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    The Direct Tax Dispute Resolution Scheme 2016 (DDRS-2016)

    Source:

     

    Chapter X of Finance Act, 2016 provides for the scheme. The Scheme come into force on 1st July, 2016. The declaration may make declaration on or before 31st December, 2016.

     

    The declarant (as defined in the scheme) has to file a declaration in relation to ‘tax arrear’or ‘specified tax’ in respect of which appeal is pending.

     

    Tax Arrear means the amount of tax, interest or penalty determined under the Income Tax Act or Wealth Tax Act in respect of which appeal is pending before CIT(A) or CIT(W) as on the 29th February, 2016.

     

    Specified Tax means tax determined in consequence of or is validated by an amendment made with retrospective effect in Income Tax Act, 1961 or Wealth Tax Act,1957 and relates to a period prior to the date on which the Act amending the Income Tax Act or Wealth Tax Act, as the case may be, received the assent of the President.

     

    Salient Features of the Scheme:

     

    Declaration is to be filed before the Designated Authority in Form 1 and shall be signed by the declarant or any person competent to verify the return of income on his behalf in accordance with the provisions of section 140 of the Income Tax Act, 1961. Form 2 has to be filed along with Form 1 stating that the declarant has agreed to waive his/her rights towards appeals and other related matter on opting to this scheme.

     

    As per section 204(1) of Chapter X of the Finance Act, 2016 the designated authority shall within a period of 60 days from the date of receipt of declaration determine the amount payable by the declarant in accordance with the provisions of the schemevide Form 3.

     

    The declarant shall pay sum determined by the designated authority within in 30 days of date of receipt of the certificate and intimate the fact of such payment to the designated authority along with the proofvide Form 4.

     

    On verification of the payment challan and other related documents, the authorities shall issue an order vide Form 5, if disclosed amount is ‘tax arrear’and Form 6, if disclosed amount is ‘specified tax’. Such order shall be the order of full and final settlement of tax amounts and shall guard the declarant from all other prosecutions and related issues.

     

    Every order passed under section 204(1) determining the sum payable under the scheme shall be conclusive as to the matters stated there in and no matter covered by such order shall be re- opened in any proceeding under the Income Tax Act or Wealth Tax Act or under any law for the time being in force or as the case may be under any agreement, whether for protection of investment or otherwise, entered in to by India with any other country or territory outside India.

     

     

    Immunity (benefit):

     

    In case of Tax Arrear-

     

    1. If disputed tax up to Rs 10 Lakh– Immunity from100% penalty;

     

    1. If disputed tax exceeds Rs10Lakh–Immunity to the extent of 75% of minimum penalty;

     

    1. If appeal pending related penalty– Immunity to the extent of 75% of minimum penalty.

     

    In case of Specified Tax-

     

    1. 100% Immunity form payment of interest and penalty.

     

    Note:

     

    Disputed Tax means tax determined under the Income Tax Act or Wealth Tax Act which is disputed by the assessee or the declarant.

     

    Immunity from instituting any proceedings in respect of any offence under the Income Tax Act or Wealth Tax Act as the case may be.

     

    Any amount paid in pursuance to declaration shall not be refundable under any circumstances.

     

    Non- applicability of Scheme:

     

    Section 205 of the Finance Act, 2016 provides that the scheme shall not be applicable in the cases relating to:

    1. Assessment made pursuant to search;
    2. Assessment made pursuant to survey conducted by the department;

     

    1. Assessment in respect of which prosecution proceedings have been instituted on or before the date of filing the declaration;

     

    1. Tax liability relating to undisclosed income from a source located outside India or undisclosed asset located outside India;

     

    1. Assessment or reassessment made on the basis of information received by the Government of India under the agreement for exchange of information with any other country;

     

    1. In the case of a person in respect of whom an order of detention has been passed under Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974 and the order has not been revoked or set aside by the competent Court;

     

    1. In case of a person in respect of whom prosecution has been instituted on or before filing of declaration or such person has been convicted of any offence punishable under the provisions of Indian Penal Code, The Unlawful Activities (Prevention) Act, 1967, The Narcotic Drugs and Psychotropic Substances Act, 1985, The Prevention of Corruption Act, 1988 or for enforcement of any civil liability;

     

    1. In case of a person notified u/s. 3 of The Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992.

     

    Withdrawal of Litigation:

     

    In accordance with Section 200(2) of the Act, where a declaration has been filed in respect of tax arrears appeal pending before CIT(A) or CWT(A), as the case may be, relating to disputed income or disputed wealth shall be deemed to have been withdrawn.

     

    In a case relating to specified tax, the assessee is required to firstly withdraw such appeal or writ pending before any appellate authority or the court and has to furnish proof of such withdrawal along with the declaration to be filed. In a case where the assessee has initiated any proceedings for arbitration, conciliation or mediation or has given any notice thereof under any law, he has to withdraw such proceedings or notice or claim, and proof of such withdrawal has to be submitted along with the declaration to be made. The assessee has also to make a declaration waiving his right to seek or pursue any remedy or any claim in relation to the specified tax which may be available to him under any law for the time being in force.

     

    It has also been provided in sub-section (6) of Section 200 that no Appellate Authority or Arbitrator, conciliator or mediator shall proceed to decide any issue relating to specified tax mentioned in the declaration and in respect of which an order has been passed by the Designated Authority or the sum payable under the scheme has been determined.

     

    Effect of False Declaration:

     

    Section 200(5) of the Act, provides that where any material particular furnished in the declaration is found to be false or the declarant violates any of the conditions of the scheme or the declarant acts in a manner which is not in accordance with the undertaking given by him under sub-section (4) of Section 200, it shall be presumed that as if the declaration was never made under the scheme and all the consequences under the Income-tax Act or Wealth-tax Act, as the case may be, will follow and appeal or other proceedings shall be deemed to have been revived.

     

    Forms:

     

     

     

    Form

     

    Remarks

     

     

     

     

     

     

     

     

     

     

    1

    Form of Declaration

     

     

     

     

     

     

     

     

     

     

    2

    Undertaking for waiving of all rights, remedies etc.,

     

     

     

     

     

     

     

     

     

     

    3

    Certification of Intimation of amount of tax arrear or specified tax by the designated authority

     

     

     

     

     

     

     

     

     

     

    4

    Intimation of Payment of amount specified in Form 3

     

     

     

     

     

     

     

     

     

     

    5

    Order of full and final settlement of Tax Arrear

     

     

     

     

     

     

     

     

     

     

    6

    Order of full and final settlement of Specified Tax

     

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