Circular No. 12/2024 on Direct Tax Vivad Se Vishwas Scheme (VSV) 2024

The Direct Tax Vivad Se Vishwas Scheme (VSV) 2024, introduced by the Finance (No. 2) Act, 2024, aims to resolve pending income tax disputes. This scheme intends to reduce litigation, enhance timely tax collection, and provide taxpayers with an opportunity to settle disputes related to tax, interest, penalty, or fees at various appellate forums. The scheme was notified to begin on 1st October 2024, and the rules and forms were issued on 20th September 2024.

?

?Key Features of the Scheme:

1. Objective:

?? - The scheme is designed to reduce long-pending tax litigation.

?? - Taxpayers benefit from saving time and resources that would otherwise be spent on lengthy court processes.

?? - Settling disputes under the scheme ensures immunity from penalties, interest, and prosecution.

?

2. Eligible Cases:

?? - The scheme applies to taxpayers with appeals, writ petitions, or special leave petitions pending as of 22 July 2024.

?? - Disputes at various appellate forums, including the Dispute Resolution Panel (DRP), First Appellate Authority, Tribunal, High Court, or Supreme Court, can be settled.

?? - Cross-objections filed or applications for revision under Section 264 pending as of 22 July 2024 are also eligible.

?

3. Ineligible Cases:

?? The scheme does not apply to the following cases:

?? - Cases involving assessments made under Section 143(3), 144, 147, 153A, or 153C due to searches initiated under Section 132 or 132A.

?? - Cases involving undisclosed income or assets from foreign sources.

?? - Prosecution initiated by the Income Tax Department or assessments based on information received under tax treaties.

?? - Cases under laws such as the COFEPOSA Act, UAPA, NDPS Act, PMLA, etc. are excluded.

?

4. Rates of Payment:

?? - The amount payable is based on the disputed tax and varies depending on whether the taxpayer is a new or old appellant:

???? - 100% of disputed tax for new appellants (on or before 31 December 2024).

???? - 110% for old appellants (after 1 January 2025).

???? - For disputes involving interest, penalty, or fees, the amount payable is 25% for new appellants and 30% for old appellants.

?? - If the appeal is filed by the tax authority (not the taxpayer), the taxpayer only pays 50% of the amounts specified above.

?

5. Forms for Filing:

?? - Form 1: Declaration and undertaking by the taxpayer.

?? - Form 2: Certificate issued by the Designated Authority (DA) determining the amount payable.

?? - Form 3: Intimation of payment by the taxpayer.

?? - Form 4: Final settlement order issued by the DA after receiving payment.

?

6. Timelines:

?? - Declarations (Form 1) must be filed on or before 31 December 2024 to avail of lower rates.

?? - The DA will issue Form 2 within 15 days of receiving the declaration.

?? - Payment must be made within 15 days of receiving Form 2.

?? - Form 3 must be filed after payment, along with proof of appeal withdrawal, before the DA can issue the final settlement (Form 4).

?

7. Settling Penalty Appeals:

?? - Penalty appeals cannot be settled independently while a quantum appeal is pending. Both appeals must be settled together.

?? - The taxpayer is only required to pay the disputed tax amount (no separate payment for penalty).

?

8. Protective and Substantive Additions:

?? - If both substantive and protective additions exist, the taxpayer can choose to settle one. Upon settling one addition, the corresponding other addition (protective or substantive) is automatically resolved by rectification.

?

9. Consequential Relief:

?? - If a taxpayer settles a dispute related to TDS or TCS, they will be entitled to consequential relief in respect of disallowed expenses under Section 40(a)(i)/(ia).

?

10. Non-refundable Payments:

?? - Any amount paid under the VSV scheme is non-refundable, and taxpayers cannot adjust future refunds towards the payable amount.

?

11. Director/Partner Immunity:

?? - Immunity from prosecution under the scheme extends not just to the taxpayer but also to directors or partners in the case of companies or firms.

?

12. Search Assessments:

?? - Assessments made due to searches initiated after 1 April 2021, or where assets are seized or documents pertain to another person, are not eligible for settlement under the scheme.

?

13. Other Clarifications:

?? - Writ petitions against reassessment notices: If no assessment order is passed, the case is not eligible for settlement.

?? - Appeals disposed before declaration: If a taxpayer’s appeal is disposed of after 22 July 2024 but before the declaration is made, it is not eligible for the scheme unless an appeal is refiled.

?? - Miscellaneous Applications: These are not considered appeals, and therefore, they are ineligible for settlement.

?

?Conclusion:

The Vivad Se Vishwas Scheme 2024 provides a clear framework for taxpayers to settle long-standing tax disputes. While it covers a broad range of disputes, certain cases, such as those involving searches, prosecution, or undisclosed foreign income, are excluded. Taxpayers benefit by avoiding interest, penalty, and prosecution once they pay the prescribed amounts. The scheme’s forms and processes ensure transparency, and taxpayers are required to file relevant forms within stipulated timelines for final settlement.