Answers to 16 questions by N.M. Ranka Sr. Advocate, Dr. K. Shivaram Sr. Advocate, S.R. Wadhwa Advocate, CA. Harish N. Motiwalla, CA. Pradip N. Kapasi and CA. Chetan A. Karia
S. 201 : Appeal – Partial basis
Q.1 My query is whether an assessee can go to Direct Tax Dispute Resolution Scheme on partial basis? Viz. if appeal is pending before CIT(A), wherein assessee has pressed four grounds. Out of those four grounds, he wants to sort out two grounds through Direct Tax Dispute Resolution Scheme, 2016, and for remaining two he wants continue his appeal as per statutory provision, Can he go “Direct Tax Dispute Resolution Scheme” on partially basis?. It is seen that many assessment orders are framed with multiple addition/disallowance, wherein, some of addition/disallowances are purely on guess work or on surmises, on which no one lie would like to pay tax forget about the penalty?
Ans. No. The assessee cannot go and apply for the Direct Tax Dispute Resolution Scheme on partial basis. The declarant shall be required to close all disputes in appeal for the relevant year, otherwise the object is not achieved and there would be problem for computation of tax and other sum payable. Section 201(1)(c) defines “disputed income”, to mean the whole or so much of the total income as is relatable to the disputed tax. “Disputed tax” has been defined in Section 201(1)(d). “Tax arrear” has been defined in 201(1)(h). Section 202 also supports the above view. [NMR ]
Ss. 201, 202 : Appeal set aside by Tribunal
Q.2 My case in quantum addition was decided ex-parte by CIT(A) which was restored back to CIT(A) by ITAT in the month of February, 2016. My question is whether the case restored will be treated as pending before CIT(A) for the purpose of DTDR Scheme.
Ans. Yes. you are eligible since technically the ITAT has restored the appeal in the hands of CIT(A) [HNM]
S. 201, 203 : Department appeal
Q.3 Whether a respondent in the case of a Departmental Appeal can take advantage of the Direct Tax Dispute Resolution Scheme, 2016?
Ans. The Hon’ble Delhi High Court in the case of All India Federation of Tax Practitioners v. UOI  236 ITR 1 (Delhi) while upholding the constitutional validity of the ‘Kar Vivad Samadhan Scheme’ proceeded to read down the proviso to Sec. 92 of the Finance (No. 2) Act, 1998 holding that there is no reason for denying the benefit of the scheme to the assessee who has succeeded at one stage of litigation if the revenue has chosen to continue with the said litigation. The Hon’ble Delhi High Court struck down the proviso to Sec. 92 of the Finance (No. 2) Act, 1998 as being violative of Article 14 while holding that the rest of the scheme was intra vires the Constitution subject to reading down the definition of ‘tax arrears’ as made by it. However, Sec. 203 (2) provides for declaration in respect of tax arrears only before Commissioner of Income-tax (Appeals) or Commissioner of Wealth-tax (Appeals) and hence limits the scope of the scheme. Explanation may be sought from the CBDT or a writ petition may be filed in the Jurisdictional High Court by any such respondent in a Departmental Appeal desirous of taking advantage of this scheme. [KS]
S. 201 : Settlement Commission
Q.4 Matter was pending before the Settlement Commission, the matter was Abated for no payment of tax and the matter was set aside . The matter has gone back to the CIT(A). Can the assessee avail the benefit.
Ans. Irrespective of how the appeal is pending before CIT(A) and the past history of litigation, once appeal is pending before CIT(A) on 29-2-2016 and the proceedings is not the one barred by section 208 of Finance Act, 2016, an application can be filed under Direct Tax Dispute Resolution Scheme. [CAK]
S. 201 : Appeal – Fee for furnishing statements u/s 234E
Q.5 Whether appeal against fee under section 234E is eligible for Dispute Resolution Scheme?
Ans. As per definitions under DTDRS S. 201(1)(d) read as under :
“(d) “disputed tax” means the tax determined under the Income-tax Act, or the Wealth-tax Act, which is disputed by the assessee or the declarant, as the case may be.”
The Hon’ble Bombay High Court in Rashmikant Kundalia v. UOI (2015) 373 ITR 268 – while dealing with the Constitutional validity of the Provision of S. 234E as held that the fee levied u/s. 234E is neither punitive nor in the nature of tax. Fees charged for extra services by the revenue.
Therefore the assessee may not be able to get the advantages of the DTRS.
S. 201 : Appeal – Penalty u/s. 271D for failure to comply with the provisions of section 269 SS
Q.6 A penalty order u/s. 271D has been imposed on the assessee against which appeal is pending. Can the assessee apply for resolution under the direct tax dispute scheme ?
