In the recent past, the Government has taken several measures to reduce tax litigations. In Finance Act 2019, a dispute resolution cum amnesty scheme called “SABKA VISHWAS LEGACY DISPUTE RESOLUTION SCHEME, 2019” was introduced for resolution and settlement of cases of Central Excise and Service Tax. In this article, we will discuss ‘the direct tax vivad se vishwas bill, 2020’.
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The Finance Ministry received around 189000 applications under Sabka Vishwas (Legacy Dispute Resolution Scheme) 2019 and collected over Rs. 38000 crores in Taxes against the target of Government of 184000 Taxpayers with tax collection of over Rs. 35000 crores.
Similar to this scheme that was introduced in Union Budget 2019 for settlement of Indirect Tax Dispute, a similar scheme to settle disputes in Direct Tax is proposed to be introduced as per Finance Minister’s Budget Speech on 01st February 2020. In line with this “THE DIRECT TAX VIVAD SE VISHWAS BILL, 2020”, a bill to provide for the resolution of disputed tax has been introduced by the Union Finance Minister on 4th February 2020.
As on the 30th of November, 2019, the amount of disputed direct tax arrears is Rs. 9.32 lakh crores. Considering that the actual direct tax collection in the financial year 2018-19 was Rs.11.37 lakh crores, the disputed tax arrears constitute nearly one-year direct tax collection.
This will not only benefit the Government by generating timely revenue but also the taxpayers who will be able to deploy the time, energy and resources saved by opting for such dispute resolution towards their business activities.
Important Definitions In The Bill
1) Disputed Interest, Disputed Fee and Disputed Penalty for the purpose of this Bill would be called as such only if an appeal has been filed the appellant in respect of such Interest/ Penalty/Fee which is levied on the Disputed Income.
2) Disputed Tax shall be determined as per the Following Formula:
In simple language,
A means= Amount of Tax as per Assessed Income under general provision of Income Tax Act
B means= Amount of Tax as per Return of Income under general provision of Income Tax Act
C means= Amount of tax on the total income assessed as per sections 115JB(MAT) and 115JC(AMT), as the case may be
D means= Amount of tax as per Return of Income as per sections 115JB(MAT) and 115JC(AMT), as the case may be
***It should be noted that where the provisions of section 115JB/115JC are not applicable, then (C-D) is to be ignored
3) Tax arrears means:
(i) the aggregate amount of disputed tax, interest chargeable or charged on such disputed tax, and penalty leviable or levied on such disputed tax; or
(ii) disputed interest; or
(iii) disputed penalty; or
(iv) disputed fee,
as determined under the provisions of the Income-tax Act
What Relief Has Been Provided In The Bill- Section 3 Of The Bill
|S.No||Nature of tax arrear||The amount payable on or before 31 March 2020||The amount payable on or after 1 April 2020 up to the last day of the scheme|
|a)||Aggregate of Disputed Tax, Interest on such Tax, Penalty levied or leviable on such Tax||100% of Disputed Tax Full Waiver of Interest and Penalty
Let us take an example to understand this:
Mehak Finvest Pvt Ltd. case was opened under sec 147 on account of income escaped Assessment.
Following are the Details as per Assessment Order passed by ACIT in case of Mehak Finvest Pvt Ltd
a) Tax as per ROI: Rs. 340000
b) Tax Assessed: Rs. 550000
c) Disputed Tax: Rs.210000
d) Disputed Interest: Rs.150000
e) Disputed Penalty: Rs. 210000
f) Total Tax Arrear: Rs. 570000
As per Above scheme, the amount payable up to 31.03.2020 would be Rs. 210000/- and after 31.03.2020 it would be Rs. 231000/- and there will be a full waiver of interest and penalty
|110% of Disputed Tax Full Waiver of Interest and Penalty
Further, where 110% comes to more than the aggregate of Disputed Tax, Interest on such Tax, Penalty levied or leviable on such Tax, the excess shall be ignored
|b)||Disputed Interest or Disputed Penalty||25% of Disputed Interest or Disputed Penalty
Let us take an example to understand this:
Mrs Mehak an Individual accepted a Loan of Rs. 50000/- in cash and accordingly penalty to the extent of 100% of the Quantum of Loan received was imposed by A.O.
She, later on, filed an appeal against the order of A.O taking Grounds of Appeal that she received the amount from her relative for an emergency and had no intention to evade tax.
She can either wait for disposal of appeal or can take the benefit of this Scheme and pay Rs. 12500/- by 31.03.2020/ Rs. 15000/- after 31.03.2020 and get a full waiver of balance
Once the Taxpayer pays an amount under this scheme, the case will not be reopened in any other proceeding under the Income-tax Act or under any other law for the time being in force in respect of that matter.
|30% of Disputed Interest or Disputed Penalty|
Procedure To Avail Benefit Of This Scheme
1) A declarant is required to file a declaration before designated authority is such form and manner as may be prescribed. Upon the filing, the declaration, any appeal pending before the ITAT or CIT(A), in respect of the disputed income or disputed interest or disputed penalty or disputed fee and tax arrears shall be deemed to have been withdrawn from the date on which certificate, as mentioned in point 2, has been issued.
Where writ petition is pending before HC or SC, the appellant shall withdraw such appeal or writ petition.
2) The Designated Authority shall within a period of 15 days from the date of receipt of the declaration by order determine the amount payable by the declarant and grant a certificate to the declarant containing particulars of the tax arrears and the amount payable after such determination.
3) The Declarant shall pay this amount within 15 days from the date of receipt of the certificate and intimate designated authority who shall then pass an order.
4) The Declarant shall furnish an undertaking waiving his right, whether direct or indirect, to seek or pursue any remedy or any claim in relation to the tax arrears which may otherwise be available to him under any law for the time being in force.
5) Order Passed under this act shall be conclusive that matters covered by such orders shall not be reopened in any other proceeding under Income Tax Act or any other law for time being in force.
Who Can’t Avail The Benefit Of The Scheme?
1) Tax arrears in respect of AY where an assessment has been made u/s 153A or 153C of the Income Tax Act.
2) Tax Arrears in respect of AY in which prosecution has been instituted.
3) Tax Arrears related to any undisclosed income from a source located outside India or an undisclosed asset located outside India.
4) Tax Arrears relating to an assessment or reassessment made on the basis of information received under an agreement referred u/s 90/90A.
5) Declaration can’t be made by any person in respect of whom an order of detention has been under the provision of Conservation of Foreign Exchange and Prevention of Smuggling Activities Act 1974.
6) Declaration can’t be made by any person in respect of whom prosecution for any offence has been instituted under certain specified acts like Indian Penal Code, Prevention of Money Laundering Act, Benami Property Transaction Act etc.
This write up is based on my understanding and interpretation and the same is not intended to be professional advice. I hope you like this article share it with your friends & family. If you have any query feel free to drop it in the comment section.