Clause(iv) of s.9(a) prohibits an assessee to file a declaration for settlement of a dispute in relation to an assessment made on the basis of information received form a foreign government as per the agreement made u/s 90 and 90A of the Act. Admittedly, the addition was made on the basis of the information received form a foreign government and therefore the assessee would not be entitled to file a declaration under the scheme leading to a withdrawal of appeal by the Income tax Department on payment of 50% of the disputed tax.  The Government has not much to loose to permit the settlement of a case which it has already lost and in the process be enriched. 

There is a doubt that the assessee qualifies to file a declaration u/s 4 under the scheme for settlement of the disputed tax which has arisen on account of an assessment under the Income tax Act in relation to an undisclosed asset located outside India. Ordinarily, such an  addition should have been made under the BMA and not under the ITA and surely not under both the Acts. The doubt has arisen on account of the language of the provision which provides for blanket prohibition  for assessments involving undisclosed foreign assets irrespective of  the parallel assessment made under the BMA. What however is not possible but is desirable to avoid double taxation is the consequential withdrawal of the assessment made under BMA and the deletion of the addition made therein in cases where an assessee succeeds in settling his dispute under ITA under the scheme .

This is yet another case of an unintended hardship which is more pronounced in cases where the assessee has opted for settlement under the scheme. The scheme does not provide for any consequential relief in an assessment year different than the year of settlement even where such relief  is consequential and denial of such relief results in a sure double taxation. Had assessee not withdrawn the appeal, he could have appealed to the appellate authorities to give consequential relief  under their powers to avoid double taxation. Unless the Government clarifies its position in such cases , it would not be possible to advise an assessee to opt for the scheme especially where the time for filing the revised return of income is over.    

This is an unintended hardship which is more pronounced in cases where the assessee has opted for settlement under the scheme  which does not provide for any consequential relief in an assessment year different than the year of settlement even where such relief  is consequential and denial of such relief results in a sure double taxation. Had assessee not withdrawn the appeal, he could have appealed to the appellate authorities to give consequential relief  under their powers to avoid double taxation. Unless the Government clarifies its position in such subjects , it would not be possible to advise an assessee to opt for the scheme especially where the time for filing the revised return of income is over.

Section 9(a), vide clause (i), prohibits an assessee from claiming benefit of the scheme in relation to an assessment year for which an assessment has been made on the basis of a search initiated u/s 132/132A of the Act and the amount of disputed tax exceeds Rs. 5 crore. Admittedly no search has taken place in the case of an assesse, neither a special assessment has been made u/s 153A or u/s 153C of the Act. However, the addition is made in his case on the basis of the material found in the search in the firm’s case. Additions made on the ‘basis of the material found in a search’ is not the same as an assessment made on the basis of ‘search’. Accordingly the dispute relating to the third party assessments not made u/s 153C  though based on material found in someone’s search should be eligible for settlement under the scheme. A clarification however would help in the good number of cases.

Once again a deserving case that would call for some help and assistance from the authorities for overcoming the jurisdictional issue. The strictest possible view is to permit the benefit of the scheme only to those persons who have a valid appeal pending on the specified date. An appeal filed with the non-jurisdictional CIT(A) maybe held to be non-est. To avoid such a possibility, a  clarification is desired;  even the regularisation of appeal by transfer to  the jurisdictional CIT(A), post the specified date, may not strictly help. The issue of signature of an authorised person may perhaps be regularised and should not pose a serious opposition. Even here it is advisable to seek the clarification to avoid the consequences of subsequent rejection and of non-refund u/s 7.

Again, a deserving case that would be denied the benefit of settlement under the scheme on the ground that there is no ‘tax dispute’ and ‘tax arrears’ though the person could be said to be an appeal and whose petition is pending before an appellate forum.

The courts have numerous such petitions  pending before them  and it would be appropriate to treat such petitions as representing the cases where ‘disputed tax’ is held to be present and the petitioner is held to be in ‘arrears of tax’ and therefore a declaration u/s 4 is held to be maintainable. Clarification however confirming this view by the CBDT would help to settle many such cases under the scheme.

A declaration u/s 4 is certainly maintainable and the dispute in appeal would stand settled on passing of the order and the payment of disputed tax under the scheme. Such an order will be final in all respects. However the issues that may arise for A.Y 2021-22 out of the accounting entries will be  independent and would not be saved by the scheme. It is fair to assume that the accounting entries by itself would not attract the income tax under the regular provisions of the Income Tax Act. However the liability to MAT u/s 115JB for that year would require to be contested if such tax is levied. The issue under the Companies Act and SEBI laws and the listing agreements and of the corporate governance and also of the CSR spends would require to be deeply examined. There are no immunity as on date  under these laws.

Section 3 authorises the declarant to file a declaration u/s 4 in respect of tax arrears where an appeal is otherwise filed in time and is pending as on 31^st  March 2020. In the given case an appeal before the tribunal, against the order u/s 263, is filed in time and is pending before it on the specified date. The test that remains to be satisfied is whether there was any ‘tax arrear’ u/s 2(iv) on the specified date . The definition of the term ‘tax arrear’ signifies that there must be a ‘disputed tax’ that is determined under the provisions of the Act. The ‘disputed tax’ is defined by s. 2(j) to mean income tax payable under the Act where the appeal was to be decided against him. The moot questions therefore are;

• Whether any tax could have said to be determined under the provisions of the Act, and
• Whether such tax could be said to be payable by the appellant or not.

The issue on hand highlights the difficulty arising on account of meeting  the conditions that require an AO to pass an order and determine the tax payable before a valid declaration can be filed under the scheme. In ordinary circumstances it appears that a declaration under the scheme cannot be filed. In the facts of the case, however, passing of an order by the AO is consequential to the order of the Commissioner who has given the clear directions to disallow/add the amount determined by him and  also determine the tax payable on the revised income. The passing of the order therefore has been rendered to be a mere formality.  

The Tribunal has numerous such appeals pending before it and it would be appropriate to treat such appeals as representing the cases where ‘disputed tax’ is held to be present and the appellant is held to be in ‘arrears of tax’ and therefore a declaration u/s 4 is held to be maintainable.

Clarification however confirming this view by the CBDT would help to settle many such cases under the scheme.