Vivad Se Vishwas Scheme, 2024: Some FAQs By Adv. Narayan Jain & CA Dilip Loyalka

Reading Time: 29 minutes

 

 

Adv. Narayan Jain, National President, AIFTP

 

 

 

 

CA Dilip Loyalka

 

The Direct Tax Vivad Se Vishwas Scheme, 2024 was announced  on 23^rd July 2024 in course of presentation of the Union Budget 2024 and has come into force from 01^st October 2024 vide Notification No. 103/2024-Income Tax dated 19^th September 2024 for settling appeals before CIT(A), ITAT, High Court, Supreme Court, revision petition u/s 264 before CIT, cases before DRP, Writ proceedings etc. Where assessee desires to settle quantum appeal i.e. disputed tax, he will be required to pay entire disputed tax (including surcharge and cess). The salient features of the scheme are discussed in this Article.

1. What disputes can be settled under the scheme?

As per Section 89 of the Direct Tax Vivad Se Vishwas Scheme, 2024 contained in Chapter IV of the Finance (No.2) Act, 2024, the following disputes can be settled under the scheme:

(a)    Appeal (by the assessee or department) pending before CIT(A), ITAT, High Court and Supreme Court or writ petition or SLP pending before High Court or Supreme Court as on 22.07.2024.

(b)    Where an objection before DRP is filed and DRP has not issued any direction on or before 22.07.2024

(c)    Where a direction is issued by DRP u/s 144C(5) but the A.O has not completed the assessment U/s 144C(13) on or before 22.07.2024

(d)    Revision petition pending before CIT u/s 264 on 22.07.2024.

2.       Which disputes have been specifically excluded from the scheme?

As per Section 96 of the Direct Tax Vivad Se Vishwas Scheme, 2024 the following disputes have been specifically excluded from the scheme:

a) Assessment Year for which assessment is made pursuant to search u/s 143(3),144, 147, 153A or 153C on the basis of search initiated u/s 132 or 132A

b) Assessment Year in respect of which prosecution has been instituted on or before date of filing declaration

c) Tax arrears relating to undisclosed income from a source located outside India or undisclosed asset located outside India

d) Tax arrears relating to assessment or reassessment made on the basis of information received under agreement referred to in section 90 or section 90A

e) Assessee in respect of whom there is any detention order under Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974 (COFEPOSA)

f) Assessee notified u/s 3 of Special Court (Trial of Offences relating to Transactions in Securities) Act, 1992

g) Any person in respect of whom prosecution for any offence punishable under the provisions of the Unlawful Activities (Prevention) Act, 1967, the Narcotic Drugs and Psychotropic Substances Act, 1985, the Prohibition of Benami Property Transactions Act, 1988, the Prevention of Corruption Act, 1988, the Prevention of Money Laundering Act, 2002 has been instituted on or before the filing of the declaration or such person has been convicted of any such offence punishable under any of these Acts.

h) Any person in respect of whom prosecution has been initiated by an Income-tax authority for any offence punishable under the provisions of the Bharatiya Nyaya Sanhita, 2023 or for the purpose of enforcement of any civil liability under any law for the time being in force, on or before the filing of the declaration or such person has been convicted of any such offence consequent to the prosecution initiated by an Income-tax authority.

2. How much amount payable by the declarant?

As per Section 90 of the Direct Tax Vivad Se Vishwas Scheme, 2024, amount payable by the declarant is as under:

i) Where assessee is an appellant after 31.01.2020 but on or before 22.07.2024 and desires to settle tax arrears i.e. disputed tax and interest and penalty on such disputed tax, he will be required to pay entire disputed tax (including surcharge and cess). On payment of such tax, the interest and penalty will be waived provided the payment is made on or before 31.12.2024.

In case the payment is made on or after 01.01.2025 the assessee shall be required to make an additional payment of 10% of the disputed tax.

However, if the appeal is filed by Department or the Department has lost an issue, assessee is required to pay 50% of disputed tax (including surcharge and cess). if payment is made on or before 31.12.2024 and if payment is made on or after 01.01.2025, 55% of the disputed tax is to be paid. On payment of the disputed tax, interest and penalty would be waived.

1. ii) Where assesse is an appellant before 01.02.2020 at the same appellate forum and desires to settle tax arrears i.e. disputed tax and interest and penalty on such disputed tax, he will be required to pay 110% of the disputed tax (including surcharge and cess). On payment of such disputed tax, interest and penalty will be waived provided the payment is made on or before 12.2024. In case the payment is made on or after 01.01.2025 the assessee shall be required to pay 125% of the disputed tax.

However, if the appeal is filed by Department or in case the Department has lost an issue, assessee is required to pay 55% of disputed tax if payment is made on or before 31.12.2024 and if payment is made on or after 01.01.2025, 62.5% of the disputed tax is to be paid. On payment of the disputed tax, interest and penalty would be waived.

iii) Where the assessee is an appellant after 31.01.2020 but on or before 22.07.2024 and desires to settle appeals relating to interest, fees or penalty he will be required to pay 25% of interest, fees or penalty as the case may be provided the payment is made on or before 31.12.2024.

