Direct Tax Vivad se Vishwas Act, 2020- FAQs You must Know

Circular No. 9/2020
F. No. IT(A)/1/2020-TPL
Government of India
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes

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Dated: 22nd April, 2020

Sub.: Clarifications on provisions of the Direct Tax Vivad se Vishwas Act, 2020 – reg. During the Union Budget, 2020 presentation, the ‘Vivad se Vishwas’ Scheme was announced to provide for dispute resolution in respect of pending income tax litigation. Pursuant to Budget announcement, the Direct Tax Vivad Se Vishwas Act, 2020 (the Act) was introduced in the Lok Sabha on 5th Feb, 2020. Subsequently, based on the representations received from the stakeholders regarding its various provisions, official amendments to the Act were proposed. These amendments sought to widen the scope of the Act and reduce the compliance burden on taxpayers.

2. After introduction of the Act in Lok Sabha, several queries were received from the stakeholders seeking clarifications in respect of various provisions contained therein. Government had considered these queries and had decided to clarify the same in form of answers to frequently asked questions (FAQs) vide circular no 7 of 2020 dated 4th March 2020. These clarifications were, however, subject to approval and passing of the Act by the Parliament and receiving assent of the Hon’ble President of India.

3. The Act has since been passed by the Parliament and has also received the assent of the Hon’ble President of India and has now been enacted as The Direct Tax Vivad Se Vishwas Act, 2020 ( Vivad se Vishwas). The objective of Vivad se Vishwas is to inter cilia reduce pending income tax litigation, generate timely revenue for the Government and benefit taxpayers by providing them peace of mind, certainty and savings on account of time and resources that would otherwise be spent on the long-drawn and vexatious litigation process.

4. 55 questions contained in circular no 7 of 2020 are reissued under this circular with following modifications

(i) Vivad se Vishwas referred to Direct Tax Vivad se Vishwas Act, 2020 in circular no 7. However, in this circular it refers to The Direct Tax Vivad Se Vishwas Act, 2020;

(ii) Since clauses of the Act have now become sections in the Vivad Se Vishwas, the reference to “clause” in circular no 7 has been replaced with “section”;

(iii) Reference to declaration form in circular no 7 has been replaced with referencing of relevant form, since rules and forms have now been notified; and

(iv) Answer to question no 22 has been modified to reflect the correct intent of the law. It has now been clarified that where only notice for initiation of prosecution has been issued without prosecution being instituted, the assessee is eligible to file declaration under Vivad se Vishwas. However, where the prosecution has been instituted with respect to an assessment year, the assessee is not eligible to file declaration for that assessment year under Vivad se Vishwas, unless the prosecution is compounded before filing the declaration.

5. Section 10 and 11 of the Vivad se Vishwas empowers the Board or the Central Government to issue directions or orders in public interest or to remove difficulties. This circular is such direction/order issued under section 10 and section 11 of the Vivad se Vishwas. Thus answers to some of the questions in this circular extend the application of Vivad se Vishwas in public interest or to remove difficulties, under section 10 and section 11 of Vivad se Vishwas.

“QUESTIONS ON SCOPE/ ELIGIBILITY (Q. No. 1— 24)”

Question No./Answer:

Which appeals are covered under the Vivad se Vishwas ?
Appeals pending before the appellate forum [Commissioner (Appeals), Income lax Appellate Tribunal (ITAT), High Court or Supreme Court], and writ petitions pending before High Court (HC) or Supreme Court (SC) or special leave petitions (SI,Ps) pending before SC as on the 31st day of January, 2020 (specified date) are covered. Cases where the order has been passed but the time limit for filing appeal under the Income-tax Act, 1961 (the Act) against the order has not expired as on the specified date arc also covered. Similarly, cases where objections filed by the assessee against draft order are pending with Dispute Resolution Panel (DRP) or where DRP has given the directions but the Assessing Officer (AO) has not yet passed the final order on or before the specified date arc also covered. Cases where revision application under section 264 of the Act is pending before the Principal Commissioner or Commissioner are covered as well. Further, where a declarant has initiated any proceeding or given any notice for arbitration, conciliation or mediation as referred to in section 4 of the Act is also covered.

