Tax department to settle all legacy disputes without overreach
The Centre is targeting the resolution of all 483,000 income tax-related legacy disputes worth Rs 9.32 lakh crore that are pending in various tribunals, and expects to unlock about 50% of the amount through its proposed one-time amnesty scheme Vivad se Vishwas (no dispute but trust), two officials said on Saturday.
In the Union budget presented on February 1, finance minister Nirmala Sitharaman announced the new scheme to resolve direct tax disputes. Under the scheme, penalty and interest will be waived if the disputed amount is paid before March 31, 2020.
“The target given to tax officials is to achieve 100% of the pending cases without any overreach, within the given time frame, which is March 31, extendable to June 30, 2020 with some additional amount,” one of the officials with direct knowledge of the matter said on condition of anonymity.
The two officials said the scheme was announced in the budget in great detail so that taxpayers were mentally prepared and could act swiftly when the scheme was passed by Parliament. The proposed scheme is likely to be passed early next month, when Parliament convenes for the second part of its budget session. The session will resume from March 2 after a recess and continue till April 3.
“It will not take more than two days to resolve a case, provided taxpayers are prepared in advance. But the deadline will not be extended,” the first official said.
The scheme will begin on the date on which provisions of the Direct Tax Vivad se Vishwas Bill come into force and will have deadlines as announced by the finance minister in the budget, the second official said on condition of anonymity.
In her budget speech in Parliament, Sitharaman said: “This year, I propose to bring a scheme similar to the indirect tax scheme ‘Sabka Vishwas’ for reducing litigations even in the direct taxes.” Presenting her first budget on July 5 last year, Sitharaman had proposed the ‘Sabka Vishwas’ legacy dispute resolution scheme for litigations related to excise and service tax. The scheme was implemented to reduce litigation in indirect taxes and it resulted in settling at least 189,000 cases.
The first official quoted above said: “The scheme is a great relief to both – the taxpayers would like to settle the vexed matter and move ahead; and for the government, it will unlock huge tax revenue.”
The second official said tax disputes consume a large part of resources both on the part of government as well as taxpayers and also deprive the government of the timely collection of revenue.
“It is felt that there is an urgent need to provide for resolution of pending income-tax disputes. This will not only benefit the government by generating timely revenue but also the taxpayers, who will gain by deploying the savings on account of time and resources towards their business activities,” he said.
The Direct Tax Vivad se Vishwas Bill, 2020, was introduced in Parliament on February 5. After the introduction of the bill, suggestions from various stakeholders were received. Based on these representations, certain amendments to the provisions of the bill were approved by the Union cabinet at a meeting held on February 12. The notice for these amendments, after obtaining the recommendation of the President, has been given to Parliament on February 14, the second official said.
According to the proposed scheme, appeals filed on or before January 31 are eligible for dispute settlement. In case a payment is made till March 31, the declarant will need to pay 100% of the disputed tax (125% of disputed tax in case of search cases). But the penalty and interest will be waived, the official said.
The taxpayer will have to pay 25% of the disputed penalty, interest or fee in case the dispute relates to disputed penalty, interest or fee only, while the balance 75% will be waived.
In case a payment is made after March 31, the declarant will need to pay 110% of the disputed tax (135% of disputed tax in case of search cases). But the penalty and interest will be waived, the second official added.
A taxpayer will have to pay 30% of the disputed penalty, interest or fee in case the dispute relates to disputed penalty, interest or fee only and balance 70% will be waived, he added.
There are, however, some exclusions. The cases that are not part of the scheme include a search case if the disputed tax is more than Rs5 crore, prosecution cases under the Income-tax Act, cases relating to undisclosed foreign assets, cases covered under the Narcotic Drugs and Psychotropic Substances Act and the Prevention of Money Laundering Act, the official added.