In case the payment is made on or after 01.01.2025 the assessee shall be required to pay 30% of the interest, fees or penalty as the case may be, in place of 25%. On payment of interest, fees or penalty, the balance fees, interest or penalty as the case may be, shall be waived.

1. iv) Where assesse is an appellant before 01.02.2020 at the same appellate forum and desires to settle appeals relating to interest, fees or penalty he will be required to pay 30% of interest, fees or penalty as the case may be provided the payment is made on or before 12.2024.

In case the payment is made on or after 01.01.2025 the assessee shall be required to pay 35% of the interest, fees or penalty as the case may be, in place of 30%. On payment of interest, fees or penalty, the balance fees, interest or penalty as the case may be, shall be waived.

Where the subject matter of appeal of the assessee is covered in favour of assessee by the order of a higher appellate authority in assessee’s own case for any year, the assessee is required to pay only 50% of the tax determined as per above calculation. Further in case the issue is covered by the order of the Supreme Court in assessee’s own case, there exists no dispute and nothing is payabe for such ground, the assessee is required to pay disputed tax on the other grounds of the appeal, if any.

Also refer FAQ 32 of Circular No. 12 of 2024 dated 15.10.2024.

           CBDT vide circular no. 12 of 2024 dated 15.10.2024 in FAQ No. 3 has clarified as under-

S No.	Nature of tax arrears	Amount payable where declaration made on or before 31.12.2024	Amount payable where declaration made on or after 1.1.2025 & before last date
1	Tax arrears include disputed tax, interest, penalty (New Appellant)	100% of disputed tax	110% of disputed tax
2	Tax arrears include disputed tax, interest, penalty (Old Appellant)	110% of disputed tax	120% of disputed tax
3	Tax arrears include disputed tax, interest/ penalty/ fee (New Appellant)	25% of disputed interest/ penalty/ fee	30% of disputed interest/ penalty/ fee
4	Tax arrears include disputed tax, interest/ penalty/ fee (Old Appellant)	30% of disputed interest/ penalty/ fee	35% of disputed interest/ penalty/ fee

Where an appeal/ writ petitions/ SLP is filed by the income tax authority on any disputed issue, the amount payable shall be 50% of the amount payable specified in the Table above.

Where an appellant before the Commissioner (Appeals)/ Joint Commissioner (Appeals) or objections are the filed before the Dispute Resolution Panel on any issue on which he has already got a decision in his favour from the ITAT (where the decision on such issue is not reversed by the High Court or the Supreme Court) or the High Court (where the decision on such is not reversed by the Supreme Court), the amount payable shall be 50% of the amount payable specified in the Table above.

Where an appeal is filed by the appellant on any issue before the ITAT on which he has already got a decision in his favour from the High Court (where the decision on such issue is not reversed by the Supreme Court), the amount payable shall be 50% of the amount payable specified in the Table above.

4. What is the procedure for filing of declaration and particulars to be furnished?
5. As per Section 91 to Section 95 of the Direct Tax Vivad Se Vishwas Scheme, 2024, the procedure for filing of declaration under VSV Scheme is as under:

In order to opt for the scheme the assessee is required to make an online declaration in the prescribed Form No.1.

The declarant is also required to furnish an undertaking in the prescribed form and manner waiving his right, whether direct or indirect, to seek or pursue any remedy or any claim in relation to the tax arrears for which declaration under the scheme is filed, which may otherwise be available to him under any law for the time being in force, in equity, under statute or under any agreement entered into by India with any country or territory outside India whether for protection of investment or otherwise.

The designated authority shall, within a period of 15 days from the date of receipt of the declaration determine the amount payable by the declarant and grant a certificate to the declarant in Form No. 2 containing particulars of the tax arrear and the amount payable after such determination. 

From date on which certificate is issued by designated Authority, the appeal pending before the Income Tax Appellate Tribunal or Commissioner (Appeals) or Joint Commissioner (Appeals), in respect of the disputed income or disputed interest or disputed penalty or disputed fee and tax arrear shall be deemed to have been withdrawn.

The declarant is required to pay the amount determined within 15 days of the date of receipt of the certificate by him and intimate the details of such payment to the designated authority in Form No. 3 along with the proof of withdrawal of appeal/writ before High Court or Supreme Court. The department shall also withdraw the appeal/writ before the issuance of final certificate for settling dispute.

On receipt of intimation of payment in prescribed from, the designated authority shall pass an order stating that the declarant has paid the amount in Form No. 4.

The designated authority shall not institute any proceeding in respect of an offence; or impose or levy any penalty; or charge any interest under the Income-tax Act in respect of tax arrear which has been settled under the scheme.

However, declarant shall not be conferred any benefit, concession or immunity in any proceedings other than mentioned above.

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

The order determining the amount payable shall be conclusive as to the matters stated therein and no matter covered by such order shall be reopened in any other proceeding under the Income-tax Act or under any otherlaw for the time being in force or under any agreement, whether for protection of investment or otherwise, entered into by India with any other country or territory outside India.

The Scheme provides that filing of declaration will not set any precedence and it cannot be claimed in any other proceedings that the taxpayer or the Department has conceded its tax position by settling the dispute.

