Direct Tax Dispute Resolution Scheme

Direct Tax Dispute Resolution Scheme is a scheme formulated by the Central Board of Direct Taxes (CBDT) to decrease the large number of pending direct tax dispute cases. The scheme has enabled the Government to reduce unnecessary litigation. The scheme came into effect from June 1, 2016. By availing the Direct Tax Dispute Resolution Scheme, a taxpayer can reduce the penalty levied on account of an

income tax assessment order or penalty order.

Features of the Scheme

Direct Tax Dispute Resolution Scheme is applicable for "tax arrear" - which is defined as the amount of tax, interest or penalty that is determined under the Income-tax or the Wealth-tax Act for which there is an appeal pending before the Commissioner of Income Tax. The pending appeal can be against an assessment order or a penalty order. A declarant under this scheme can pay tax at the applicable rate along with interest due until the assessment date to close the litigation without any penalty. If the disputed tax exceeds Rs.10lakh, the individual should pay a minimum of 25% of the penalty that is levied. Also, if the pending appeal is against a penalty order, then 25% of the minimum penalty can be paid with the tax and interest to complete the assessment. Following the declaration, the appeal that is pending before the Commissioner should be withdrawn.

Conditions of the Scheme

For an individual to avail the benefits from the scheme, the declarant has to withdraw any writ petition or an appeal filed against the specified order before the Commissioner or the Tribunal or High Court or Supreme Court, before making the declaration. Submission of the proof of the withdrawal is mandatory for availing benefits under the Direct Tax Dispute Resolution Scheme.
Also, any person making a declaration under specified tax is required to furnish an undertaking in the prescribed form. The applicant must waive his or her right, whether direct or indirect. This is to seek or pursue any remedy or claim in relation to the specified tax which otherwise is available to them under any protection of investment or otherwise, entered into by India with a country or territory outside India.
If a declarant violates the scheme, it will be considered as if the declaration was never made under this scheme. The consequences under the Income-tax Act or Wealth-tax under which the proceedings against declarant were or are pending will be revived.
Finally, no Appellate Authority, Arbitrator, Conciliator or Mediator can decide an issue that is related to the specified tax in the declaration. For this, an order is made by the concerned authority or according to the payment of the sum determined to be payable.

Ineligibility for this Scheme

A person becomes ineligible under the following cases.

A case where the prosecution has been initiated prior to 29.02.2016.
A search or survey case that has been declared under tax arrears.
A case that deals with the undisclosed foreign income and assets.
A case based on the details received under the Double Taxation Avoidance Agreement under section 90 or 90A of the Income-tax that has been declared under tax arrears.
A person who has been notified under the Special Courts Act, 1992.
A case that has been covered under Narcotic Drugs and Psychotropic Substances Act, Indian Penal Code, Prevention of Corruption Act or Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974.

To know about the Vivad se Vishwas scheme introduced by the Central Government, click

here.

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Frequently Asked Questions

Common questions about Direct Tax Dispute Resolution Scheme India 2023.

The Direct Tax Dispute Resolution Scheme is a scheme formulated by the Central Board of Direct Taxes (CBDT) to reduce the large number of pending direct tax dispute cases. It allows taxpayers to resolve their disputes by paying the applicable tax and interest, while waiving or reducing the penalty amount.

The scheme is applicable for taxpayers who have pending appeals against income tax assessment orders or penalty orders before the Commissioner of Income Tax, Tribunal, High Court, or Supreme Court. However, certain cases such as those involving prosecution, undisclosed foreign income, or offenses under specific acts are ineligible for the scheme.

By availing the Direct Tax Dispute Resolution Scheme, a taxpayer can reduce or eliminate the penalty levied on account of an income tax assessment order or penalty order. The taxpayer can pay the applicable tax and interest to close the litigation without paying the entire penalty amount.

If the disputed tax amount exceeds Rs. 10 lakh, the individual needs to pay a minimum of 25% of the levied penalty along with the tax and interest to complete the assessment under the scheme.

To avail the scheme, the declarant must withdraw any pending writ petition or appeal before making the declaration. The declarant must also furnish an undertaking in the prescribed form and waive their rights to seek or pursue any remedy or claim related to the specified tax.

No, no Appellate Authority, Arbitrator, Conciliator, or Mediator can decide on an issue related to the specified tax in the declaration. The decision made by the concerned authority or the payment of the sum determined to be payable is final.

If a declarant violates the scheme, the declaration will be considered null and void. The consequences under the Income-tax Act or Wealth-tax Act, under which the proceedings against the declarant were or are pending, will be revived.

No, the scheme is not applicable for cases where prosecution has been initiated prior to February 29, 2016.

No, the scheme cannot be availed for cases that deal with undisclosed foreign income and assets.

The Direct Tax Dispute Resolution Scheme has enabled the government to reduce unnecessary litigation by providing a mechanism for taxpayers to resolve their disputes. This helps in efficient tax administration and reduces the burden on the judicial system.