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January 5, 2021

More than Rs 1 lakh crore tax demands cleaned up under Vivad se Vishwas scheme

by CA Shivam Jaiswal in Income Tax

More than Rs 1 lakh crore tax demands cleaned up under Vivad se Vishwas scheme

Vivad se Vishwas scheme is a direct tax scheme announced in Budget 2020, for settling tax disputes between individuals and the income tax department. Earlier, the scheme offered complete waiver on interest and penalty to the taxpayers with a full and final settlement of the dispute if the scheme was availed by 31st December, 2020.

In October 2020, the government had extended for the third time the deadline for making payment under the Vivad Se Vishwas scheme by three months to March 31, 2021 in wake of the Covid-19 pandemic. However, declarations had to be filed by December 31, 2020. But, considering the surge in Vivad se Vishwas scheme applications that got filed in December 2020 and demands of taxpayers, the government had extended the scheme by a month till 31st January, 2020.

What shall be the amount payable by the declarant under this scheme?

Nature of tax arrearAmount payable under this Act on or before 31.03.2021Amount payable under this Act on or after 01.04.2021
where the tax arrears are the aggregate amount of disputed tax, interest chargeable or charged on such disputed tax and penalty leviable or levied on such disputed taxamount of the disputed taxthe aggregate of the amount of disputed tax and 10% of disputed tax
where the tax arrears include the tax, interest or penalty determined in any assessment on the basis of search under section 132 or section 132A of the Income-tax Act.the aggregate of the amount of disputed tax and 25% of the disputed taxthe aggregate of the amount of disputed tax and 35% of disputed tax
where the tax arrears relate to disputed interest or disputed penalty or disputed fee.25% of disputed interest or disputed penalty or disputed fee30% of disputed interest or disputed penalty or disputed fee

What is the manner of payment under this scheme?

The designated authority shall, within 15 days from the date of receipt of the declaration, by order, determine the amount payable by the declarant in accordance with the provisions of this Act and grant a certificate to the declarant containing particulars of the tax arrears and the amount payable after such determination.

The declarant shall pay the amount determined within 15 days of the date of receipt of the certificate and intimate the details of such payment to the designated authority in the prescribed form and thereupon the designated authority shall pass an order stating that the declarant has paid the amount.

Any amount paid in pursuance of a declaration under this scheme shall not be refundable under any circumstances.

Rs 1 lakh crore of disputed tax to be settled under this Scheme

  • Nearly one-fifth of about 5 lakh entities locked in tax litigation with the government have opted for a dispute redressal scheme, helping settle around Rs 83,000 crore of contested amount.
  • This Scheme was an attempt to release Rs 9.32 lakh crore blocked in approximately 4.8 lakh appeals pending at various appellate forums.
  • Out of the pending cases, 96,000 have opted for the scheme to settle about Rs 83,000 crore (of disputed tax).
  • Under this exercise, more than Rs 1 lakh crore tax demands, which arose because of incorrect entries, have been cleaned up.
  • The litigation and appeal cases are before the Commissioner (Appeals) and tax tribunals to higher courts and in arbitration.
  • Once an entity opts for the scheme and pays the due tax, the cases are deemed to have been withdrawn from the forums, interest, penalty and prosecution are also withdrawn.

Government extended the date till January 31 to achieve a much higher figure. So that substantial number of cases which are pending will get settled under Vivad Se Vishwas scheme. A large proportion of entities opting to settle disputes are from the private sector. A large number of cases at the level of income tax appellate tribunal (ITAT), high court and the Supreme Court are decided in favour of the assesses, making participation in the amnesty scheme less encouraging. Approximately, 20% of cases at the SC, HC and ITAT are ruled in favour of the income tax department, and 40% are settled in favour of the tax department at commissioners of income tax (appeals) or CIT (A).

As per the scheme income tax disputes settled under it cannot be reopened in any other proceeding by the income tax department or any other designated authority. The extension of the deadline will come as relief for those individuals who want to settle their tax disputes without paying additional 10% penalty and interest. The extension will also give a breather to those individuals who were yet to do a cost-benefit analysis of the scheme and decide whether to opt for it or not.

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