The Direct tax Dispute Resolution Scheme, 2016 Narendra Jain - - PowerPoint PPT Presentation

The Direct tax Dispute Resolution Scheme, 2016

Narendra Jain

Partner NNMS & Co, Chartered Accountants

BACKG CKGROUND UND



FM Budget Speech – There are about 3 Lakh tax cases pending with the first Appellate Authority with disputed amount of 5.5 Lakh Crores.



Budget 2016 therefore proposes to introduce Direct & Indirect Tax Dispute Resolution Scheme.



As per Fin Min Annual Report, 2014-15, total direct tax outstanding demand in FY 2013-14 is at Rs. 674,916 crores. Total amount locked up in appeal pending at CIT(Appeals) upto October 2014 is Rs. 383, 920 Crores.



The Finance Bill, 2016 has proposed to introduce ‘The Direct Tax Dispute Resolution Scheme, 2016’ in respect of the appeals pending before the Commissioner of Income tax/Wealth Tax- Appeals, the first appellate authority. The scheme also applies to dispute pending in respect of tax determined in consequence of retrospective amendment in the Income Tax Act or Wealth Tax Act.



The above scheme intends to settle the pending cases by way of giving an opportunity to the assessees to pay the disputed tax, interest & penalty thereon and resultant withdrawal of the pending appeal.



Sections 199 to 208 of the Bill contains the proposed scheme. The Central Government has powers to issue instructions for proper administration and removing difficulties.



(A) “designated authority” means an officer not below the rank of a Commissioner of Income-tax and notified by the Principal Chief Commissioner for the purposes of this Scheme;



(B) “tax arrear” means, the amount of tax, interest or penalty determined under the Income-tax Act or the Wealth-tax Act, 1957 in respect of which appeal is pending before the Commissioner of Income-tax (Appeals) or the Commissioner of Wealth-tax (Appeals) as on the 29.02.2016;



(C) ‘‘specified tax’’ means a tax— (i) the determination of which is in consequence of or validated by any amendment made to the Income-tax Act or the Wealth-tax Act with retrospective effect and relates to a period prior to the date on which the Act amending the Income-tax Act or the Wealth-tax Act, as the case may be, received the assent of the President; and (ii) a dispute in respect of such tax is pending as on the 29.02.2016.



Section 199 of the Bill provides for filing declaration on or after 01.06.2016, but before notified date.



In respect of ta tax ar arrea ear, r, or

• r spec

specifie ified ta tax, the amount payable by the declarant shall be determined as follows:

• In case of pending appeal related to tax arrear

ar being:

• Tax & interes

terest –

 Where disputed tax is not more than Rs 10 Lakhs, whole of such disputed tax & interest till the date of assessment or reassessment;  In any other case, whole of disputed tax + 25% of minimum penalty leviable + interest on disputed tax till the date of assessment or reassessment

• Pena

enalty lty – 25% of minimum penalty leviable + tax & interest payable on total income finally determined.

• In case of specified

cified tax, the amount of such tax determined



Where the declaration is in respect of tax arrear, appeal in respect of the disputed income, disputed wealth and tax arrear pending before the CIT(Appeals) or the CWT(Appeals), sh shall ll be be dee deemed med to to ha have be been en wi withd hdrawn.



Where the declaration is in respect of specified tax and the declarant has filed any appeal before CIT(A), CWT(A), Tribunal, High Court or Supreme Court; or any writ petition is pending before High Court/Supreme Court against such

• rder;
• r

the assessee initiated any arbitration/conciliation/mediation the same sh should

• uld be

be withd ithdra rawn & th the as asse sess ssee ee sh should

• uld fu

furnis rnish pro proof of

• f withd

ithdra rawal al alo along ng with ith declara eclaration

• tion. The

he withdraw ithdrawal al sh should

• uld be

be pri prior

• r to

to makin making decla declara rati tion

• n und

nder er the the sche scheme. Also the declarant to furnish an undertaking, in the prescribed form and manner, waiving his right, to seek or pursue any remedy or any claim.



As per Section 200(5),

• where any material furnished in the declaration is found to be false; or
• declarant violates conditions of the scheme; or
• declarant acts in manner not being in accordance with the scheme

it shall be presumed as if the declaration was never made under the Scheme and all the consequences under the Income-tax Act or the Wealth tax Act, under which the proceedings against the declarant are or were pending, shall be deemed med to to have been reviv ived ed. Further Amount paid in pursuance of declaration is not refundable.



As per Section 201, the designated authority shall, within a period of sixty days from the date of receipt of the declaration, determine the amount payable by the declarant in accordance with the provisions of this Scheme and grant a certificate to the declarant stating the sum payable.



The declarant shall pay the sum so determined within thirty days of the date of receipt of the certificate and intimate the fact of such payment to the designated authority along with proof and the designated authority shall thereupon pass an order stating that the declarant has paid the sum.



Such Order passed shall be conclusive as to the matters stated therein and no matter covered by such order shall be re-opened in any other proceeding under the Income-tax Act or the Wealth-tax Act or under any other law for the time being in force, or under any agreement.



As per Section 202, immunity shall be granted from:

• Instituting any proceedings in respect of an offence under the

Income-tax or wealth Tax Act; or;

• Imposition or waiver of penalty under the Income-tax Act or the

Wealth-tax Act, as the case may be, in respect of specified tax or tax arrear; or

• Waiver of interest under the Income-tax Act or the Wealth-tax Act in

respect of specified tax or tax arrear to the extent the interest exceeds the amount of interest referred Section 199.



As per Section 205, the scheme is not applicable in the following cases:

• In respect of tax arrear or specified tax:

 relating to assessment or reassessment made in consequence of a search rch;  relating to an assessment or reassessment in respect of which a su surv rvey ey is conducted;  relating to an assessment year in respect of which prosec rosecutio ution has been instituted on or before the date of filing of declaration under section 199;  relating to any und undis isclose closed income income fro from a so source urce locate located out

• utsi

side de Indi India

• r
• r undis

iscl closed ed asset et locate ted outsid ide India ia;  relating to an assessment or reassessment made on the basis of info form rmat ation ion receiv eived ed under der DTAA AA or

• r EOI;



To any person in respect of whom an order of detention has been made under the provisions of the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974: (sub. to conditions)



To any person in respect of whom prosecution for any offence punishable under the provisions of the Indian Penal Code, the Unlawful Activities (Prevention) Act, 1967, the Narcotic Drugs and Psychotropic Substances Act, 1985, the Prevention of Corruption Act, 1988 or for the purpose of enforcement of any civil liability 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 those Acts;



To any person notified under section 3 of the Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992.



The scheme shows Government’s resolve to reduce pending litigation.



However, expecting 100% tax plus interest and 25% penalty would only attract cases where taxpayer’s appeal was on weaker grounds. Assessee’s expecting relief from appellate authority may not opt for the scheme.



May not attract taxpayers who want to buy peace by paying part of demand and waiver of penalty.



Scheme could have been extended to appeals pending before ITAT or appeals filed subsequently.

N N M S & Co

Mahaveer Arcade, No.180, II Floor, 2nd Main Road, Chamarajpet, Bangalore – 560 018. Ph : + 91 80 22410026/46, Email : narendra@nnms.in ww.nnms.in