The declaration shall be presumed to be non-est (never to have been made) in the undermentioned cases –

(a)    any material particular furnished in the declaration is found to be false at any stage;

(b)    the declarant violates any of the conditions referred under this scheme;

(c)    the declarant acts in any manner which is not in accordance with the undertaking given by him.

All the proceedings and claims which were withdrawn under the scheme and all the consequences under the Income-tax Act against the declarant shall be deemed to have been revived in above cases.

5. What is the definition of disputed income, disputed tax, disputed fee, disputed interest and disputed penalty?

As per Section 89 of the Scheme, 2024, the definitons are as under:

“disputed income”, in relation to an assessment year, means the whole or so much of the total income as is relatable to the disputed tax.

 “disputed tax”, in relation to an assessment year or financial year, as the case may be, means the income-tax including surcharge and cess (hereafter in this Chapter referred to as the amount of tax) payable by the appellant under the provisions of the Income-tax Act, as computed hereunder:—

(A)   in a case where any appeal, writ petition or special leave petition is pending before the appellate forum as on the specified date, the amount of tax that is payable by the appellant if such appeal or writ petition or special leave petition was to be decided against him;

(B)   in a case where objection filed by the appellant is pending before the Dispute Resolution Panel u/s 144C of the Income-tax Act as on the specified date, the amount of tax payable by the appellant if the Dispute Resolution Panel was to confirm the variation proposed in the draft order;

(C)   in a case where Dispute Resolution Panel has issued any direction under sub-section (5) of section 144C of the Income-tax Act and the Assessing Officer has not completed the assessment under sub-section (13) of that section on or before the specified date, the amount of tax payable by the appellant as per the assessment order to be passed by the Assessing Office in pursuance of the said assessment under sub-section (13) thereof;

(F)    in a case where an application for revision u/s 264 of the Income-tax Act is pending as on the specified date, the amount of tax payable by the appellant if such application for revision was not to be accepted:

Provided that in a case where the dispute in relation to an assessment year relates to reduction of tax credit under section 115JAA or section 115JD of the Income-tax Act, or any loss or depreciation computed thereunder, the appellant shall have an option either to include the amount of tax related to such tax credit or loss or depreciation in the amount of disputed tax, or to carry forward the reduced tax credit or loss or depreciation, in such manner as may be prescribed.;

“disputed fee” means the fee determined under the provisions of the Income-tax Act, 1961 in respect of which appeal has been filed by the appellant.

 “disputed interest” means the interest determined in any case under the provisions of the Income-tax Act, 1961, where—

(i)     such interest is not charged or chargeable on disputed tax.

(ii)    an appeal has been filed by the appellant in respect of such interest.

 “disputed penalty” means the penalty determined in any case under the provisions of the Income-tax Act, 1961, where—

(i)     such penalty is not levied or leviable in respect of disputed income or disputed tax, as the case may be.

(ii)    an appeal has been filed by the appellant in respect of such penalty.

“Old appellant” refers to a declarant who became an appellant on or before 31st January 2020, in respect of any tax arrear and continues to be an appellant at the same appellate forum on 22^nd July 2024 in respect of such tax arrear.

“New appellant” refers to any case other than an old appellant case where the declarant became an appellant after 31st January 2020 but on or before 22^nd July 2024.

6. What are the various Forms specified in the Scheme?

CBDT vide circular no. 12 of 2024 dated 15.10.2024 in FAQ No. 4 has clarified as follows-

           Four separate Forms have been notified for the purposes of the said Scheme. These are as under:

           Form – 1: Form for the filing declaration and undertaking by the declarant

           Form – 2: Form for Certificate to be issued by Designated Authority

           Form – 3: Form for the Intimation of payment by the declarant

           Form – 4: Order for Full and Final Settlement of tax arrears by Designated Authority

           The Scheme also provides Form-1 shall be filed separately for each dispute, provided that where appellant and the income-tax authority, both have filed an appeal in respect of the same order, single Form-1 shall be filed in such a case.

           The intimation of payment is to be made in Form-3 and is to be furnished to the Designate Authority along with proof of withdrawal of appeal, obligation, application, writ petition, special leave petition, or claim.

7. What are the various timelines specified in the Scheme?

• CBDT vide circular no. 12 of 2024 dated 15.10.2024 in FAQ No. 5 has clarified various timelines specified in the Scheme, as follows:
• i) Declaration and Undertaking shall be filed by the tax payer in Form-1 on or before 31.12.2024 to keep the amount payable on the lower threshold. In case of filing the declaration and undertaking beyond 31.12.2024, amount payable will increase as specified in rates Table-1 above.
• ii) The Designated Authority shall issue Form-2 within a period of fifteen days from the date of receipt of the declaration to determine the amount payable by the taxpayer.

iii) The tax-payer shall pay the amount as determined in Form-2 within a period of fifteen days from the date of receipt of the certificate, and shall intimate the details of such payment in Form-3.

           Upon receipt of Form-3, Designated Authority shall pass an order in Form-4 stating that the taxpayer has paid the full and final amount.

8. Which assessments shall be considered to have been made on the basis of search initiated under section 132/132A of the Act?