If there is no appeal pending but the case is pending in arbitration, will the taxpayer he eligible to apply under Vivad se Vishwas? If yes what will he the disputed tax?
An assessee whose case is pending in arbitration is eligible to apply for settlement under Vivad se Vishwas even if no appeal is pending. In such case assessee should fill the relevant details applicable in his case in the declaration form. The disputed tax in this case would be the tax (including surcharge and cess) on the disputed income with reference to which the arbitration has been filed.

Whether Vivad se Vishwas can he availed for proceedings pending before Authority of Advance Ruling (AAR)? If a writ is pending against order passed by AAR in a HC will that case he covered and how disputed tax to he calculated?
Vivad se Vishwas is not available for disputes pending before AAR. However, if the order passed by AAR has determined the total income of an assessment year and writ against such order is pending in HC, the appellant would he eligible to apply for the Vivad se Vishwas. The disputed tax in that case shall he calculated as per the order of the AAR and accordingly, wherever required, consequential order shall be passed by the AO. However, if the order of AAR has not determined the total income, it would not be possible to calculate disputed tax and hence such cases would not he covered. To illustrate, if AAR has given a ruling that there exists Permanent Establishment (PE) in India but the AO has not yet determined the amount to be attributed to such PE, such cases cannot be covered since total income has not yet been determined.

An appeal has been filed against the interest levied on assessed tax; however., there is no dispute against the amount of assessed tax. Can the benefit of the Vivad se Vishwas be availed?
Declaration covering disputed interest (where there is no dispute on tax corresponding to such interest) are eligible under Vivad se Vishwas. It may be clarified that if there is a dispute on tax amount, and a declaration is filed for the disputed tax, the full amount of interest levied or leviable related to the disputed tax shall be waived.

What if the disputed demand including interest has been paid by the appellant while being in appeal?
Appeals in which appellant has already paid the disputed demand either partly or fully are also covered. If the amount of tax paid is more than amount payable under Vivad se Vishwas, the appellant will be entitled to refund without interest under section 244A of the Act.

Can the benefit of the Vivad se Vishwas be availed, if a search and seizure action by the Income-tax Department has been initiated against a taxpayer?
Case where the tax arrears relate to an assessment made under section 143(3) or section 144 or section I53A or section 153C of the Act on the basis of search initiated under section 132 or section 132A of the Act are excluded if the amount of disputed tax exceeds five crore rupees in that assessment year.
Thus, if there are 7 assessments of an assessee relating to search & seizure, out of which in 4 assessments, disputed tax is five crore rupees or less in each year and in remaining 3 assessments, disputed tax is more than five crore rupees in each year, declaration can be filed for 4 assessments where disputed tax is five crore rupees or less in each year.

If assessment has been set aside for giving proper opportunity to an assessee on the additions carried out by the AO. Can lie avail the Vivad se Vishwas with respect to such additions?
If an appellate authority has set aside an order (except where assessment is cancelled with a direction that assessment is to be framed de novo) to the file of the AO for giving proper opportunity or to carry out fresh examination of the issue with specific direction, the assessee would be eligible to avail Vivad se Vishwas. l lowever, the appellant shall also be required to settle other issues, if any, which have not been set aside in that assessment, and in respect of which either appeal is pending or time to file appeal has not expired. In such a case disputed tax shall be the tax (including surcharge and cess) which would have been payable had the addition in respect of which the order was set aside by the appellate authority was to be repeated by the AO.
In such cases while filling the declaration in Form No 1, the declarant can indicate in the appropriate schedule that with respect to the set-aside issues the appeal is pending with the Commissioner (Appeals).

Imagine a case where an appellant desire to settle concealment penalty appeal pending before CIT (A), while continuing to litigate quantum appeal that has travelled to higher appellate forum. Considering these are two independent and different appeals, whether appellant can settle one to exclusion of others? If yes, whether settlement of penalty appeal will have any impact on quantum appeal?
If both quantum appeal covering disputed tax and appeal against penalty levied on such disputed tax for an assessment year are pending, the declarant is required to file a declaration form covering both disputed tax appeal and penalty appeal. However, he would be required to pay relevant percentage of disputed tax only. Further, it would not be possible for the appellant to apply for settlement of penalty appeal only when the appeal on disputed tax related to such penalty is still pending.

