News Excerpt
The Union Budget 2020-21 has proposed ‘Vivad Se Vishwas’ Scheme (No dispute but trust) which aims at reducing litigations in the direct taxes payments.

Pre-Connect
●    The Scheme gives complete waiver of interest and penalty if the scheme is availed before 31st march, 2020.
●    The scheme was introduced after the success ofthe“Sabka Vishwas (Legacy Dispute Resolution) Scheme,” which was introduced to reduce litigations in taxation.

Highlights
⮚    The Direct Tax Vivad Se Vishwas Bill 2020 was introduced in Lok Sabha after the scheme was announced in the Budget.  
⮚    It seeks to resolve direct tax dispute cases pending before various appellate forums: commissioner (appeals), ITATs, high courts and the Supreme Court.
⮚    Those willing to settle the cases before March 31st may just need to pay the taxes and secure a full waiver on interests and penalties.
⮚    The scheme is supposed to remain open till June 30th, but those availing it after March 31st needs to pay extra.
⮚    Income tax cases being arbitrated abroad will be eligible to be taken up under the proposed ‘Vivad se Vishwas’ scheme to settle disputes between the taxman and the taxpayer.

Analytica
Exclusions from the Scheme
The scheme applies to all the pending litigation except the following cases:-
    Cases related to search or seizure;
    Cases where the prosecution has been instituted on or before the date of filing of declaration;
    Cases related to any undisclosed foreign income or assets;
    Cases which are completed based on information received as a result of exchange of information with other tax jurisdictions.

PROS
▪    The distinguishing feature of the scheme is that it focuses on settling pending lawsuits with existing taxpayers, rather than trying to lure new taxpayers into the net by getting citizens to voluntarily disclose undeclared assets.
▪    Many of the post-demonetisation cases, now at the appellate stage, may get settled. Now, some of them who were served tax notices and, in some cases, faced income tax (I-T) department’s surveys and raids before getting tax demands may find a remedy in a government scheme Vivad Se Vishwas. Moreover, People who did sham transactions in penny stocks will also use this new scheme.  
▪    The scheme promises to wipe off the stigma that usually follows an I-T notice or raid. Moreover, the scheme will help business and industry to come out of litigation and concentrate on the wealth creation.

CONS
•    The scheme offers only a quick-fix solution to resolve legacy tax litigation and does not address its root cause. The root causes for much of the direct tax litigation in India lie in the Centre’s unrealistically high tax targets set in the annual budget, collection-based performance incentives for tax officers and the discretionary powers vested in assessing officers owing to loosely drafted tax laws and rules.
•    Disputes relating to wealth, securities transaction, commodity transaction taxes and equalisation levy will not be covered under 'Vivad Se Vishwas' amnesty scheme. The scheme would also not cover those cases where the dispute is under the foreign black money act, benami property act and PMLA, among others.
•    The scheme will not cover disputes pending before the Authority of Advance Ruling (AAR). However, if the AAR has determined the total income and the order has been challenged in High Court, it would come under the ambit of the scheme.

Conclusion
The ‘Vivad se Vishwas’ scheme is expected to reduce tax litigation, which is a welcome move by the government. The scheme will undisputedly benefit the interest of taxpayers looking for an expeditious and rapid settlement of their tax claims raised by the department.  But the Government is also required to give assurance to the taxpayer that the acceptance of any addition under the scheme will not be used as a tool to punish the taxpayer in other proceedings. A negotiated settlement – between the taxpayer and the CBDT- is a sensible way to resolve disputes without moving to court. It is an advantageous scheme for both the taxpayer and the revenue department.

PEPPER IT WITH
Sabka Vishwas scheme, Pradhan Mantri Garib Kalyan Yojana 2016