CBDT vide circular no. 12 of 2024 dated 15.10.2024 in FAQ No. 6 has clarified as under-

           Survey cases have not been excluded under the DTVSV Scheme, 2024. Only search cases have been excluded.

9. A taxpayer is evaluating to close few years in DTVSV Scheme, 2024 out of 4 rollback years. Whether Advance Pricing Agreement can be pursued for remaining years of the 4 rollback years?
10. CBDT vide circular no. 12 of 2024 dated 15.10.2024 in FAQ No. 7 has clarified as under-

           As per CBDT Circular 15/2015 dt. 10.6.2015—

           “The applicant does not have the option to choose the years for which it wants to apply for rollback. The applicant has to either apply for all the four years or not apply at all. However, if the covered international transaction(s) did not exist in a rollback year or there is some disqualification in a rollback year, then the applicant can apply for rollback for less than four years.”

Thus, in certain exceptions, the rollback period could be less than 4 years also. On the same analogy, if few years are settled in the Scheme, the rollback can be applied for the remaining years.

10. Suppose a taxpayer is eligible to apply for DTVSV Scheme, 2024 as his appeal is pending as on 22.7.2024. But subsequently, before the taxpayer could file declaration under the DTVSV Scheme, 2024, his appeal has been disposed off. Can such a taxpayer still file declaration under the Scheme?

CBDT vide circular no. 12 of 2024 dated 15.10.2024 in FAQ No. 8 has clarified as under-

           The DTVSV Scheme, 2024 is a Scheme for settlement of tax disputes. Where a decision has been given prior to the taxpayer filing a declaration, there is no dispute pending unless the taxpayer or the Department again prefers an appeal. Therefore, where an appeal is pending as on 22.7.2024 but is not pending as on the date of making declaration under the Scheme, such cases shall not be eligible for the Scheme.

           However, in cases where a taxpayer files declaration under section 90 of the Scheme and intimates the same to the appellate authority, the concerned appellate authority may consider not disposing the appeal of the taxpayer.

11. Extant provisions of DTVSV Scheme, 2024 does not cover cases where Taxpayer would have received orders but the time limit to file an appeal / special leave petition had not expired as on 22 July 2024. Is there any possibility that such cases can be covered in the Scheme?

CBDT vide circular no. 12 of 2024 dated 15.10.2024 has clarified in FAQ No. 9 as under-

As per section 89(1) of the Scheme, it is clear that the appeal has to be pending as on the specified date i.e. 22.07.2024 for an appellant to be eligible for the Scheme. The definition of appellant also covers cases where the DRP has issued directions u/s 144C(5) but the AO has not completed the assessment u/s 144C(13). Therefore, the Scheme does not provide for eligibility of those cases where an appeal is not pending as on 22.7.2024 except for DRP cases referred above.

           In this connection it may be noted that in the VSV 2020 scheme, assessee could have filed VSV is the time for filing appeal had not expired on 22.7.2024.

12. Where disputed tax contains qualifying tax arrears along-with non-qualifying tax arrears (such as, tax arrears mentioned in section 96(a) for eg. tax arrears in respect of undisclosed foreign income), whether the taxpayer can apply for the Scheme in such a case?

CBDT vide circular no. 12 of 2024 dated 15.10.2024 in FAQ No. 10 has clarified as under-

           As per section 91(2) of the Scheme, after filing of declaration, appeals before ITAT/ CIT(A)/ JCIT(A) are deemed to be withdrawn from the date of issue of certificate by the Designated Authority. Further as per section 91(3) of the Scheme, the taxpayer is required to withdraw appeals and furnish proof thereof along with intimation of payment u/s 92(2) of the Scheme. Therefore, the Scheme does not envisage settling issue in part. The dispute has to be settled in full as per the Scheme. Thus, where there are non-qualifying tax arrears, such disputes are not eligible to be covered under the Scheme.

13. Can a taxpayer settle penalty appeal while continuing to litigate the associated quantum appeal?

CBDT vide circular no. 12 of 2024 dated 15.10.2024 in FAQ No. 11 has clarified as under-

           Reference may be made to section 89(1)(i) of the Scheme, which provides the definition of ‘disputed penalty’. It provides that the disputed penalty is such penalty which is not levied or leviable in respect of disputed income or disputed tax. Thus, 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. 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 giving details of both disputed tax appeal and penalty appeal. However, he would be required to pay relevant percentage of disputed tax only.

14. If there is substantive addition as well as protective addition in the case of same assessee for different assessment year, how will that be covered? Similarly, if there is substantive addition in case of one assessee and protective addition on same issue in the case of another assessee, how will that be covered under DTVSV Scheme, 2024?

CBDT vide circular no. 12 of 2024 dated 15.10.2024 in FAQ No. 12 has clarified as under-

           Where substantive as well as protective additions have been made whether in the case of same taxpayer for different assessment years or in the hands of different taxpayers, then either of the two additions i.e. substantive or protective can be settled if the substantive addition is eligible for settlement under the Scheme. On settlement of dispute related to substantive or the protective addition, AO shall pass rectification order deleting the protective or the substantive addition, as the case may be, relating to the same issue in the case of the same taxpayer or .in the case of another taxpayer.

