Taxpayers keen to withdraw their income-tax (I-T) appeal cases to settle those under the Vivad Se Vishwas (VSV) direct tax dispute resolution scheme are now in a fix.
With the appeals process going faceless from September onwards, there are no jurisdictions for the Commissioner of I-T (Appeals), or CIT(A), to approve the withdrawal request.
This has sprung a unique challenge for the Central Board of Direct Taxes (CBDT), already hamstrung by dismal participation, with less than 10 per cent potential declarations under the scheme and barely 20 days to go before the window closes.
The department is now toying with the idea of releasing a clarification asking appellants to upload withdrawal request letters on the national faceless appeals system.
In a guidance note, assessees may be asked to declare under the window by the 31st, with a withdrawal letter, while the process may continue thereafter, given the payment deadline extension until March 31. The details are, however, still being worked out.
“Several CIT(A)s are getting requests for withdrawal of cases, but they no longer hold any jurisdiction. Moreover, the cases have not yet been allocated under the faceless appeals regime. Hence, the CBDT is working on a clarification,” said a government official.
For instance, a taxpayer based out of Delhi had his appeal being heard by the CIT(A)-Delhi. But, now that the appellant wants to withdraw the case to settle it under VSV, there is no jurisdictional officer to approve the withdrawal since the case has not yet been allocated under the faceless system in the transition period.
“Taxpayers may be asked to upload appeal withdrawal letter requests on the national faceless appeals portal. Based on that, they may be able to declare under the dispute resolution scheme. If they get approved by the designated authority, they may make the payment,” said another officer.
The scheme, announced in the Union Budget on February 1, allows for waiver of interest, penalty, and prosecution for settling tax disputes due up to January 31, 2020, on payment of 100 per cent of the disputed tax and 25 per cent of the disputed penalty or interest or fee.
While the declarations under the scheme have to be filed by December 31, 2020, the government had, in October, extended the deadline for making payment by three months to March 31, 2021, in view of the Covid-19 pandemic.
Before the faceless appeals mechanism was introduced, CIT(A)s were given informal instructions to hold orders and encourage assessees to participate in the VSV scheme.
According to government estimates, there are more than 400,000 such cases eligible to avail of the scheme, involving at least Rs 9.3 trillion. But, as of November 17, the government had collected Rs 72,480 crore tax through the scheme.
A total of 45,855 declarations were filed under the scheme, involving disputed tax demand of Rs 31,734 crore till November 17.
As for central public sector enterprises, tax disputes worth Rs 1 trillion are being settled under the scheme.
The net direct tax collection at Rs 4.09 trillion as of November 30 is merely 31 per cent of the targeted Rs 13.19-trillion estimated in the Budget for 2020-21.
The taxpayer is granted Immunity from levy of interest, penalty, and institution of any proceeding for prosecution for any offence under the I-T Act in respect of matters covered in the declaration.
Disputes related to wealth, securities transaction, commodities transaction tax, and the equalisation levy are not covered under the scheme.