Statement of Objects and Reasons:
The distressing figures of 483,000 pending income tax cases before appellate authorities and the disputed tax in these appeals being nearly ₹9.32 trillion as of 30th November 2019, which is approximately a year's direct tax collection for the government stimulated the Finance Ministry to come out with a direct tax dispute resolution scheme.
The Hon’ble Finance Minister Nirmala Sitharaman, on 01.02.2020 in her speech for Budget 2020, announced the Direct Tax Vivid se Vishwas Scheme. After that, the Scheme was Tabled before the Lok Sabha, and after making amendments, it was subsequently passed by the Lok Sabha on 4th March 2020. Subsequently, the Bill became an Act upon getting the assent of the President on 17.03.2020.
The act is a major scheme for the winding up of previous Income Tax disputes. It also offered a complete waiver of interest and penalty for the taxpayer.
Important Provisions of the Act:
The act applies to all the appeals [Commissar (Appeals), Income Tax Appellate Tribunal (ITAT), High Court or Supreme Court] and written petitions pending before the High Court (HC) or Supreme Court (SC) or special leave petitions (SLPs) pending before the SC filed by the taxpayers or the income tax department, which were pending until 31st January 2020.
- What is The Disputed tax?
Section 2(1) (j) of the act defines the Disputed Act.
Disputed tax concerning an assessment year or financial year, as the case may be, means the income-tax, including surcharge and cess payable by the appellant under the provisions of the Income-tax Act, 1961 and is pending before any court.
The Disputed Tax is a very vital concept of the act to understand as the whole foundation of this dispute resolution Scheme rests on it. Under the act, the taxpayer is liable to pay only ‘disputed tax’ and will get immunity from paying penalties, interest, and fees on the disputed tax and Disputed interest, disputed penalty, or disputed fees where there is no disputed tax.
- Amount Payable By Declarant
According to Section 3 of the Act, a taxpayer who has a dispute with the income tax department can pay:
- According to the Act if the taxpayer made payment before or on 31st March 2020 then the taxpayer will have to pay 100% of the disputed tax amount without paying any pending penalty, interest, or fees.
If the taxpayer makes a payment after 31st March 2020 then along with the 'amount of tax disputed', an additional 10 percent of the disputed tax will have to be paid.
- According to the Act if the dispute with the income tax department is solely on interest, penalty, or fees, then a taxpayer is required to pay 25 per cent of the disputed interest or disputed penalty or disputed fee only if the taxpayer makes payment before or on 31st March
and if the payment is made after 31st March will get 30 percent of the disputed interest or disputed penalty or disputed fee will be payable.
If an issue in a taxpayer’s pending appeal is already decided in favour of the taxpayer by a higher appellate forum or if the Department has filed an appeal, the amount payable is 50% of aforesaid amounts.
- Cases Where Provisions of This Act Shall Not Apply
Section 9 of the Act deals with cases that are not covered under the act.
This involves cases –
- Search cases if the amount of disputed tax in the assessment year exceeds five crore rupees.
- If a taxpayer is arrested or charged under other statutes (Income Tax Act,1961, or India Penal Code,1860 (IPC).
- Cases involving unreported foreign income and assets.
- Cases where person notified under section 3 of the Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992 (27 of 1992) on or before the filing of declaration.
- Cases covered under Narcotic Drugs and Psychotropic Substances Act, Unlawful Activities (Prevention) Act, Prevention of Corruption Act, Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, Prevention of Money Laundering Act, Prohibition of Benami Property Transactions Act.
The Direct Tax Vivid se Vishwas Act, 2020 was launched by the government as they knew that tax disputes cases in the judiciary organ of the country are being increased at an alarming rate and they tend to travel on for years.
This act will help the government to generate revenues as this will terminate the issues of money locked up judicial proceedings, and the act will also help the taxpayers by saving their time and valuable money.
Only time will tell how fruitful this scheme by the government is and how many people suffice the scheme. But this is the sure thing that if a large number of taxpayers avail the benefit of the scheme, it will give our economy an excellent push as well as facilitate the overload of the judiciary.