15. Are disputes relating to wealth tax, security transaction tax, commodity transaction tax and equalisation levy covered?

CBDT vide circular no. 12 of 2024 dated 15.10.2024 in FAQ No. 13 has clarified as under—

           No.

           Only disputes relating to income-tax are covered.

16. If a taxpayer has requested for withdrawal of appeal under section 91(3) of the Scheme and the appeal is not yet allowed to be withdrawn, how will the taxpayer furnish proof of withdrawal in such cases?

CBDT vide circular no. 12 of 2024 dated 15.10.2024 in FAQ No. 14 has clarified as under-

           Where assessee has made request for withdrawal and such request is under process, proof’ of request made shall be enclosed.

17. 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 22.7.2024′? Will such cases be covered under the Scheme?

CBDT vide circular no. 12 of 2024 dated 15.10.2024 in FAQ No. 15 has clarified as under-

           A taxpayer who has filed a waiver application is not an appellant u/s 89(1)(a) of the Scheme. Therefore, such cases are not covered.

18. If JCIT(Appeals)/ CIT(Appeals) has given an enhancement notice, can the appellant avail the DTVSV Scheme, 2024 after including proposed enhanced incoming the total assessed income?

CBDT vide circular no. 12 of 2024 dated 15.10.2024 in FAQ No. 16 has clarified as under-

Yes. Where an appeal is pending before the JCIT(A)/ CIT(A), the disputed tax is the amount that is payable by appellant if such appeal was to be decided against the appellant. This is as per the definition of ‘disputed tax’ in u/s 89(1)(j) of the DTVSV Scheme, 2024, Hence, where JCIT(A)/ CIT(A) has given enhancement notice, the taxpayer can avail the Scheme after including proposed enhanced income in the total assessed income. Appropriate calculation of disputed tax is accordingly provided in the relevant Schedules of Form-1.

19. Whether taxpayers can settle appeals under DTVSV Scheme, 2024 using the refunds which they are expecting from the department?

CBDT vide circular no. 12 of 2024 dated 15.10.2024 in FAQ No. 17 has clarified as under-

           As per section 92(2) of the Scheme, the declarant shall pay the amount determined under section 92(1) of the Scheme within a period of fifteen 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. There is no provision in the Scheme allowing payment of the amount determined u/s 92(1) of the Scheme through adjustment of any refund expected from the Department.

20. If taxes are paid after availing the benefits of the DTVSV Scheme, 2024 and later the taxpayer decides to take refund of these taxes paid, would it be possible?

CBDT vide circular no. 12 of 2024 dated 15.10.2024 in FAQ No. 18 has clarified as under-

           No. Any amount paid in pursuance of a declaration made under the Scheme shall not be refundable under any circumstances as per provisions of section 94(1) of the Scheme.

21. Will delay in deposit of TDS/TCS be also covered under the Scheme?

CBDT vide circular no. 12 of 2024 dated 15.10.2024 in FAQ No. 19 has clarified as under-

           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 the Scheme.

22. Where assesses settles TDS appeal (against order u/s 201 of the Act) as deductor of TDS, will credit of such tax be allowed to deductee?

CBDT vide circular no. 12 of 2024 dated 15.10.2024 in FAQ No. 20 has clarified as under-

Yes. However, the credit will be allowed as on the date of settlement of dispute by the deductor and hence the interest as applicable to deductee shall apply.

23. When assessee settles his own appeal under DTVSV Scheme. 2024, will consequential relief be available to the deductor in default from liability determined under TDS order u/s 201 of the Act?

CBDT vide circular no. 12 of 2024 dated 15.10.2024 in FAQ No. 21 has clarified as under-

           Yes. In such a case, the deductor in default would not be required to pay the corresponding TDS amount. However, he would be required to pay the interest under sub-section (1A) of section 201 of the Act. If such levy of interest under sub-section (1A) of section 201 of the Act qualifies for DTVSV Scheme, 2024, the deductor in default can settle this disputed interest by filing up the relevant schedule of disputed interest.

24. Where assessee settles TDS liability as deductor of under DTVSV Scheme, 2024(i.e. against order u/s 201), when will he get consequential relief of expenditure allowance under proviso to section 40(a)(i)/(ia) of the Act?

CBDT vide circular no. 12 of 2024 dated 15.10.2024 in FAQ No. 22 has clarified as under-

           In such cases, the deductor shall be entitled to get consequential relief of allowable expenditure under proviso to section 40(a)(i)/(ia) of the Act in the year in which the tax was required to be deducted, if the disallowance under section 40(a)(i)/(ia) of the Act is with respect to same issue on which order under section 201 has been issued.

           However, if the assessee has already claimed deduction of the same amount under   section 40(a)(i)/(ia) of the Act in subsequent year on account of recovery of TDS in such subsequent year, he shall not be entitled to consequential relief under section 40(a)(i)/(ia) of the Act on the basis of the settlement under DTVSV Scheme, 2024.

           In case, in the order under section 143(3) there are other issues as well, and the appellant wants to settle the dispute with respect to order under section 143(3) of the Act as well, then the disallowance under section 40(a)(i)/(ia) of the Act relating to the issue on which he has already settled liability under section 201 of the Act would be ignored for calculating disputed tax.