Ans. Penalty has been imposed u/s. 271D for default u/s. 269SS, is in arrear and appeal is pending before the Commissioner of Income-tax (Appeals). The querist can avail of the Direct Tax Dispute Resolution Scheme, 2016 and make a declaration on or after 1-6-2016 u/s. 202 to the designated authority. The declarant would be required to pay 25% of the minimum penalty leviable u/s. 271D of the Act. It is a condition precedent that he has paid tax and interest payable on the total income finally determined. (NMR)
S. 201 : Appeal – Penalty was paid and appeal is pending.
Q.7 Can an assessee who has paid penalty amount in full and filed appeal before CIT(A) can file application under DTDRS and claim refund?
Ans. As per S. 201(1)(d) of DTDRS “disputed tax” means the tax determined under the Income-tax Act, or the Wealth-tax Act, which is disputed by the assessee or the declarant, as the case may be;
Whereas S. 87(f) KVSS 1998 reads as under:
“disputed tax” means the total tax determined and payable, in respect of an assessment year under any direct tax enactment but which remains unpaid as on the date of making the declaration under section 88.
Therefore the assessee can avail the benefit of the Scheme. He may have to make application to the Assessing Officer to refund the amount paid under protest when the appeal is pending. [KS]
S. 202, 203 : Delayed appeal
Q.8 Can an appellant in the case of a Delayed Appeal take advantage of the Direct Tax Dispute Resolution Scheme, 2016?
Ans. The language of S. 203 in case of ‘Specified tax’ explicitly states that “Where the declaration is in respect of specified tax and the declarant has filed any appeal…”. This wording of the Section clearly implies that the appeal needs to be filed. However, there is no express requirement of such an appeal to be admitted. Therefore, in the case of an Appeal (or other relevant proceedings as per the scheme) the appeal merely needs to be filed. Hence, even an appeal with a condonation of delay application that is pending can be said to be eligible for this scheme.
However, in the case of pending arrears, the S. 202(1) states “in case of pending appeal related to tax arrear being…”. The department as per Circular Samadhan: 4/98, dated 28-10-1998 in the In the ‘Kar Vivad Samadhan Scheme’ (which as per Sec. 98(i) (c) restricted the application of that scheme to cases where an appeal, reference or writ petition was pending ) had clarified that in cases involving delay in appeals filed before the CIT(A) or CEGAT, the proof of condonation of delay must be furnished. However, the Hon’ble Gujarat High Court in the case of
Shatrushailya Digvijayasingh Jadeja v. CIT  259 ITR 149 (Guj.)
as affirmed by the Hon’ble Supreme Court in Shatrushailya Digvijayasingh Jadeja v. CIT  277 ITR 435 (SC)
while referring to the case of Raja Kulkarni v. State of Bombay AIR 1954 SC 73 held that the word ‘appeal pending’ would mean that an appeal should be pending and that there was no need to introduce qualifications that it should be valid or competent. The Hon’ble Gujarat High Court went on to hold that the revision applications were to be held as ‘pending’ even before condonation of delay. Hence, though it is good law as per the Hon’ble Supreme Court that condonation of delay would not be necessary to show an appeal as ‘pending’; it would be in the assessees best interest to get delay in filing of appeal condoned right at the outset before the CIT(A). [KS]
Ss. 202, 203 : Appeal against, protective assessment
Q.9 The assessment was made on protective basis and the appeal is pending, can the assessee take advantages of DTDRS ?
Ans. Interpreting the provisions relating to KVSS, 1998, in S. Jaganathan v. ACIT (2014) 266 ITR 305(Karn.)(HC), the Court held that there should be factual arrears that could be demanded legally; where there was only protective assessment and protective demand the assessee’s declaration / application was rightly rejected. According to me the same interpretation will be applicable in respect of DTDRS. [KS]
Ss. 202, 203, 208 : Appeal against undisclosed income of any other person, u/s. 158BD
Q.10 Appeal against the order u/s 158BD is pending before the First Appellate Authority. Can the appellant avail the scheme since only orders u/s. 153/153A are beyond the scope of the scheme.
Ans. Query is not clear. However, if appeal is pending, the Income Declaration Scheme would be inapplicable. If action has been taken u/s. 158BD, the assessment order has to be passed u/s. 158BC. Section 208(a)(i) prohibits applicability of the Dispute Resolution Scheme relating to an assessment year in respect of which an assessment has been made u/s. 153A or 153C of the Act. It does not prohibit in respect of appeal against Order u/s. 158BC. (NMR)
S. 202, 203 : Appeal – Enhancement
Q.11 I have filed DRS application. However, the CIT(A) has now issued a notice post filing the application under DRS to enhance the income. While the enhancement proceedings and the outcome stand abated once the DRS is accepted by way of order by designated authority ?
