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Key Takeaways from New FAQs issued by CBDT & Practical Guide to e-File Declaration Form 1 under Vivad se Vishwas Scheme, 2020
The Apex Body CBDT has issued Circular No. 21/2020 dated 4.12.2020 containing FAQ's & Clarifications on some crucial & vital issues in the Vivad se Vishwas Scheme, 2020. This Circular has been issued in continuation of its earlier Circular No. 9/2020 dated 22.4.2020 (containing Questions 1 to 55), containing 34 more FAQs (Q. no. 56-89).
It is pertinent to mention here that CBDT has stipulated the last date for filing of Declaration Form 1, to opt for settlement of the incometax disputes, under the Vivad se Vishwas Scheme as 31.12.2020. Further the declarants can make the payment of disputed tax without any additional amount by 31.3.2021.
A. The Key Takeaways from the said CBDT Circular are being summarised for ready reference of our readers as under:
1. Eligibility of Appeals filed beyond the cut-off date of 31.1.2020 with Application for Condonation of Delay
It has been clarified in the CBDT Circular that if the time limit for filing appeal has expired during the period from 1.4.2019 to 31.1.2020, (both dates included), and the application for condonation of delay is filed before 4.12.2020, (the date of issue of CBDT Circular), and appeal is admitted by the concerned appellate authority before the date of filing of declaration (the last date for filing declaration form 1 is 31.12.2020), such appeal will be deemed to be pending as on 31.1.2020 and as such will be eligible under the Vivad se Vishwas (VsV) Scheme.
As a corollary, the appeals filed beyond the cut-off date of 31.1.2020, with condonation of delay applications, where such applications for condonation of delay have not been admitted or rejected by the appellate authority, or where such condonation application has been approved by the appellate authority after 31.12.2020, will not be eligible for the VsV Scheme.
2. Eligibility of Appeals filed before the cut-off date of 31.1.2020, but where the appeal has been disposed off by the concerned appellate authority, against the assessee after 31.1.2020.
It has been clarified in the CBDT Circular that such appeals which have been filed before the cut-off date of 31.1.2020, but where the appeals have been disposed off by the concerned appellate authority, against the assessee after 31.1.2020, will also be eligible under the VsV Scheme and the disputed tax payable under the scheme shall be computed with reference to the position of the appeal on 31.1.2020.
3. Effect of Enhancement Notice issued by CIT(Appeal) after the cut-off date of 31.1.2020, in the computation of disputed tax payable under the VsV Scheme.
Enhancement Notice issued by CIT(Appeal) after the cut-off date of 31.1.2020, but before the date of issue of the CBDT Circular i.e. 4.12.2020, shall be required to be taken into account for determining the amount of disputed tax payable under the VsV Scheme.
However, in order to ensure fair play & justice to the assessees it has been provided that the Enhancement Notice issued on or after the date of issue of CBDT Circular i.e. 4.12.2020, shall not be taken into account for determining the amount of disputed tax payable under the VsV Scheme.
4. Eligibility of the Assessment Order which has been framed in the case of an assessee u/s 143(3)/144 based on the search executed in some other taxpayer case
It has been clarified in the CBDT Circular that such case shall be considered as a Search Case and accordingly the prescribed threshold limit of Rs 5 crore of the disputed tax payable, for the eligibility of such case under the VsV will apply.
5. Eligibility of Appeal filed against an intimation u/s 143(1) of the Income Tax Act
It has been clarified in the CBDT Circular that the appeal filed against intimation u/s 143(1) is eligible under the VsV Scheme if adjustment has been made under sub-clauses (iii) to (vi) of clause (a) of section 143(1) of the Act.
The adjustments made under these sub-clauses are:
(iii) disallowance of loss claimed, if return of the previous year for which set off of loss is claimed was furnished beyond the due date specified under sub-section (1) of section 139;
(iv) disallowance of expenditure indicated in the audit report but not taken into account in computing the total income in the return;
(v) disallowance of deduction claimed under sections 10AA, 80-IA, 80-IAB, 80-IB, 80-IC, 80-ID or section 80-IE, if the return is furnished beyond the due date specified under sub-section (1) of section 139; or
(vi) addition of income appearing in Form 26AS or Form 16A or Form 16 which has not been included in computing the total income in the return.
As a corollary, the adjustments made under sub-clauses (i) and (ii) of clause (a) of section 143(1) of the Act, are not eligible to be settled under the VsV Scheme. These are:
(i) any arithmetical error in the return;
(ii) an incorrect claim, if such incorrect claim is apparent from any information in the return.
6. Eligibility of Appeals against the Orders denying Registration to Trusts u/s 12AA
It has been clarified in the CBDT Circular that such Appeals against the Orders denying Registration to Trusts u/s 12AA are not eligible to be settled under the VsV Scheme. The likely reason for the said ineligibility may be the lack of possibility of quantification of disputed tax payable under such cases.
