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Answers By Expert: Dr. K. Shivaram (Sr. Advocate)
Query

264 filled in Jan 19, pending as on 31.1.20 i.e. Upto here Applicant is qualified for VsV, but PCIT does not consider press note dt. 24.3.20 extending dates & disposes off 264 by rejecting it on 31.3.20. Can Assessee now file VsV ? Considering i) dispute is now not pending on specified dt. 31.1.20 but on 31.3.20 ii) Writ can be filled in High Court against 264, If yes then what would be the relevance of specified date ? Also than, all Appeals disposed after 31.1.20 also can be settled under VsV ? kindly suggest.
Answer

Yes, as on January 31, as per Section 2(1) (v) of the the assessee is an appellant under VSVAct, 2020 .    

The order passed by the PCIT is not in accordance with the provisions of the Act and also ordinance . The querist is advised to file  a rectification application before the PCIT . The PCIT may pass the order recalling his order . The assessee can avail the benefit of the Scheme . One may to consider whether the PCIT has afforded the assessee a reasonable opportunity to be heard while deciding the matter.  As there is no provision for appeal against order u/s 264 it may be desirable to file the  Writ against the order u/s 264 of the Act . 

 

Today The Income Tax Appellate Tribunal had arranged the Video conferencing on the Topic : The Direct Tax Vivad Se Viswas Act .2020.   Shri Pramod Chandra Mody Honourable Chairman CBDT  was present on the occasion and he has kindly agreed to clarify the issues raised by the Tax professionals.   We will take up this issue also when a representation is sent to Chairman  CBDT . 
Query

Sir, the assessee has filed appeal against the addition made at the time of processing of return of income in intimation order u/s 143(1). Such appeal is pending as on specified date. Can the assessee take benefit of the scheme under VsVS against such appeal?

If the answer to the above question is affirmative, then it may further be noted that there is no option to select the order u/s 143(1) in the dorpdown box provided by the income tax department in form no.1 on income tax portal. In such cases, how to file application in from no. 1 under VsVS?
Answer

As per Section 2 (1)(a) (ii) of the VSVA, an ‘appellant’ means, a person in whose case an order has been passed by the Assessing Officer, or an order has been passed by the Commissioner (Appeals) or the Income Tax Appellate Tribunal in an appeal, or by the High Court in a writ petition, on or before the specified date, and the time for filing any appeal or special leave petition against such order by that person has not expired as on that date;

The word “Order” is not defined under the Act .  

Since an order under section 143(1) of the Act is passed by an Assessing Officer defined under Section 2(7A) of the Income tax Act, 1961. Section 246A (1) (a) also refer order u/s 143( 1) is also an appealable order.   Therefore, in our  opinion, the same should allowed under the VSVA. 

With respect to the limitations on the portal, the same will be   addressed to the designated authority and CBDT in due course of time . 
Query

The facts of the case are as under:
Sr No Particulars Amount in
Lacs
1. Returned loss 500
2. Addition made by the AO
600
3. Assessed Income 100

Case -1
As in the above case, returned loss has been converted into income, meaning thereby, returned loss of Rs 500 lacs has been fully reduced to nil and converted into income of Rs 100 lacs after assessment.
The assessee wants to exercise the second option as given in Rule 9(1)(ii), i.e to carry forward the reduced loss of Rs 500 lacs to nil and wants to pay the tax on balance amount of addition of Rs. 100 lacs (Rs. 600 lacs-Rs 500 lacs ).

Query 1 :
For the above situation, no schedule is available in Form no 1, then how the assessee can file form no 1, please clarify.

Case -2
In the aforesaid example, if the assessee is having a decision of higher court in his favour on the addition made by the AO which has also not been reversed so far, then as per second provisio to rule 9(2), one-half of the amount by which loss is reduced shall be considered for reduction.

Consequently, in the above example, 50% of addition works out to Rs 300 lacs and as such the assessee can carry forward the reduced loss of Rs. 200 lacs (Rs 500 lacs minus Rs 300 lacs) as per the aforesaid second provisio to Rule 9(2).

Query 2 :
Again for such a situation, no schedule is available in Form no 1, then how the assessee can file form no 1, please clarify.

Case -3
In the aforesaid example, if the assessee has got full relief form CIT (A)/ITAT/High Court on the addition of Rs 600 lacs made by the AO and IT Department has further filed appeal before ITAT/High Court/Supreme Court as the case may be which is pending as on 31.01.2020.

In the above case, the assessee is liable to pay 50% of disputed tax or carry forward the reduced loss by 50% as per section 3 read with section 1(j) of Act and also read with Rule 9 above.