Is there any necessity that to qualify under the Vivad se Vishwas, the appellant should have tax demand in arrears as on the date of filing declaration?
Vivad se Vishwas can be availed by the appellant irrespective of whether the tax arrears have been paid either partly or fully or are outstanding.

Whether 234E and 234F appeals are covered?
If appeal has been filed against imposition of fees under sections 234E or 234F of the Act, the appellant would be eligible to file declaration for disputed fee and amount payable under Vivad se Vishwas shall be 25% or 30% of the disputed fee, as the case may be.
If the fee imposed wider section 234E or 234F pertains to a year in which there is disputed tax, the settlement of disputed tax will not settle the disputed fee. If assessce wants to settle disputed fee, he will need to settle it separately by paying 25% or 30% of the disputed fee, as the case may be.

In case where disputed tax contains qualifying tax arrears as also non-qualifying tax arrears (such as, tax arrears relating to assessment made in respect of undisclosed foreign income):
(i) Whether assessee is eligible to the Vivad se Vishwas itself?
(ii) If eligible, whether quantification of disputed tax can exclude/ignore non-qualifying tax arrears?
If the tax arrears include tax on issues that are excluded from the Vivad se Vishwas, such cases are not eligible to File declaration under Vivad se Vishwas. There is no provision under Vivad se Vishwas to settle part of a pending dispute in relation to an appeal or writ or SIT for an assessment year. For one pending appeal, all the issues are required to be settled and if any one of the issues makes the declaration invalid, no declaration can be filed.

If a writ has been.filed against a notice issued under section 148 of the Act and no assessment order has been passed consequent to that section 148 notice, will such case be eligible to file declaration under Vivad se Vishwas?
The assessee would not be eligible for Vivad se Vishwas as there is no determination of income against the said notice.

With respect to interest under section 234A, 234B or 234C, there is no appeal but the assessee has filed waiver application before the competent authority which is pending as on 31 Jan 2020? Will such cases be covered under Vivad se Vishwas?
No, such cases are not covered. Waiver applications are not appeal within the meaning of Vivad se Vishwas.

Whether assessee can avail of the Vivad se Vishwas for some of the issues and not accept other issues?
Refer to answer to question no 11. Picking and choosing issues for settlement of an appeal is not allowed. With respect to one order, the appellant must choose to settle all issues and then only he would be eligible to file declaration.

Will delay in deposit of TDS/TCS he also covered under Vivad se Vish was?
The disputed tax includes tax related to tax deducted at source (TDS) and tax collection at source (TCS) which are disputed and pending in appeal. However, if there is no dispute related to TDS or TCS and there is delay in depositing such TDS/TCS, then the dispute pending in appeal related to interest levied due to such delay will be covered under Vivad se Vishwas.

Are cases pending before DRP covered? What if the assessee has not filed objections with DRP and the AO has not yet passed the final order?
Yes, a person who has filed his objections before the DRP under section 144C of the Act and the DRP has not issued any direction on or before the specified date as well as a person in whose case the DRP has issued directions but the AO has not passed the final assessment order on or before the specified date, is eligible under Vivad se Vishwas. It is further clarified that there could be a situation where the AO has passed a draft assessment order before the specified date. Assessee decides not to file objection with the DRP and is waiting for final order to be passed by the AO against which he can file appeal with Commissioner (Appeals). In this situation even if the final assessment order is not passed on or before the specified date, the assessee would be considered as the appellant and would be eligible to settle his dispute under Vivad se Vishwas. Disputed tax in such case would be computed based on the draft order. In the declaration in Form No 1, the declarant in this situation should indicate in the appropriate schedule that time to file objection with DRP has not expired.

If CIT (Appeals) has given an enhancement notice, can the appellant avail the Vivad se Vishwas after including proposed enhanced income in the total assessed income?
The amendment proposed in the Vivad se Vishwas allows the declaration even in cases where CIT (Appeals) has issued enhancement notice on or before 31″ January, 2020. However, the disputed tax in such cases shall be increased by the amount of tax pertaining to issues for which notice of enhancement has been issued.

On issuance of this circular, circular no 7 of 2020 dated 4th March 2020 is hereby withdrawn.

Under Secretary to the Govt. of In

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Direct Tax Vivad se Vishwas Act, 2020- FAQs You must Know

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