Understanding the VSV II Scheme 2024: Challenges and Stakeholder Concerns

Introduction

The Vivad Se Vishwas II (VSV II) Scheme, 2024, is designed to alleviate pending tax appeals and provide taxpayers an opportunity for amicable dispute resolution. However, the specification that only appeals or revisions pending as of July 23, 2023, are eligible under the scheme has led to uncertainties for taxpayers who had not yet finalized their appeals by this date but had refrained from doing so based on the expectations of provisions similar to those in the previous scheme. This limitation has raised concerns among taxpayers and could potentially lead to legal disputes.

Key Challenges of the VSV II Scheme

The VSV II Scheme aims to reduce taxpayer anxiety caused by prolonged appeals and litigation. However, the requirement that matters must be pending as of July 23, 2023, restricts many taxpayers, particularly those whose time to file appeals had not expired by that date. Many of these taxpayers, under the impression that similar provisions to the first scheme would apply, chose not to file appeals.

Key points regarding the challenges include:

• Limited Scope: The scheme only applies to cases with pending appeals as of July 23, 2023.
• Taxpayer Response: Some taxpayers have opted to not file appeals due to the expectation of similar provisions as in VSV 2020.
• Legal Actions: The issue has resulted in cases such as Naveen Kumar Agarwal vs. CBDT, where the Delhi High Court directed the CBDT to address these concerns.
• Stakeholder Representations: Numerous stakeholders have expressed concerns, indicating a substantial number of affected cases that require reconsideration.

Call for Clarification from CBDT

The All India Federation of Tax Practitioners (AIFTPO), representing advocates, chartered accountants, and tax practitioners, has formally reached out to the Central Board of Direct Taxes (CBDT) to request a review of the scheme. In a letter dated December 19, 2024, the federation highlighted the following:

• The primary objective of the VSV II Scheme is to reduce appeal pendency and provide taxpayers with the opportunity to resolve disputes.
• The rigidity surrounding the July 23, 2023, cut-off date appears to hinder fairness for many taxpayers.
• Taxpayers who were contemplating appeals in 2023 chose to hold off based on the earlier scheme’s provisions, believing they could avail themselves under the new scheme.

The federation urges the CBDT to consider extending the eligibility to those whose appeal filing time was not yet expired as of the cut-off date. This appeal for relaxation aims to minimize taxpayer distress and foster a more equitable resolution process.

Conclusion

The implications of the VSV II Scheme, 2024, highlight the need for clarity in tax dispute resolution methods. By addressing the concerns raised, the CBDT can enable a more inclusive approach that encourages timely filings and reduces the existing legal backlog. The request from the AIFTPO, supported by multiple stakeholders, aims to ensure fairness and transparency within the tax system, ultimately lessening the burdens placed on taxpayers.