The Direct Tax Dispute Resolution Scheme, 2016, was incorporated as chapter X of the Finance Act, 2016. In response to queries about the scheme, the government has issued the following clarifications:
- If an appeal pending before the Commissioner of Income Tax (Appeals) has already been disposed of before making a declaration, a declaration under the scheme cannot be filed.
- Where a declaration has been made under the scheme or an intention to use the scheme has been expressed by an appellant, the commissioner of appeals shall not dispose of the pending appeal.
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- Where a valid declaration under the scheme is made in respect of a quantum appeal, the appeal against a penalty levied under section 271(1)(c) of the Income Tax Act, 1961 (ITA), relating to the quantum appeal pending before the commissioner of appeals shall be deemed to be withdrawn and the penalty or the balance amount of penalty, as the case may be, shall be deemed to be waived.
- An appeal pending with the commissioner of appeals shall be deemed to be withdrawn from the date on which a certificate under section 204(1) of the ITA is issued by the designated authority.
- The scheme applies to cases where there is disputed tax. Since there is no disputed tax in the case of reduction of loss, the assessee shall not be eligible to use the scheme. However, if an appeal is pending before the commissioner of appeals in respect of a penalty order as a result of variation in quantum loss, the assessee may file a declaration in respect of the penalty order.
- The scheme shall not be available for assessment or reassessment in relation to a survey conducted under section 133A of the ITA.
- Any variation to the total income as a result of any appellate order passed subsequent to the date of declaration shall be ignored for the purposes of computing the amount of penalty payable under the scheme.
- An order under the scheme does not decide any judicial issue. It only determines the sum payable under the scheme with reference to tax arrears or specified tax, as the case may be, and only provides for a dispute resolution mechanism in respect of cases in which a declaration has been made.
- As per section 202(I)(b) of the scheme, in the case of pending appeals related to penalties, 25% of the minimum penalty that may be levied along with tax and interest on the total income finally determined must be paid. Therefore, if an assessee who has already paid an amount over and above the amounts referred to in section 202(I)(b) opts for the scheme, they shall be eligible for refund of the excess payment already made.
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