The Direct Tax Vivad Se Vishwas Act, 2020: CBDT Circular No. 21 Of 2020 – Better Late Than Never

Advocate Shashi Bekal has appreciated the efforts of the CBDT in issuing Circular No. 21 of 2020 and clarifying the several doubts that tax professionals and taxpayers had with regard to The Direct Tax Vivad Se Vishwas Act, 2020. The ld. author has explained the salient points of the Circular in a succinct manner. He has suggested that the CBDT may consider appointing a Centralised Nodal Officer in each city to speedily resolve any incremental difficulties that may arise

1. Introduction

The Vivad se Vishwas (VSV) Scheme was announced by Union Finance Minister Nirmala Sitharaman during her budget speech on February 1, 2020 (2020) 420 ITR 115 (st) (146). This has been introduced as a way to reduce the pendency of litigation under the Income tax Act, 1961 (Act) with a golden shake hand.

Pursuant to that, the administration has come out with amendments & circulars with a view to provide clarification, extend the Scheme, remove any difficulty caused to the assessee etc.

The important dates under The Direct tax Vivas Se Vishwas Act, 2020 (VSVA) are as under:

2. CBDT Circular No. 18 of 2020 dated December 04, 2020

Section 10 & 11 of VSVA empowers CBDT and the Central Government to issue directions or orders in public interest or to remove difficulties. CBDT had issued such a Circular No. 9 of 2020 dated April 22, 2020wherein 55 Questions were addressed.

In furtherance to the abovementioned Circular, CBDT vide Circular No. 18 of 2020 dated December 04, 2020 has issued further clarifications by answering 34 questions i.e. Question No. 56 to 89.

Some of the salient features are as under:

► It addresses an issue where a matter being disposed after January 31, 2020 but before filing of Declaration under the Scheme; and allows the same. This should pertain to an issue in which the matter is heard before January 31, 2020 and the Order is pronounced after the specified date. An instance where the matter is contested after the specified date should be expressly excluded from VSVA. This ambiguity still exists. [FAQ No. 56]

► The issue of condonation of delay, where a condonation of delay would amount to good filing has been settled. However, tax professionals have been advising taxpayers on the basis of an unreported judgement of the Hon’ble Bombay High Court in the case of Awantika Pratap Singh Morarji v Ashwin Kumar (CIT) WP No 1691 of 2005 dt 9-07 -2014 dealing with KVSS honourable High Court has directed the designated authority to grant the benefit of the scheme, when the delay was condoned by the Appellate Tribunal. [FAQ No. 59]

► With respect to Miscellaneous Applications under section 254 of the Act and Cross-objects, it has been clarified that they would be covered under VSVA.[FAQ No. 60 & 61]

► Proceedings before the Settlement Commissioner or a Writ Petition against an order of the Settlement Commissioner has been excluded from the purview of VSVA. [FAQ No. 63]

► An Order under section 143(3) or 144 of the Act based on the search executed in some other taxpayer’s case would be considered to be a search case. [FAQ No. 70]

► If prosecution is launched for a specific assessment year, the assessee is barred from availing VSVA for issues other than the issue on which prosecution has been launched for that specific year.[FAQ No. 73]

► It has been specified that Enhancement notice issued by CIT(A) after January 31, 2020 but before the date of issue of this circular shall be required to be taken into account for determining amount payable under VSVA. However, the enhancement notice issued on or after the date of this circular but on or before December 31, 2020 shall not be taken into account for determining amount payable under VSVA. On plain reading, it appears that the assessee does not even get an opportunity to contest the Notice on metrist and have to accept the same if he wishes to avail VSVA. The specified date loses its sanctity and also a beneficial legislation has been harshly interpreted in the disinterest of the beneficiaries. This is not in accordance with the principles of fair-play & justice. [FAQ No. 76]

► Penalty imposed under section 271B, 271BA, 271DA of the Act are not waived under VSVA. [FAQ No. 80]

► With respect to accounting treatment for addition under section 68 of the Act. It has been clarified that VSVA is not an Amnesty Scheme, it only provides an option to settle appeals on contentious issues that are neither accepted by the Department nor the assessee. Therefore, the assessee cannot make entries in his books by crediting the said loan in his capital account. [FAQ No. 81]

► A declaration made under VSVA can be revised any number of times before the DA before the issuance of the certificate. [FAQ No. 89]

3. Dénouement

Several assesees are still facing difficulties while filing the Form and filing the declaration. It is desirable that one centralised nodal officer may be appointed each city so that the difficulties faced by the tax consultants and asssessee can be clarified at the earliest.

Albeit, the CBDT Circular has been issued within less than a month from the last day for the declaration under VSVA. It does provide clarity on several ambiguous issues. However, even during these uncertain times of COVID-19, the Administration has time and again issued several clarifications and extensions to ensure the success of the Scheme. The work of the Administration deserves to be appreciated.

This administration had also issued the Sabka Vishwas – (Legacy Dispute Resolution) Scheme, 2019 and Companies Fresh Start Scheme, 2020. Under these Schemes too the administration has tirelessly issued clarifications and extensions to ensure its success. It shows the Administration’s intention of starting a fresh relationship with businesses and tax payers. Forgiving and setting all pending disputes with a view to build a fresh and healthy relationship which will build this Country’s economy