Karnataka CA Association's Key Suggestions on Direct Tax Vivad Se Vishwas Scheme 2024

Introduction

The Karnataka State Chartered Accountants Association (KSCAA) has presented key suggestions and concerns regarding the Direct Tax Vivad Se Vishwas Scheme 2024 (VSVS) to the Central Board of Direct Taxes (CBDT). This representation highlights issues such as the eligibility criteria for taxpayers with pending appeals, challenges regarding remanded cases and ex-parte appeals, and the implications of high tax rates on settlement viability.

Key Issues Raised

Eligibility of Taxpayers

Pending Appeals: The FAQs state that if an appeal is disposed of before exercising the option under the scheme, the taxpayer is ineligible. This may contradict the scheme's purpose to alleviate pending litigation. KSCAA suggests clarifying that all appeals pending on the "specified date" should qualify, regardless of their status before filing Form 1.
Extension for Non-Filed Appeals: Taxpayers with orders passed but not yet appealed, within the filing time frame as of the "specified date," should also be considered eligible, similar to guidance provided in VSVS 1.0.
Remanded Issues: The current FAQ excludes issues remanded by the ITAT from eligibility. KSCAA recommends including these cases, especially concerning penalty proceedings or when remanded for de novo assessments.
Ex-Parte Appeals: Appeals disposed of ex-parte by the CIT(A) and subsequently restored by the ITAT should also qualify for VSVS. A clarification on this will support the scheme's objectives.
High Tax Rates: Due to the excessive tax rates, including surcharge and cess under section 115BBE of the Act, disputes for AY 2017-18 and onwards may be unmanageable under the scheme. A reduction in the settlement amount is proposed to facilitate resolution.
Set-Off of Refunds: The scheme should permit set-off of refunds obtained through the scheme against tax liabilities for other Assessment Years.

Need for Clarifications

KSCAA advises the following points require clarification:

Settlement provisions for belated appeals filed after the specified date, once the delay is excused by the appellate forum.
In cases where both an appeal and a rectification application are pending concerning the same issue, the tax dispute should reflect the rectification order.
Applicability for additional grounds filed before the specified date.
Addressing the inconsistency between the parent legislation and FAQ No. 16, as the legislation does not necessitate disputed tax payment related to proposed enhancements, in contrast to the FAQ's requirements.
Clarification on the correct usage of challan for disputed tax payments, ensuring accuracy in credit calculation.

Appellate Processes

With the scheme open until 31.12.24 (and potentially beyond), it is suggested that appellate authorities suspend proceedings to avoid unnecessary redundancy, enabling CIT(A)s to allow appellants to utilize the scheme.
Section 91(2) of the Finance Act deems an appeal withdrawn when Form 2 is issued, implying the avoidance of withdrawal requirements pursuant to subsection (3).

Rectification Proceedings

Clarity is needed regarding settlement amounts for pending rectification applications concerning:
- TDS credits disallowed in assessments.
- Set-offs for undisputed carried-forward losses.
- Reapplication rights in case of technical rejection of forms.
Timely disposal of rectification applications is essential before submitting Form 1 or processing Form 2.

Technical Issues

There is confusion regarding the aggregation of payable amounts before and after 1 January 2025, which should be clarified.
Certain entries in Form 1 create unnecessary confusion and should be streamlined.
Proper identification of tax components in Part B of Form 1 is necessary to avoid ambiguity.

Principles of Natural Justice

KSCAA emphasizes the importance of allowing taxpayers to be heard before processing modified Form 2 or rejecting their applications, potentially through an online faceless system.

Grievance Redressal Mechanism

Echoing VSVS 1.0, KSCAA requests a dedicated grievance cell to expedite resolutions for taxpayer queries, minimizing compliance burdens.

Conclusion

KSCAA appreciates the CBDT's efforts to lessen the burden on appellate authorities and provide clarity to taxpayers embroiled in litigation. Addressing the outlined concerns will further facilitate a fair and efficient tax administration system. The association urges the CBDT to prioritize these recommendations to mitigate the compliance challenges faced by taxpayers and professionals. and Goa. 3. Shri. Sanjay Malhotra, Hon’ble Revenue