Can the government’s ambitious Vivad se Vishwas scheme for the resolution of direct tax legacy cases have exclusions where prosecution has started for over ₹5 crore, or where arrears have been raised after search and seizure proceedings?

A writ petition has now been filed with the Supreme Court as a public interest litigation (PIL) for quashing of stay constitutional validity of the Amendments to Section 9 of the Vivad se Vishwas Act, 2020.

The petition, filed on March 16, argues that Section 9 of the Act seeks to exclude from the scheme tax arrears relating to an assessment year where an assessment has been made under Section 153A or Section 153C of the Income-tax Act and also cases where prosecution has been instituted on or before the date of filing of declaration of over ₹5 crore.

Sections 153A and 153C of the IT Act deal with search and seizure.

The petition further notes that the exclusion shall cause avoidable hardships to the assessee without there being commensurate revenue to the government. It has sought that the scheme be amended to cover all tax arrears irrespective of the sections under which they have been raised.

Discrimination of assessees

“Can such amendments be allowed which violate Article 14 and 21 of the Constitution of India, since the amendments propose to discriminate assessees on the basis of the amount of a tentative pending tax disputed?” contended the writ petition filed by chartered accountant Satyaprakash Singh against the Union of India and the Central Board of Direct Taxes.

“Cases involving search and prosecution have been excluded. The purpose of the government should be to give maximum benefit to taxpayers. Most cases pending are search cases,” Singh told BusinessLine , adding that the assent came on Tuesday and he has given an application for an early hearing as the deadline for the scheme is March 31.

“This is a question of ₹27 lakh to 28 taxpayers. The main aim is to collect revenue from taxpayers, so there should not be any exclusions in the scheme,” he added.

Noting that there are over 4.83 lakh direct tax cases pending at various appellate forums, Finance Minister Nirmala Sitharaman had, in Budget 2020-21, proposed the Vivad se Vishwas scheme for bringing down such litigation.

Under the proposed scheme, a taxpayer would be required to pay only the amount of the disputed taxes and get complete waiver of interest and penalty provided he pays it by March 31, 2020. Those who avail the scheme after March 31will have to pay some additional amount. The scheme will remain open till June 30, 2020.

Last week, Parliament also cleared the Direct Tax Vivad se Vishwas Bill, 2020.

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