Finance Minister Nirmala Sitharaman on Wednesday introduced in the Lok Sabha the much-awaited ‘Direct Tax Vivad Se Vishwas’ Bill 2020 to provide for resolution of disputed direct taxes.
The Bill provides a lucrative option to the taxpayers to settle their cases pending before the Commissioner (Appeals), Income Tax Appellate Tribunal, High Court or Supreme Court as on January 31, 2020, irrespective of whether the demand in such cases is pending or has been paid. It also provides for waiver of interest , penalty and prosecution.
The pending appeal may be against disputed tax, interest or penalty in relation to an assessment or reassessment order or against disputed interest/ fee where there is no disputed tax. In fact, an appeal may even be against tax determined on defaults in respect of tax deducted/collected at source.
The tax litigation process in India is time-consuming and cumbersome. A plethora of cases is pending before various appellate forums and a humongous amount is locked up in appeals. As on November 30, 2019, the amount of disputed direct tax arrears stood at ₹9.32 lakh crore, and considering the profuse amount of time and resources tax disputes consume, a dispute-litigation scheme was the need of the hour for both taxpayers and the government.
Taxpayers willing to settle disputes under the scheme shall be allowed a complete waiver of interest and penalty if they pay the entire amount of tax in dispute up to March 31, 2020, after which 10 per cent additional disputed tax will have to be paid over and above the tax liability.
Further, where the tax arrears relate to disputed interest or penalty only, then 25 per cent of disputed penalty/interest will have to be paid only while settling appeals relating to interest/penalty if payment is made up to 31st March 2020, beyond which the same shall be enhanced to 30 per cent.
The scheme would not apply where tax in arrears related to assessments in the nature of search and requisition.
Rakesh Nangia, Chairman, Nangia Andersen Consulting, said this can be a beneficial scheme for settlement of cases such as additions of unexplained cash deposited during the demonetisation period, additions for penny stocks, where factually the taxpayers have high exposures.
“It would be beneficial for such taxpayers, to pay the tax amount and settle the disputes without imposition of interest & penalty,” he said.
Abhay Sharma, Partner, Shardul Amarchand Mangaldas & Co, said that the proposed scheme, once enacted into law, will in all probability help in shrinking the mountain of pending tax litigation.