Consequently, in the above example, 50% of addition works out to Rs 300 lacs and as such the assessee can carry forward the reduced loss of Rs. 200 lacs (Rs 500 lacs minus Rs 300 lacs) as per as per section 3 read with section 1(j) of Act and also read with Rule 9 above.

Query 3 :
Again for such a situation, no schedule is available in Form no 1, then how the assessee can file form no 1, please clarify.

Case-4

In the aforesaid example it is assumed that the assessee has to carry forward reduced loss in a particular assessment year under the scheme. Under such situation, benefit of such reduced carry forward loss of such assessment year is to be allowed in other assessment years where assessee is also going under this scheme for other subsequent years as well.

Query 4:

How the reduced loss carried forward in one particular assessment year under the aforesaid scheme is to be shown as Brought forward reduced loss in next assessment year and so on in form no 1 so as to set off the same in subsequent assessment year or years to work out disputed tax, if any, under the said scheme, please clarify.

Answer

Please refer Circular No 9 /2020   dt 22-04 -2020 , issued by the CBDT  which reads as under ; 

Q. no 53 : If loss is not allowed to be adjusted while calculating  disputed  tax, will  that loss be allowed to be carried forward ? 

Ans : As per the amendment  proposed in Vivad  se Vishwas, in a case where the dispute  in relation to an assessment year relates to reduction of Minimum Alternate Tax (MAT) credit or reduction of loss or depreciation, the appellant shall have an option either to (i)  include the  amount  of tax related to such  MAT credit or loss or depreciation in the amount of  disputedtax and carry forward the MAT credit or loss or depreciation or (ii) to carry forward the reduced tax credit or loss or depreciation. CBDT  will prescribe the manner of calculation in such cases. 

 

It is desirable to  wait and reads the clarification of CBDT as and when issued and take the appropriate decision .
Query

As per the proviso to Rule 9(2), if the declarant opts not to pay tax and carry forward the reduced losses, then in subsequent years the assessee shall be liable to pay interest.

Suppose there are two pending appeals of A Ltd and for Year 1 the returned loss was Rs 15 lakhs and the addition made by the AO was of Rs 15 lakhs.

For year 2, the returned income was 5 lakhs after set off of loss of year 1. In this, the addition made is of Rs 10 lakhs and also denied the loss i.e, assessed income became 30 Lakhs.

Here, the assessee wishes to opt for VsV scheme for both the years and exercise the option of carry forward the reduced loss.

Whether Interest u/s 234B, 220 is leviable in year 2 ?
Answer

Rules are subordinate legislation . Subordinate legislation can also be questioned on the ground that it violates article 14 of the Constitution of India as held in J.K Industroies Ltd v UOI ( 2008) 297 ITR 176 (SC) (at 178 -179)    Rules cannot beyond the Act. Though the Rule 9(2) states that Assessee shall be liable to interest it seems that the intentions would be to levy interest on non-VsV years. This is because, if you chose to file declaration for year 1 and year 2 both together, option to carry forward loss does not make any difference, unless there is a tax – arbitrage for the difference in tax rates. In both years, interest and penalty is waived off, and in such a case, whether you opt or not to set off and carry forward would not make a difference. Please note that this answer is specific to the facts of your case.   
Query

There are many missing sections while Filling Form 1, Part B, Coloumn 4 – Section under which order is passed…
Some of the sections are 143(1), 220(2), 206C(6A), 206C(7), 200A, 234E, 234F, etc and many more. How can Form 1 be filed in the cases where order under this section is passed.

Moreover how can The TAN of the Assessee be entered in this Form 1, Part A – 1st Row PAN/TAN.

These are autopopulated columns.
Thanks in advance
Answer

There are various technical issues in the form and the government is working to improve on these online facilities and to remove technical glitches. As of now above mentioned sections are missing from the form. However we are making a representation to bring out these issues so that they can be considered and be taken care of.  

As far as filling up of TAN number is concerned, the form B and other Schedules allow to declare and settle TDS/TCS issues as well. Hence non-mentioning of TAN is not fatal for eligibility under the VsV scheme. 
Query

In a case where prosecution proceedings under any of the provisions of the Income Tax Act has been instituted against the assessee immediately after framing of assessment against him by filing a complaint in the Competent Court though against the Spirit of Circular No.24/2019 Dtd. 09.09.2019 issued by CBDT since the penalty has not been confirmed by the ITAT and simultaneously, the Department withdraws the Complaint filed before the Competent Court, Whether such withdrawal from the Court would tantamount to Non-institution of Prosecution Proceedings and the Benefit of the DTVsV could be availed by the assessee??
Answer