25. A trust has been denied registration u/s 12AA of the Act. Whether appeal against such order is eligible for DTVSV Scheme, 2024?

CBDT vide circular no. 12 of 2024 dated 15.10.2024 in FAQ No. 23 has clarified as under-

           No.

26. An order has been set aside, fully or partially, to the AO. Can the taxpayer avail the DTVSV Scheme, 2024 if the set-aside matter is pending as on 22.7.2024?

CBDT vide circular no. 12 of 2024 dated 15.10.2024 in FAQ No. 24 has clarified as under-

           According to the Scheme, an appeal which is pending as on 22.7.2024 shall be eligible for settlement. A set-aside matter to the AO is not an appeal pending as such. Therefore, set-aside matters to the AO, whether fully set-aside or partially set-aside are not covered under the Scheme.

27. Where there are two appeals filed for an assessment year in respect of the same order – one by the appellant and one by the tax department, whether the appellant can opt for only one appeal? How would the disputed tax be computed in such a cases?

CBDT vide circular no. 12 of 2024 dated 15.10.2024 in FAQ No. 25 has clarified as under-

           Yes. The appellant has an option to opt for settling appeal filed by him or appeal filed by the department or both. This has to be specified in the declaration to be made in Form-1. Also refer to the proviso to Rule 4 of the Direct Tax Vivad se Vishwas Rules, 2024 which is reproduced as under:-“where the appellant and the income-tax authority have both filed an appeal or writ petition or special leave petition in respect of the same order, single Form-1 shall be filed by the appellant.”

           Accordingly, relevant Schedules in Form-1 have to be filled out by the appellant and the disputed tax would be worked out.

28. If a writ has been filed against a notice issued under section 148/ 148A of the Act and no assessment order has been passed consequent to that notice, whether such cases are eligible under the Scheme?

CBDT vide circular no. 12 of 2024 dated 15.10.2024 in FAQ No. 26 has clarified as under-

           The income in such cases is yet to be determined. Therefore, the disputed tax is not ascertainable.

           Thus, the taxpayer would not be eligible for the Scheme in such cases.

29. If appeal is filed before High Court or Supreme Court and is pending for admission as on 22.7.2024, whether the case is eligible for DTVSV Scheme, 2024?

CBDT vide circular no. 12 of 2024 dated 15.10.2024 in FAQ No. 27 has clarified as under-

           Yes.

30. Whether cross objections filed and pending as on 22.7.2024 will also be covered by the Scheme?

CBDT vide circular no. 12 of 2024 dated 15.10.2024 in FAQ No. 28 has clarified as under-

           Yes.

31. Whether Miscellaneous Application (MA) pending as on 22.7.2024 will also be covered by the Scheme?

CBDT vide circular no. 12 of 2024 dated 15.10.2024 in FAQ No. 29 has clarified as under-

           No. MA is not an appeal. Therefore, there is no pending appeal as on 22.7.2024.

32. Whether the DTVSV Scheme, 2024 can be availed in a case where the enforceability of an assessment order passed by AO has been stayed by the High Court or Supreme Court?

CBDT vide circular no. 12 of 2024 dated 15.10.2024 in FAQ No. 30 has clarified as under-

           No. A quantum appeal pending on 22.7.2024 can be settled under the Scheme. Where an assessment order has been stayed, it does not tantamount to an appeal pending as on 22.7.2024.

33. The assessment order under section 143(3) of the Act was passed in the case of an assessee for an assessment year. The said assessment order is pending with ITAT. Subsequently another order under section 147/143(3) was passed for the same assessment year and that is pending with CIT (Appeals)? Could both or one of the orders be settled under DTVSV Scheme, 2024?

CBDT vide circular no. 12 of 2024 dated 15.10.2024 in FAQ No. 31 has clarified as under-

           The appellant in this case has an option to settle either of the two appeals or both appeals for the same assessment year.

           As per rule 4(1) of the Direct Tax Vivad se Vishwas Rules, 2024, the declaration shall be filed separately in respect of each order. Therefore, if a taxpayer decides to settle both appeals then he has to file separate declaration for the two orders.

34. There is no provision for 50% concession in appeal pending in HC on an issue where the assesses has got relief on that issue from the Supreme Court’?

CBDT vide circular no. 12 of 2024 dated 15.10.2024 in FAQ No. 32 has clarified as under-

           If the appellant has got decision in his favour from Supreme Court on an issue, there is no dispute now with regard to that issue and he need not settle that issue. If that issue is part of the multiple issues, the disputed tax may be calculated on other issues considering nil tax on this issue.

35. Addition was made u/s 143(3) on two issues whereas appeal is filed only for one addition. Whether interest and penalty be waived for both additions.

CBDT vide circular no. 12 of 2024 dated 15.10.2024 in FAQ No. 33 has clarified as under-

           Under DTVSV Scheme, 2024 interest and penalty will be waived only in respect of the issue which is disputed in appeal and for which declaration is filed. Hence, for the undisputed issue, the tax, interest and penalty shall be payable.

