The Direct Tax ‘Vivad se Vishwas’ Act, 2020 intends to end the lawsuit and disputes under the direct taxes category as 9.32 lakh crore worth of tax is pending in around 4.8 lakh appeals at various income tax appellate tribunals. It aims to reduce pending income tax litigation, generate timely revenue for the government and benefit taxpayers easily and speedily. All the litigation against the individual or corporates who opt for the scheme by the income tax department will be dropped, provided they have to pay a required amount.

The scheme defines an appellant as a person, the income tax authority, or both, whose appeal is pending before any appellate tribunal such as the Supreme Court, the High Courts, and the Income Tax Appellate Tribunals as of January 31, 2020. Once a conflict gets resolved, the designated authority cannot levy interest or penalty concerning that dispute. Also, no appellate forum can decide about the matter once it gets settled.

The highlights and points of the scheme are as follows:

• Mechanism of resolution as proposed by the scheme:  The scheme proposed a mechanism following which an appellant can file a declaration to the designated authority to resolve pending direct tax disputes. Based on the declaration, the authorities will determine the amount payable by the appellant against the dispute and a certificate will be granted, containing details of the amount payable, within 15 days of the receipt of the declaration. 

• The non-refundable amount must be paid within 15 days of the receipt of the certificate and the appellant must inform the designated authority of such payment. The appeals pending before the Income Tax Appellate Tribunals will be considered to be withdrawn once the certificate is issued.

• The amount payable for resolution:  The amount payable by the appellant for resolution of disputes is determined based on whether the dispute relates to the payment of tax, interest, penalty, or fee. Further, the person is required to pay an extra amount if such payment gets delayed.

• Waiver of rights to seek remedy or claim: For the resolution of conflict, the appellant is required to provide an undertaking waiving his rights to seek remedy or claim related to that dispute under any law, including the IT Act. All such claims already filed related to the dispute must be withdrawn before filing the declaration.

• Conflict revival: The declaration filed by an appellant will become invalid if: its particulars turn out to be false, he violates any of the conditions referred to in the IT Act, or he seeks any remedy or claim concerning that dispute.

• Disputes not covered: The proposed mechanism will not cover certain cases that include: disputes where the prosecution has been initiated before the declaration is filed, disputes which involve persons who have been convicted or are being prosecuted for offences under certain laws (such as the Indian Penal Code), or enforcement of civil liabilities, and disputes involving undisclosed foreign income or assets.

The Central Board of Direct Taxes can issue directions or orders to the income-tax authorities, as required, provided that no such direction or order shall be issued which requires any designated authority to dispose of a case in a particular way. The Central Government can enact rules for carrying out the provisions of this Act, which will further be placed before each House of Parliament. The rule shall only affect if both Houses agree to the modification.