Yes, the same in our view should amount to non-institution of prosecution proceedings and the assessee should be eligible under VSVA.  In Tigrania Steel Corporation v. CIT [2017] 291 CTR 496 (Bom)(HC)  has held that , the assessee had been discharged by Criminal Court before it filed its application under Kar VivadSamadhan Scheme, he was entitled to avail benefit of scheme.
Query

In a case where an assessee opts for the DTVsV and a Final Certificate is issued by the DA in terms of the said Act, whether the Department would be debarred from reopening the assessment case u/s.148 of the Income Tax Act for the particular assessment year as per the provisions of section 5 of the DTVsV, even on the basis of any Audit Objections, fresh tangible material post assessment etc.??
Answer

Once certificate is issued it is binding on the revenue ,  hence none of the mater(s) covered under an order of section 5 of VSVA shall be reopened.    In Killick Nixon Ltd. v. Dy. CIT (2002) 258 ITR 627 / 125 Taxman1055/(2003)172Taxation373 / 178 CTR 387 (SC) dealing with S.87 of the Kar Vivad Samadan Scheme , the Honourable Supreme Court held that   ,upon declaration being made tax arrears being determined, paid and certificate issued under KVSS, there is no jurisdiction for the Assessing Officer to reopen the assessment by a notice under section 148 except where case falls under the proviso (2) of sub-section (1) of section 90 of the scheme and it is found that any particular material furnished in the declaration is found to be false. 

 
Query

In a case where the proceedings under section 179 of the Income Tax Act have been instituted against the Directors in respect of tax liability of the Private Limited Company and the Company opts for the DTVsV Scheme, whether the immunity extended by the provisions of Section 6 of DTVsV apply to the parallel proceedings undertaken u/s.179??
Answer

Since proceedings are initiated against the Directors in respect of the tax arrears payable by the Private Limited Company. If the Company opts under the VSVA, the immunity in our opinion should extend to the directors as well. The issue is taken up before Board and Board may clarify the issue in ther next  Circular on provisions of Direct tax Vivad Se Viswas Act , 2020 
Query

Appeal before CIT(Appeals) is pending regarding deduction under section 54F as on 31-01-2020 . Even though one hearing took place before 31-01-2020, neither order nor enhancement notice was issued. In the meanwhile notice under section 263 was issued on the ground that the assessing officer failed to apply section 50C in the month of August 2019. The assessee replied that as per the decision of the jurisdictional high court decision in the case of Renuka Phillip, section 263 cannot be invoked during the pendency of Appeal and the assessee is willing to avail the VVS scheme if the proceedings under section 263 are dropped. However order has been passed under section 263 setting aside the assessment with a direction to the assessing officer to apply section 50C on 21-03-2020 in spite of the willingness of the assessee to avail VVS. Now that the assessment is set aside, whether the appeal would become infructuous and the assessee will not be able to avail VVS. Can he avail VVS in respect of the dispute with reference to section 54F only and dispute the application of section 50C by requiring the assessing officer to make a reference to valuation officer. Or can he file appeal to the Honourable Chennai ITAT against 263 order. Is the PCIT correct in setting aside the assessment when appeal is pending before CIT(Appeals) and it is possible that that the assessment order may be annulled for technical reasons like non issue of notice under section 143(2) and enhancement notice was not issued before 31-01-2020 even though the case was already heard by the CIT(Appeals ) in February 2019 itself.

Answer

It is desirable to file an appeal before the Tribunal against the order of revision. One can also request for an early hearing  before the Tribunal   . Considering the facts of the case the assessee may get the relief from the ITAT. Appeal regarding the issue of deduction under section 54F of the Income tax Act, 1961 does not become infructuous and the same can be settled under VSVA. 
Query

The addition was made u/s.68 in the case of a Company. The assessee-company has b/f. MAT Credit of which part adjustment is made during the subject year in the Return filed and balance c/f. to subsequent year. Post addition u/s.68 made by AO, the Company is entitled to MAT Credit based on assessed tax under normal rate of tax being higher than as per ROI when Book Profit u/s.115JB remained the same. While raising demand, credit for MAT was given as claimed in ROI. The assessee-company filed appeal before 31-1-2020 which is pending on that day disputing addition u/s.68. MAT credit not allowed properly is not disputed in GOA but rectification application application is filed u/s. 154.
Whether excess MAT credit that should have been granted be considered while arriving at disputed tax liability under VSV Scheme Act?
Answer

The assessee should  request the AO to pass the rectification order for granting MAT  Credit. Once the rectification order is passed the assessee will get the credit for excess MAT Credit . It is desirable to the assessee to raise an additional ground before the CIT(A) as regards not granting of excess MAT credit . CIT (A) may direct the AO to grant the MAT credit or direct the AO to pass the order on rectification application.