36. Once declaration is filed under DTVSV Scheme, 2024, and for financial difficulties, payment is not made accordingly, will the declaration be null and void?

CBDT vide circular no. 12 of 2024 dated 15.10.2024 in FAQ No. 34 has clarified as under-

Yes. As per provisions of section 91(5) of the Scheme, it shall be deemed as if the declaration has not been made.

37. Whether the immunity from prosecution is only for the declarant or also for the Director of the company or partner of the firm with respect to the disputes settled under DTVSV Scheme, 2024?

CBDT vide circular no. 12 of 2024 dated 15.10.2024 in FAQ No. 35 has clarified as under-

           If a dispute has been settled under the Scheme, the immunity from prosecution with respect to that dispute shall also extend to the director / partner of company / firm (being the declarant) in respect of same dispute under section 278B of the Act.

38. Whether reopening is permitted on issues which were not subject matter of appeal for which VSV scheme has been opted?

the scheme, issues in the appeal are only settled. Issues not covered in the appeal can be reopened.

Yes. There is no bar in making payment at different times for different declarations. Assessee can make payment for a declaration before 31 December and after 31 December for other declaration subject to additional payment.

38. What will be the consequence of making payment beyond 15 days of the receipt of the certificate from the Designated Authority?

There is no provision of accepting payment beyond 15 days of the receipt of the certificate, therefore such payments may not be considered as payment under the scheme unless such relaxation is announced later.

           The scheme further provides the tax paid under the scheme cannot be refunded under any circumstance. At best, assessee can ask for adjustment of the tax paid with the disputed tax.

41. Where an appeal has been heard before 22nd July 2024, but order has not been pronounced, can assessee opt for the scheme?

In case the appeal is pending on 22nd July 2024, the assessee can opt for the scheme.

41. Where assessee has filed an appeal with petition for condonation of delay prior to 22nd July 2024 and the delay has not yet been condoned, can assessee opt for VSV scheme?

The following judgment was pronounced by the Supreme Court under KVSS 1998, in the case of CIT v. Shatrusailya Digvijaysingh Jadega [2005] 277 ITR 435 (SC) wherein it has been held that:-

           When a section contemplates pendency of an appeal, what is required for its application is that an appeal should be pending and in such a case there is no need to introduce the qualification that it should be valid or competent. Whether an appeal is valid or competent is a question entirely for the appellate court before whom the appeal is filed to decide and this determination is possible only after the appeal is heard but there is nothing to prevent a party from filing an appeal which may ultimately be found to be incompetent, e.g., when it is held to be barred by limitation. From the mere fact that such an appeal is held to be unmaintainable on any ground whatsoever, it does not follow that there was no appeal pending before the Court.

           Since the assessee has filed appeal prior to 22nd July 2024, and the appeal has not been rejected on or before 22 July 2024, the assessee can opt for VSV scheme,

43. Where CIT(A) has dismissed the appeal and time for filing appeal before ITAT has expired before 23rd July 2024 and assessee furnished a belated appeal with condonation of delay after 22nd July 2024 but before 16th August 2024 (before Finance (No. 2) Act, 2024 was passed) can he opt for VSV scheme?

The scheme does not specifically provide for the appeals for which due date u/s 249 has expired on or before 23^rd July 2024 but appeal is filed after 22^nd July 2024 with condonation of delay.

           However, Supreme Court in the case of CIT v. Shatrusailya Digvijaysingh Jadega [2005] 277 ITR 435 (SC) in relation to KVSS 1998 referring to Raja Kulkarni v. State of Bombay AIR 1954 SC 73, held that –

           When a section contemplates pendency of an appeal, what is required for its application is that an appeal should be pending and in such a case there is no need to introduce the qualification that it should be valid or competent. Whether an appeal is valid or competent is a question entirely for the appellate court before whom the appeal is filed to decide and this determination is possible only after the appeal is heard but there is nothing to prevent a party from filing an appeal which may ultimately be found to be incompetent, e.g., when it is held to be barred by limitation. From the mere fact that such an appeal is held to be unmaintainable on any ground whatsoever, it does not follow that there was no appeal pending before the Court.

           Further, CBDT Circular No. 33 of 2016 dated 12.9.2016 in relation to Direct Tax Dispute Resolution Scheme, 2016 in FAQ No. 6 opined that a declarant shall be eligible for the Scheme, if:

(i)     the time limit for filing of appeal u/s 249 of the Income-tax Act, 1961 has got barred by limitation on or before 29.02.2016 (corresponding to 22.07.2024 under the VSV Scheme)

(ii)    the appeal with condonation application has been filed before Commissioner (Appeals) before 01.06.2016(date of commencement of scheme) and

(iii)   the delay in filing of such appeal is condoned by the Commissioner (Appeals)

           In view of the above, if the delay is condoned by the appellate authority the declaration can be filed and even if the decision on delay has not been pronounced, the declaration may be filed in view of the Apex Court decision.

           However, a clarification from CBDT will ease the situation.

44. Where prosecution has been instituted for violation of TDS provisions for an assessment year, can assessee opt for the VSV scheme for the additions in the quantum assessment for the same assessment year?

