Time to resolve the Tax Disputes by VSVS – 2.0
“For resolution of certain income tax disputes pending in appeal, I am also proposing Vivad Se Vishwas Scheme, 2024.” – FM Sitharaman in her Budget-2024 (No. 2) speech.
To reduce the pending income tax litigation & unlock the blocked revenue for the Government, the Finance Minister has announced another dispute resolution scheme titled “Vivad Se Vivad Scheme (VSVS)”. This is the 2.0 version of the scheme; the first one was launched in 2020 wherein around 1 lakh taxpayers opted for the scheme with revenue of Rs. 75,000 Cr to the Government. At present, around 5.44 Lakhs appeals are pending just before the Commissioner (Appeals) wherein the disputed money has ballooned at around Rs 10.60 Lakh Crores. VSVS 2.0 is set to start from 1st October 2024. Let us know about the key feature of the scheme:
1. Which cases are covered under VSVS:
The Writs, Petitions and Appeals that are pending across different authorities as on 22nd July 2024 are only covered by the scheme. The cases pending before the Commissioner / Joint Commissioner (Appeals), ITAT, High Courts and Supreme Court can be amicably resolved through settlement under the said Scheme. It will also involve cases that are pending before the Dispute Resolution Panel (DRP) and revision petitions that are before the CIT. Even those taxpayers who have not opted for VSVS-2020 earlier can also now opt for VSVS 2024, albeit with a slightly higher burden of Tax. It also provides for Lower Settlement Amount for Taxpayers who file declarations on or before 31st December 2024 as compared to those who file later.
2. Who can avail benefits of this scheme:
All categories of the taxpayers can opt for VSVS- 2024 except the following cases:
i. Assessments made under specific sections of the Income Tax Act based on Income Tax searches (i.e. Raids).
ii. Assessment years where prosecution has started before the declaration is filed.
iii. Undisclosed income or assets located outside India.
iv. Assessments based on information from international agreements under sections 90 or 90A of the Income Tax Act.
v. By anyone who has been detained under the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974, before filing the declaration, unless certain conditions regarding revocation apply.
vi. By anyone facing prosecution under various laws, including 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, before filing the declaration or who has been convicted of such offenses.
vii. By anyone prosecuted by the Income Tax authority for offenses under the Bharatiya Nyaya Sanhita, 2023, or for civil liabilities on or before the declaration is filed, or who has been convicted of such offenses.
viii. By anyone notified under the Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992, on or before filing the declaration.
3. Settlement Amount under the Scheme:
The settlement amount is different for appeals filed up to 31.01.2020 (i.e., the effective date of first VSVS) & appeals filed after this date up to 22.07.2024 (i.e., the date of Budget No. 2 of 2024) . Further, the amount payable would also be dependent upon whether the tax is paid till 31.12.2024 or after this date. The same is summarized in the following chart:
| Nature of tax arrear | Amount payable on or before 31st December 2024 | Amount payable on or after 1st January 2025 | ||
| Appeal filed after 31st January 2020 but on or before 22nd July 2024 | Appeal pending at same forum on or before 31st January 2020 | Appeal filed after 31st January 2020 but on or before 22nd July 2024 | Appeal pending at same forum on or before 31st January 2020 | |
| Aggregate amount of disputed tax | 100% of disputed tax | 110% of disputed tax | 110% of disputed tax | 120% of disputed tax |
| Disputed interest/penalty/fee | 25% of disputed interest/penalty/fee | 30% of disputed interest/penalty/fee | 30% of disputed interest/penalty/fee | 35% of disputed interest/penalty/fee |
The amount payable will be reduced to 50% in the following scenarios:
a) The appeal was filed by tax authorities.
b) The appeal was filed before any authority, and an order in favour of the taxpayer was received and a higher authority has not reversed such an order
c) Where the dispute is related to the reduction of MAT/AMT (Minimum alternative tax/ Alternative Minimum tax) credit or loss or depreciation, the taxpayer will have an option to include the amount of tax related to such tax credit/loss/depreciation in the disputed taxes or carry forward the reduced MAT/AMT credit or loss/depreciation.
4. Other key features of VSVS – 2020:
Significant changes have been made in VSVS-2024 in comparison to VSVS 2020. Notably, search cases, which were addressed in VSVS – 2020 for assessments up to Rs. 5 crore whereas it has been completely omitted from in VSVS-2024. Furthermore, the scheme does not cover arbitration, conciliation, or mediation cases. Additionally, cases where an assessment or appellate order has been issued, but the appeal deadline does not extend beyond July 22, 2024, are not eligible for VSVS 2024.
Conclusion:
1. This is a one-time chance for various tax payers, especially in cases where there is a dilemma as to the outcome of the pending litigation involving high stakes. By opting for the scheme, the taxpayers not only get the waiver from interest & penalty but also against subsequent prosecutions if the appeal is confirmed. It is certainly a welcome scheme for settling the pending litigations & disputes.
2. Time is too short to opt for the scheme (i.e., up to 31.12.2024) and so taxpayers have to act quickly now. Though an additional time frame after 31.12.2024 is also for payment, the cost of such delayed payment is much higher as compared to the normal interest rate of 1%. It is advisable for the person opting for the scheme to make the payment before 31.12.2024.
3. Taxpayers must note that “payment” is the main crux of the scheme. If taxpayers fail to make the payment, they will not have any remedy as withdrawals of appeal is one of the conditions for availing the benefit under the present scheme.
[Views expressed are the personal view of the author. Readers are advised to seek professional advice before taking any decisions. Readers may forward their feedback & queries at nareshjakhotia@gmail.com. Other articles & response to queries are available at www.theTAXtalk.com]
The copy of the order is as under:
