How to apply for Vivad se Vishwas Scheme ?

The key objective of Vivad se Vishwas scheme is to collect taxes and reduce litigation. It offers a complete waiver on interest and penalty to the taxpayers who pay their disputed taxes on or before March 31, 2020.

Benefits

Apart from waiver of interest and penalty, the taxpayer shall also get the following immunities once the case is settled under the scheme:

  • Such cases cannot be reopened in any other proceeding by any tax authority or designated authority;

  • Once the dispute has been resolved, an appellate forum cannot issue an order in relation to the matter; and

  • Opting for the scheme shall not amount to conceding the tax position and tax authority cannot claim that taxpayer has acquiesced to the decision on the disputed issue.

Though the scheme prima-facie seems to be attractive as it waives interest and penalty, an individual taxpayer has to analyse various aspects before opting to settle in the scheme. Some of the aspects to be looked at include how strong are merits of the case, expected cost of litigating the matter, implications of carried forward losses, cash flow considerations etc.

It is also a burden for an individual to litigate a tax matter and therefore, if the merits of the case are weak and there is lack of adequate documentary evidences to substantiate ones claim, it is better to settle by paying taxes rather than unforeseen fate of litigation. 

Eligibility Criteria

The scheme shall be applicable to all the appeals/petitions filed by taxpayers or the income tax department, which are pending on January 31, 2020 with the following forums:

  • Commissioner of Income-tax (Appeals);

  • Income-tax Appellate Tribunal;

  • High Court; or

  • Supreme Court

Further, the scheme is also applicable to the following cases where, as on January 31, 2020: 

  • Time limit for filing an appeal has not expired;

  • Cases are pending before the Dispute Resolution Panel (DRP) or where DRP directions have been passed but final assessment order is awaited;

  • Revision petitions are pending before the Commissioner of Income-tax; and

  • Search cases where the disputed demand is less than Rs 5 crore

However, there are no provisions in the scheme to settle part of a pending dispute in relation to an appeal / petitions.

Application Procedure

Under the tax dispute resolution scheme, an individual taxpayer has to complete the following steps by March 31, 2020 to avail the benefit of complete waiver of interest and penalty:

  • Taxpayer has to file a declaration in a specified Form (which is yet to be notified) to the designated authority (Principal Chief Commissioner shall designate an officer, not below the rank of a Commissioner of Income-tax as the designated authority) to initiate resolution of pending direct tax disputes. Along with the declaration, the taxpayer has to also furnish an undertaking in a specified format (which is also yet to be notified) waiving his right to pursue any other remedy/claim.

  • Based on the declaration, within 15 days, the designated authority will determine the amount payable by the Applicant and grant a certificate, containing particulars of the amount payable. It has been clarified that the applicant will not be able to file any appeal in case it does not agree to the amount determined by designated authority.

  • The Applicant has to make the payment of the said amount within the next 15 days and submit the proof of withdrawal of appeal. The proof of appeal could either be an order dismissing the appeal due to withdrawal or can be the application filed to withdraw the appeal.

  • The designated tax authority will then pass an order, which shall be conclusive as to the matters stated therein.

However, in case the above four steps are not completed by March 31, 2020, then there will be an additional payment as discussed in the table above. Last date for Vivad se Vishwas scheme While the Bill passed in the lower house of the Parliament says that the last date will be later notified, however, the Finance Minister in her budget speech had mentioned that the same shall be open until June 30, 2020. Further, an advertisement on the income tax website also suggests that the last date of the scheme is June 30, 2020. An appropriate clarification in this regard is still needed from the government.

Dispute Settlement

Under the Vivad se Vishwas, declarant is required to make following payment for settling disputes:

A. In appeals / writ / SLP / DRP objections / revision application under section 264 / arbitration filed by the assessee -

  1. In case the payment is made till 31" March, 2020-

    1. 100% of the disputed tax (125% in search cases) where dispute relates to disputed tax (excess amount over 100% limited to the amount of interest and penalty levied or leviable), or

    2. 25% of the disputed penalty, interest or fee where dispute relates to disputed penalty, interest or fee only.

  2. In case the payment is made after 31 st March, 2020 -

    1. 110% of the disputed tax (135% in search cases) where dispute relates to disputed tax (excess amount over 100% limited to the amount of interest and penalty), or

    2. 30% of the disputed penalty, interest or fee in case of dispute related to disputed penalty, interest or fee only. However, if in an appeal before Commissioner(Appeals) or in objections pending before DRP, there is an issue on which the appellant has got favourable decision from ITAT (not reversed by HC or SC) or from the High Court (not reversed by SC) in earlier years then the amount payable shall be half or 50% of above amount. Similarly, if in an appeal before IT AT, there is an issue on which the appellant has got favourable decision from the High Court (not reversed by SC) in earlier years then the amount payable shall be half or 50% of above amount.

B. In appeals / writ / SLP filed by the Department -

  1. In case the payment is made till 31 "March, 2020-

    1. 50% of the disputed tax (62.5% in search cases) in case of dispute related to disputed tax or

    2. 12.5% of the disputed penalty, interest or fee in case of dispute related to disputed penalty, interest or fee only.

  2. In case the payment is made after 31"' March, 2020 -

    1. 55% of the disputed tax (67.5% in search cases) in cases of dispute related to disputed tax, or

    2. 15% of the disputed penalty, interest or fee in case of dispute related to disputed penalty, interest or fee only.