Introduction

The Minister of Finance, Ms Nirmala Sitharaman, introduced the Direct Tax Vivad se Vishwas Bill, 2020 on February 5, 2020. The Bill aims to provide a structure for settlement and resolution of unsettled tax disputes regarding income tax and corporation tax.

Any tax authority or/and the person whose appeal is pending before any forums, including the Supreme Court, the High Courts, the Income Tax Appellate Tribunals, and the Commissioner (Appeals), as of January 31, 2020, shall be considered as an appellant.

Resolution Mechanism

The Bill establishes a mechanism for resolution where an appellant can file a declaration to initiate resolution of pending direct tax dispute directly to the designated authority.

Based on such a declaration, the amount payable by the appellant against the dispute can be determined by the authority. The authority shall grant the certificate stating the particulars of the amount in 15 days from the date such declaration was made. The appellant is bound to pay the amount in 15 days from such a certificate and should intimate the authority about such payment.

The amount payable for resolution

The amount determined by the authority for resolution is based on whether the dispute relates to tax payment or payment of interest, penalty, or fee. If the appellant is required to pay any additional amount, and such amount is paid after 31st March 2020, Table 1 shall apply. 

Waiver of rights

The declaration made by the appellant shall be rendered invalid in case if: 

1. its particulars are found to be false, 

2. he violates any of the conditions referred to in the IT Act, or 

3. he seeks any remedy or claim in relation to that dispute.  

All proceedings and claims that were withdrawn based on such declaration will be deemed to have been revived.

Disputes not recovered

Those disputes that are not covered by this bill are:

1. where the prosecution has been initiated before the declaration is filed, 

2. which involve persons who have been convicted or are being prosecuted for offences under certain laws (such as the Indian Penal Code), or enforcement of civil liabilities, and 

3. involving undisclosed foreign income or assets

Our word

It should be noted that the settlement under this Bill does not set any precedence for either of the parties. The taxpayers get to keep their side of the bargain for cases whenever they would like to pursue such a case based on the merit of their right to litigate.

The only drawback of the Bill is that the taxpayer is required to settle all disputes in the proceeding. The taxpayer has no option to settle only limited issues and continue the litigation on the remaining.

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Author: Shrishti Zaveri