Ans. Once Scheme became operative on 1-6-2016; valid declaration having been filed & pending, the CIT(A) would be unjustified in issuing enhancement notice. The declarant should approach the Principal Chief Commissioner of Income-tax/Central Board of Direct Taxes to intervene. Once the DRS is accepted and order is issued by the designated authority, the notice should abate and would be inoperative and void. Such an act of the Commissioner of Income-Tax (Appeals) is not in accord with fairness and good conscience. It is against law, justice and equity. [NMR ]
S. 202 : Appeal – Penalty.
Q.12 In case of dispute relating to penalty, the scheme requires payment of 25% of the amount of penalty. If a person has already paid 50% of penalty after filing appeal, the issue is:
– Does he get refund of excess paid or
– Does he need to pay 25% in addition to what is paid or
– He neither gets refund nor required to pay anything ?
Ans. Declarant having paid 50% of the penalty would not be entitled for refund of excess paid. However, the declarant need not pay further amount of 25% of minimum penalty as he has already paid in excess. He should not be penalised for being a good citizen paying in excess then specified in the Scheme. Section 202(1)(b) requires payment of 25% of the minimum penalty leviable only. Form No. 1 Part A-3(d), (e), (f) and (g) also supports this view. (NMR)
S. 202 : Appeal pending before ITAT
Q.13 As an Appellant, have an appeal pending before ITAT. Can I use this scheme to settle the case finally to buy peace?
Ans. As per section 202 of the Finance Act provide that the assessee who wants to settle the tax dispute pending before the concerned appellate authority as on 29-2-2016, can make a declaration in the prescribed Form on or after 1-6-2016 but before 31-12-2016. In the case of an assessee in whose case the assessment or reassessment is made in the normal course and not due to any retrospective amendment, and the appeal is pending before CIT(A) as on 29-2-2016, the tax dispute can be settled.
Similarly in a case where the disputed tax demand relates to addition made in the assessment or reassessment order made as a result of any retrospective amendment in the Income-tax or Wealth-tax Act, the dispute can be settled at the level of any appellate proceedings (i.e. CIT(A), ITA Tribunal, High Court etc.) by payment of disputed tax. No interest or penalty will be payable in such a case. Hence, if the appeal before the Tribunal is not of the specified tax as define u/s. 201(1)(g) the assessee may not be able to take advantages of the DTDRS. [KS.)
S. 205 : Immunity under Sales-tax Act
Q.14 Can an assessee claim immunity under Sales-tax Act in respect of dispute settled under DTDRS?
Ans. In Master Cables Pvt Ltd v. State of Kerala (2007) 296 ITR 8 (SC), interpreting the provisions of KVSS the Apex Court held that the finality of order under section 90(3) and immunity under section 91 thereof cannot be availed in proceedings under Sales Tax law of the State. The same interpretation will also hold good for DTDRS. [KS]
S. 208 : Survey – Penalty
Q.15 Assessee has made disclosure in the course of survey. On this AO levied the penalty u/s. 271(1)(c) which is pending before CIT(A) on 28-2-2016. Can assessee withdraw the appeal and submit the application under Dispute Resolution Scheme, 2016?
Ans. As tax arrear, being penalty, arises out of assessment made in pursuant of survey u/s. 133A, the applicant is barred by section 208(a)(ii) from making a declaration.(CAK)
S. 208 : Discharge by competent court
Q.16 Where the prosecution is launched against and subsequently the accused is discharged by the Competent Court, can he take advantage of IDIS or DTDR, 2016?
Ans. Dealing with FAQ on KVSS Q. No. 33 of circular Samadhan 3 /98 dated 7-10-1998 (1998) 233 ITR 121 (ST) (125), clarifies that where the prosecution has been launched for any particular year but the assessee has been since then discharged by the competent court, declaration can be made under the Scheme. If the same interpretation of the language of the statute is to be taken given the similarities of the wording in the case 208(c) of DTDR and 95(iii) of KVSS, 1998, if the assessee is discharged by the competent court he can take advantages of the DTDR.
S. 227 of the CrPC states that upon consideration of the record of the case and the documents submitted therewith and after hearing the submissions of the accused and prosecution, if the Judge considers that there is not sufficient ground for proceedings against the accused, he shall discharge the accused. If the accused is discharged, there is no prosecution pending against the accused and hence it follows that he may take advantage of both IDIS & DTDR, 2016. [KS]