7. Eligibility of Appeals or Writs against the Order u/s 263 of the Act
It has been clarified in the CBDT Circular that if the Order u/s 263 contains general directions and income is not quantifiable, appeal against such order is not eligible under the VsV Scheme. In such cases, the assessee is required to settle all the issues in the order, which are subject matter of order u/s 263 as well as issues pending in appeal as on 31.1.2020, with reference to the said order.
However, if Order u/s 263 contains specific directions and income is quantifiable, appeal against such order is eligible under the VsV Scheme.
8. Eligibility of Cross Objections filed and pending as on 31.1.2020
The Cross Objections filed and pending as on 31.1.2020 are also eligible to be settled under the Scheme. However, the main appeal is also required to be settled along with cross objections.
9. Eligibility of Cases where Proceedings are pending before Income Tax Settlement Commission or where Writ has been filed against the Order of Settlement Commission
It has been clarified in the CBDT Circular that such cases are not eligible to be settled under the VsV Scheme.
10. Subsequent Treatment of Additions u/s 68 of Unsecured Loans/Share Capital/Share Premium, settled under the VsV Scheme, in the Books of Accounts
It has been clarified in the CBDT Circular that VsV Scheme is not a Tax Amnesty Scheme and as such the assessees can’t make entries in their Books of Accounts by crediting such unsecured loans/ share capital/share premium in Capital Reserve Account.
As a corollary, the assessees will have to credit such unsecured loans/ share capital/share premium as income in their Revenue Account and as such their Book Profits for MAT Computation will get increased inviting additional MAT liability u/s 115JB.
11. If appeal involving issue of disallowance u/s 40(a)(i)/(ia) of the Act is settled under the VsV Scheme, whether consequential relief will be available in proceedings u/s 201 of the Act qua the same payment/deduction.
It has been clarified in the CBDT Circular that the consequential relief will not be available in proceedings u/s 201 of the Act qua the same payment/deduction.
However, Q. No. 31 of the earlier CBDT Circular No. 9/2020 dated 22.4.2020, clearly provided that where the assessee settles his TDS liability as deductor of TDS under the VsV Scheme (i.e. against order u/s 201 of the Act), he will get consequential relief of expenditure disallowance u/s 40(a)(i)/(ia).
13. Treatment of Interest levied u/s 201(1A) of the Act, pursuant to the settlement of Order u/s 201(1) under the VsV Scheme
It has been clarified in the CBDT Circular that once appeal against order u/s 201(1) is settled under VsV Scheme, there would be 100% waiver of corresponding interest levied u/s 201(1A) of the Act.
14. Manner of Apportionment of Prepaid Taxes (TDS/Advance Tax/TCS) in cases where assessee accepts certain additions in the order (giving rise to undisputed tax liability) and appeals against certain additions (giving rise to disputed tax liability)
It has been clarified in the CBDT Circular that if prepaid taxes (TDS/TCS/Advance Tax) are clearly identifiable with the source of income, these will be adjusted against tax liability w.r.t. such income. The remaining prepaid taxes, which can’t be clearly identified with the source of income, will be apportioned against the remaining tax liability, i.e. undisputed tax liability and disputed tax liability.
15. Possibility of Revision of Declaration Form 1 after its Filing
It has been clarified in the CBDT Circular that, the Declaration in Form 1 can be revised any number of times, before the Designated Authority i.e. the PCCIT issues a Certificate of final tax amount payable under the VsV Scheme.
B. Instructions for Filling Declaration Form 1 under the Vivad se Vishwas Scheme
CBDT has stipulated the last date for filing of Declaration Form 1, to opt for settlement of the income-tax disputes, under the Vivad se Vishwas Scheme as 31.12.2020. Further the declarants can make the payment of disputed tax without any additional amount by 31.3.2021.
For ready reference of our Readers and for ensuring Practical Ease in Filing the Declaration Form 1 under the VsV Scheme, the Field-wise Instructions to Fill Part A to F of the Declaration Form 1 are being provided and enclosed as per the PDF file below.
About the Author: The Author, Sh. Mayank Mohanka, FCA is a Senior Partner in a Noida based established and reputed CA Firm, M/s S M Mohanka & Associates. He is the Founder Director in M/s TaxAaram India Pvt Ltd, and has recently launched his unique Start-up Venture taxaaram.com, India’s first digital platform offering painless, seamless and cost-effective professional e-services in relation to faceless assessments, appeals and other statutory e-compliances. He has a 15+ years of rich and profound experience in the field of Taxation (Direct & Indirect), and Advisory. He makes Representations for a widely diversified cross section of industries including Power Sector, Banking & Finance, Real Estate, Food Processing, Infrastructure, Manufacturing, Education and Information Technology, before Authority for Advance Rulings, ITAT, Education Boards and other appropriate forums.
He has also authored ‘Best Seller’ Professional Books titled “Faceless Assessment Ready Reckoner with Real Time Case Studies“ & “Case Studies & Procedures under Direct Tax Vivad se Vishwas Act, 2020”, with Taxmann Publications, and the Book ‘SUPER 21’, treasuring his real-life winning representations on Income Tax, GST, PF, ESI, IBC & Banking Regulation Act, in his professional practice.