Similar question came before Bombay High Court in relation to VSV Scheme 2020, where in the High Court in the case of Macrotech Developers Limited v. Pr CIT [TS-207-HC-2021(BOM)] held that to hold that an assessee would not be eligible to file a declaration because there is a pending prosecution for the assessment year in question on an issue unrelated to tax arrear would defeat the very purport and object of the Vivad se Vishwas Act. The clarification given by way of answer to question No.73 vide circular No.21/2020 dated 04.12.2020 is not in consonance with section 9(a)(ii) of the Vivad se Vishwas Act and, therefore, the same would stand set aside and quashed.

44. Where assessee has disputed the tax rate and not the income, can it opt for VSV scheme?

The tax amount can be disputed on account of addition in income, disallowance of expenditure or even for taxing the income at a higher rate then applied by the assessee. Therefore, the assessee can opt for the scheme for disputes relating to tax rates.

44. Whether Vivad se Vishwas can be availed for proceedings pending before Authority of Advance Ruling (AAR)? If a writ is pending  against order passed by AAR in a High Court will that case be covered and how disputed tax to be 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 be eligible to apply for the Vivad se Vishwas. The disputed tax in that case shall be 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 be 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.

44. Whether appeals against Fee for default in furnishing statements under section 234E and Fee for default in furnishing Return of Income under section 234F are covered?

If appeal has been filed against imposition of fees under section 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 u/s 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 assessee 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.

44. 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?

1. 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 SLP 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.
2. In a case ITAT has quashed the assessment order based on lack of jurisdiction by the AO. The department has filed an appeal in HC which is pending. Is the assessee eligible to settle this dispute under Vivad se Vishwas and if yes how disputed tax be calculated as there is no assessment order?
3. The assessee in this case is eligible to settle the department appeal in HC. The amount payable shall be calculated at half rate of 100%, 110% or 120%, as the case may be, on the disputed tax that would be restored if the department was to win the appeal in High Court.
4. In the case of an assessee prosecution has been instituted and is pending in court. Is assessee eligible for the Vivad se Vishwas? Further, where the prosecution has not been instituted but the notice has been issued, whether the assessee is eligible for Vivad se Vishwas?
5. 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.
6. Addition was made u/s 143(3) on two issues whereas appeal filed only for one addition. Whether interest and penalty be waived for both additions.
7. Under Vivad Se Vishwas, interest and penalty will be waived only in respect of the issue which is disputed in appeal and for which declaration is filed. Hence, for the undisputed issue, the tax, interest and penalty shall be payable.
8. Where tax determined by Designated Authority is not acceptable can appeal be filed against the order of Designated Authority before ITAT, High Court or Supreme Court?
9. No. As per section 4(7), no appellate forum or arbitrator, conciliator or mediator shall proceed to decide any issue relating to the tax arrears mentioned in the declaration in respect of which order is passed by the Designated Authority or the payment of sum determined by the Designated Authority.
10. If loss is not allowed to be adjusted while calculating disputed tax, will that loss be allowed to be carried forward?
11. Where the dispute in relation to an assessment year relates to reduction of Minimum Alternate Tax (MAT) credit or reduction of loss or depreciation, the appellant shall have an option either to (i) include the amount of tax related to such MAT credit or loss or depreciation in the amount of disputed tax and carry forward the MAT credit or loss or deprecation or (ii) to carry forward the reduced tax credit or loss or depreciation. The form 1 of VSV provides the said option.
12. In case of appeals pending against both assessment and reassessment where addition is repeated on same issue, would tax be payable twice in respect of the same issue if both appeals are settled?
13. Since disputed tax in respect of repeated addition will be payable only once, both the assessment and reassessment appeals are required to be settled together. If there is a difference between tax liability in respect of such addition in assessment and reassessment, then higher of the two tax liabilities will be considered for computing disputed tax.
14. In respect of some loan, addition was made u/s 68 of the Act Appeal is pending before CIT(A) and the assessee is eligible for opting Vivad se Vishwas. After making the payment of tax under Vivad se Vishwas, can the assessee make entries in his books by crediting the said loan in his capital account?
15. No, Vivad se Vishwas is not an amnesty scheme. It only provides an option to settle appeals on contentious issues that are neither accepted by the Department nor the assessee.
16. Once declaration is filed by assessee u/s 4 of Vivad se Vishwas can the same be revised? If Yes, at what stage of the proceedings will the same be allowed?
17. Yes, declaration can be revised any number of times before the DA issues a certificate u/s 5(1) of Vivad se Vishwas.
18. Whether interest on refund u/s 244A is recoverable while processing VsV application?
19. There is no provision in the DTVSV Act which authorises recovery of interest paid earlier by the Department under Section 244A of the IT Act by adding the same to the amount of disputed tax. Cooperative Rabobank UA v. CIT W.P. 1025 of 2021 (Bom), TS-807-HC-2021(BOM). The said ruling was given in context of VSV 2020.

Adv. Narayan Jain and CA Dilip Loyalka are authors of famous books “How to Handle Income Tax Problems” and “Income Tax Pleading & Practice”. They are Life members of AIFTP. Email npjainadv@gmail.com