,was incepted at para 126 of the 2020 Budget Speech. The name of the scheme literally means, from litigation to faith, thereby expressing the intentions of the current administration to amicably settle disputes pending before any forum and improve the faith of the people in the Nation.
Although the scheme was unanimously welcomed by tax practitioners and tax payers, the provisions of the Scheme required much clarity for its successful implementation. After several consideration and representation from various tax professionals and professional organisations, amendments are introduced to the Scheme, which is welcome move; However, minor lacuna still exists and the same has not yet been addressed.
Twelve amendments have been brought in form a table. Therefore, for the sake of convenience, comments are provided serial number wise. Comments are as under:
1. Widening the definition of “appellant” [ Clause 2 (1) (a) ]
The erstwhile definition of an “appellant” envisaged under section 2 (1) (a) of the Scheme, was a three-line definition, restricting the scope of the tax payers who would be eligible to avail the benefit under the scheme. The erstwhile definition required an appeal to be pending as on January 31, 2020 to apply under the Scheme.
The new definition brought in vide the amendment has provided a much-required relief to the tax payers/assessee, it has firstly, expresslyincluded Writ Petitions and SLPs, cross-objections and cross-appeals. Secondly, it has included cases where an order by an Assessing Officer (‘AO’) has been passed and the statutory period for filing an appeal under the provisions of the Income tax Act, 1961(‘Act’) has not been exhausted. Thirdly, it has extended its definition to include matters the assessee has filed its objections before the Dispute Resolution Panel (‘DRP’) and also, instances where directions have been issued by the DRP & the Ld. AO has not passed an order. Fourthly, revisionary matters pending under section 264 of the Act has also been included.
Matters where appeals were filed before January 31, 2020; however, on account of a delay in filing of the appeal as per the respective statutory provisions and the application for condonation of delay is filed along with the appeal and the same has not been disposed of.
2. Widening the definition of “dispute tax” [ Clause 2(1)(j)]
With a view to eliminate the confusion arising out of the complex formula provided under the erstwhile section 2 (1) (j) (i) of the Scheme which was similar to the formula provided under Form 36, the amendment has omitted the formula and provided a much simpler method of computation.
In consonance with the new definition of “appellant” brought in vide the amendment, in order to eliminate any consistency within the provisions of the Scheme, the definition of “disputed tax” envisaged under section 2 (1) (j) of the Scheme is also widened to include tax that is payable according an appeal, Writ Petition, Special leave petition, draft AO order, directions of the DRP.
Further, it has included matters where the Commissioner (Appeals) have issued a notice of enhancement under section 251 of the Act, but the disputed tax amount will be increased by the amount of tax pertaining to the issues for which the notice of enhancement has been issued.
Further, the amended under this section of the scheme includes disputes in an assessment year related to section 115 JAA,section 115D of the Act, any loss or depreciation.
3. Omission of TDS and TCS proceedings .[ Clause 2(1)(j)(ii) ]
The erstwhile definition of “tax disputes” envisaged under section 2 (1) (j) of the Scheme had under section 2 (1) (j) (ii) of the Scheme, included proceedings wherein tax is determined under section 200A, section 201 or section 206C(6A) or section 206CB of the Act wherein appeal has been filed by the assessee. The amendment has omitted section 2 (1) (j) (ii) of the Scheme.
4. Inclusion of search and seizure matter [ Clause 3 ]
Under the erstwhile provisions of section 9 (a)(1) of the Scheme, the Scheme would not apply to assessments made under section 153A or section 153C of the Act. This is a amendment allows matters where assessments under search and seizure to avail the benefit of the Scheme.
With this welcoming amendment, as a large number of ‘penny stock’ cases were as a result of assessments under section 153C of the Act. This inclusion was imperative with respect to the successful implementation of the Scheme.
According to the amendment, assesses have to pay an aggregate on disputed tax and 25 % of the disputed tax, provided where the 25 % of the disputed tax exceeds the aggregate of interest chargeable or charged and penalty leviable or levied, the excess shall be ignored for the purpose of computation of amount payable under the Scheme. For the period post the cut-off date as per the Scheme i.e. March 31, 2020, the amount of 25% will be increased to 35%.
5. Clarification on Departmental appeals and covered matters[ Clause 3 ]
Vide this amendment the Government has clarified the amount payable by a declarant/ assessee in peculiar cases as the same was a matter of confusion before the amendment. The amendment made by way of insertions are as follows:
a. In case where an appeal or writ petition or SLP is filed by the Income tax Department, the amount payable shall be one half of the amount as payable under the Scheme.
b. In case of a matter before an authority, and the assessee has a favourable order on the same issue from a higher authority, and the decision is not reversed by any order of an even higher authority on the same issue. The amount payable shall be one half of the amount as payable under the Scheme.
