Introduction
The Central Board of Direct Taxes (‘CBDT’) has issued a revised set of Frequently Asked Questions[i] (‘FAQs’) to provide clarity and resolve ambiguities concerning the Direct Tax Vivad se Vishwas Scheme, 2024 (‘DTVSV Scheme’). The DTVSV Scheme, a landmark initiative aimed at efficiently resolving pending tax disputes, has gained significant traction since its inception. However, like any large-scale tax initiative, operational and interpretational challenges necessitated periodic clarifications. The latest FAQs resolve these issues comprehensively, and this update highlights the salient aspects.
Background
The DTVSV Scheme was introduced to resolve pending tax disputes in a timely and efficient manner. Taxpayers can settle disputes by paying a specified percentage of the disputed tax, thereby reducing litigation. While widely appreciated for its intent, the Scheme’s initial framework left several procedural and substantive aspects unclear, necessitating further clarification.
The DTVSV Scheme officially commenced on 01.10.2024, with rules and forms for implementation notified on 20.09.2024. To address initial queries, Guidance Note 1/2024 was issued on 15.10.2024. Based on additional stakeholder feedback, the CBDT released Guidance Note 2/2024, which provides further explanations.
Key Clarifications (FAQs from Guidance Note 2/2024)
Expanded Coverage of Disputes: One of the most notable updates in the FAQs is the clarification on disputes eligible for resolution. Disputes pending as of 22.07.2024 are eligible, even if the appeal is subsequently disposed of. However, the FAQs also clarify that disputes arising from search actions (assessments under ss. 153A or 153C of the Income-tax Act, 1961 [‘IT Act’]) or where prosecution has already been initiated are excluded under s. 96(a). Further, appeals are pending as of 22.07.2024 against intimations under s. 143(1) of the IT Act are eligible, whereas cases where only review petitions are pending before High Courts or the Supreme Court are ineligible.
Clarification on 'Disputed Tax' Calculation: The computation of disputed tax, a contentious issue since the scheme’s inception, has been addressed in detail. The FAQs outline how disputed tax is calculated in complex scenarios, such as composite demands, appeals with additional grounds, or penalties unrelated to quantum assessments.
Procedural Simplifications: The FAQs streamline the process for taxpayers to withdraw appeals pending before various judicial and appellate forums. They also specify timelines for filing supporting documents, ensuring smoother implementation of the scheme. Additionally, it states that taxes paid by the taxpayer before filing the declaration will be credited against the amount payable under the Scheme, preventing duplication.
Addressing Transitional Provisions: The FAQs address transitional cases, particularly disputes arising from amendments to income tax provisions or retrospective tax demands. They clarify how such disputes can be settled under the DTVSV framework, reducing uncertainties for taxpayers navigating between old and new provisions. It further provides those appeals filed under s. 248 of the IT Act before 01.04.2022, regarding liability to deduct tax, are eligible for the Scheme. However, cases where tax was paid after this date are excluded.
Comparative Analysis with Erstwhile Provisions
The FAQs address gaps in the initial framework, including the eligibility for pending appeals, clarifications on penalties and interest, and transfer pricing adjustments. It has been clarified that appeals pending as of 22.07.2024 are eligible. Still, appeals filed after this date (with condonation of delay applications) are excluded unless the condonation was admitted before the cut-off date. Earlier, there was confusion about the treatment of penalties and interest in composite disputes. The FAQs clarify that penalties unrelated to quantum assessments can now be settled independently, and for quantum-related penalties, immunity is granted upon settlement of the disputed tax. Further, the FAQs confirm that secondary adjustments under s. 92CE of the IT Act will apply unless the primary adjustment pertains to assessment years before 01.04.2016.
Extension of the Due Date
The CBDT has extended the due date for determining the amount payable under the DTVSV Scheme from 31.12.2024 to 31.01.2025, vide its Circular dated 30.12.2024[ii].
Applicability of Revised Due Date: For declarations filed on or before 31.012025, the amount payable will be determined as per column (3) of the Table in s. 90, which prescribes lower settlement rates for disputes resolved before this deadline. For declarations filed on or after 01.02.2025, the amount payable will be determined as per column (4) of the Table in s. 90, which prescribes higher settlement rates applicable after the extended deadline.
Supersession Clause: This extension overrides any contrary provisions in the DTVSV Scheme Rules or Guidance Note of 2024.
Conclusion
The CBDT’s issuance of the revised FAQs is a commendable step toward strengthening the effectiveness of the DTVSV Scheme. By resolving ambiguities and simplifying procedural requirements, these updates reduce the compliance burden on taxpayers and align with the Scheme’s primary objective of mitigating litigation. The clarified provisions ensure broader accessibility for eligible taxpayers while emphasising procedural adherence, such as meeting filing deadlines and enabling fair resolutions. These measures significantly bolster confidence in the Scheme.
Overall, the FAQs reaffirm the government’s commitment to fostering a more equitable and transparent tax system. Taxpayers and advisors are encouraged to thoroughly analyse these updates to fully leverage the benefits of the DTVSV Scheme. As the Scheme evolves, it continues to be a cornerstone of India’s strategy to enhance tax compliance and streamline dispute resolution.
End Notes
[i] Circular No. 19 of 2024 (F. No. 370142/22/2024 -TPL).
[ii] Circular No. 19 of 2024 (F. No. 370149/213/2024-TPL).
Authored by Jitin Bharadwaj & Srishty Jaura, Advocates at Metalegal Advocates. The views expressed are personal and do not constitute legal opinions.
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