6. Filing of declaration. [ Clause 4 (2) & (3) ]
There existed a slight inconsistency between the erstwhile provisions of Section 4 (2) and section 4(3) of the Scheme. The erstwhile section 4 (3) of the Scheme contained the term ‘appellate forum’ which is defined under section 2(1) (b) of the Scheme and includes the Ld. CIT(A) and Hon’ble ITAT and required the assessee to seek leave of the Court to withdraw the appeal along with a declaration. On the other hand, Section 4(2) confers a deeming provision with respect to the withdrawal of the appeal before the CIT(A) and Hon’ble ITAT.
The amendment although pertains to the procedural technicalities of the Scheme, and removes these inconsistencies. The same is welcoming as it removes any doubt that might arise in the mind of the assessee.
7. Clarification to protect the interest of the assessee [ Clause 5 ]
One of the recurring doubts in the minds of tax practitioners and assessee was if in case of a year on year issue which is debatable and on that basis the case is selected for scrutiny. Merely because the assessee has chosen to avail the scheme to buy peace of mind, would the same amount to admission on the part of the assessee.
Clarification has been brought in vide amendment by way of insertion of explanation to section 5 of the Scheme which explains that making a declaration under this Act shall not amount to conceding the tax position and it shall be unlawful to contend that the assessee or the department has acquiesced in the decision on the disputed issue by settling the dispute.
8. Refund[ Clause 7 ]
There existed much confusion as to in a case where an assessee has paid its tax arrears as per the Notice of demand i.e. along with interest and has preferred an appeal against the impugned order. If he chooses to avail the benefit of the Scheme would he be entitled to receive a refund on the excess payment.
This amendment by way of explanation to section 7 of the Scheme, stands to clarify that where the assessee had already paid the any amount under the Act in respect of his arrears which exceeds the amount payable under the Scheme, he shall be entitled to a refund of such excess amount, but shall not be entitled to interest on such excess amount.
9. Bar for high stake search & seizure matters [ Clause 9 (a) (1) ]
The initial Scheme did not entertain matters arising out of search and seizure as the same were contained under Section 9 of the Scheme i.e. cases where the provisions of this Scheme shall not apply to. Although vide the amendment, it has allowed such assessments to avail the benefit of the Scheme, it has set a monetary threshold of Rupees 5 Crore per assessment year vide an amendment by way of substitution of Section 9 (a) (1) of the Scheme. Now, where in an assessment year, assessment is made on the basis of a search, the amount of disputed tax cannot exceed Rupees 5 Crore in order to be eligible for the Scheme.
10. Omission of matters where enhancement notice has been issued by the Commissioner (Appeals) [ Clause 9 (a) (v) ]
To ensure consistency with the amendment proposed in the definition of “disputed tax”; wherein vide the amendment the definition of “disputed tax” envisaged under 2 (1) (f) is widened to include cases where the Commissioner Appeals has issued a notice of enhancement under section 251 of the Act.
Therefore, Section 9 (a) (v) of the Scheme i.e. the non-applicability of the scheme to matters where anotice of enhancement under section 251 of Act has been issued, stands removed.
11. Further clarification on non-applicability of the Scheme [ Clause 9 (c)& (ca) ]
A plain reading of the erstwhile section 9 (c) of the Scheme, it could be interpreted that any person against whom a suit for enforcement of a civil liability has been initiated or has been convicted for any offence punishable under the Indian Penal Code would not be eligible for the Scheme.
For the purpose of not rendering the Scheme impossible, certain changes have been brought into section 9 (c) of the Scheme wherein any case of enforcement of a civil liability, has been removed, and further introduced section 9 (ca) of the Scheme to restrict the coverage of the Indian Penal Code vis-à-vis the Income tax Act, 1961.
12. Matters pertaining to tax credit, loss, depreciation etc. [ Clause 12 (da) & (db) ]
To ensure consistency with the amendment proposed in the definition of “disputed tax” under section 2 (1) (j) of the Scheme, this amendment is made by way of insertion to Section 12 of the Schemei.e. empowering the Central Government, by notification in the Official Gazette, to make rules for carrying out the provisions of this Scheme.
All the above amendments are welcoming and they more or less cover most of the issues and needed clarification. Some of the issues that still exist are of condonation of delay i.e. Matters where appeals were filed before January 31, 2020. however, on account of a delay in filing of the appeal as per the respective statutory provisions and the application for condonation of delay is filed along with the appeal and the same has not been disposed of.
Further, matters arising of revision under section 263 of the Act has not been covered. Also, there requires more clarity on matters that are remanded by the Tribunal to the Ld. AO or Commissioner (Appeals) or both.
Further, clarification is awaited on computation of tax payable in matters arising out of departmental writ petitions emanating from settlement proceedings.
The Scheme is of vital importance as it serves a dual purpose, it will not only reduce the pendency of litigation and win the faith of the tax payers but also provide the Government with much needed funds. One can expect further clarifications from the Government with respect to computation inter alia in the next few weeks. If implemented and executed correctly, the Government can kill two birds with one stone.
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