Union Budget: Move amid a spurt in amounts locked up in disputes.
Budget 2023: Faced with a huge backlog of cases and with an aim to cut down litigation, the income tax department may offer a fresh dispute resolution (amnesty) scheme for taxpayers.
According to sources, the finance ministry is contemplating the move that would allow taxpayers to resolve cases stuck in litigation and appeal at various fora. Taxpayers will have the option to pay the disputed tax amount and a penalty of 10-20% to dispose of the case.
The move is being thought of at a time when there is a huge backlog of pending cases, especially at the level of Commissioner of Income Tax (Appeals) due to the pandemic, when many hearings could not take place.
The amnesty scheme, if implemented, would help bring immediate additional revenue to the tax authorities, and would come in handy for them in a year when the growth in tax collections is expected to moderate. It would also be beneficial to sections of taxpayers as it would reduce their potential tax liabilities besides removing the uncertainties and costs associated with litigation. If the proposal is finalised, an announcement will be made in the Union Budget 2023-24.
According to official data, a large number of pending cases are one to two years old. Amount under dispute for over one year but less than two years, rose to Rs 6.58 trillion by March 31 2021, whereas amount locked up for over two years but less than five years increased to Rs 3.4 trillion. The amount locked up in direct tax disputes had increased from Rs 2.87 trillion in FY14 to Rs 8.83 trillion in FY20, despite a fall in disputed amounts and number of cases between FY16 and FY18, thanks to Income Disclosure Scheme (IDS) announced in Budget FY16. The pandemic led to a further increase in litigation and amounts locked up.
The government had previously launched the Vivad se Vishwas scheme in 2020 for settlement of disputes related to tax deducted at source, interest or penalty. The scheme had proved to be successful. Of the disputed direct tax amount of Rs 99,756 crore, as much as Rs 53,684 crore was paid to settle the cases, according to a response in the Parliament.
Tax experts said such a scheme would be beneficial but should be fair in nature. Aarti Raote, partner, Deloitte India noted that since the pandemic, there is a huge pile up of cases, especially at the CIT(A) level as online settlement was not operational. “Some people may prefer a tax amnesty or resolution scheme that will help reduce litigation. However, it should be a fair scheme to make sure that it is advantageous for the taxpayers as well,” she said.
S Vasudevan, executive partner, Lakshmikumaran & Sridharan Attorney said that in many cases, the taxpayers while intending to settle the tax demands, continue to litigate the matter to avoid any consequential penalties. “Such taxpayers are eyeing the upcoming Budget with the hope of introduction of a dispute resolution mechanism or an amnesty which will allow them to re-evaluate their pending appeals and settle the disputes in deserving cases. Such schemes will also be beneficial for the tax department as they will not only channelise revenue but also result in clearing the huge backlog of cases pending before various judicial forums,” said Vasudevan.
The proposal in the Central Board of Direct Taxes is being formed at a time when a similar amnesty scheme is also being looked into by the Central Board of Indirect Taxes and Customs to resolve litigation on the customs and export side.
With a view to settling tax cases and allowing people to become tax-compliant, the government had, in the past, announced few amnesty and dispute resolution schemes. The Union Budget 2016-17 announced a number of measures to reduce litigation, including the IDS, under which taxpayers could declare undisclosed income or income represented in the form of any asset by paying tax at 30% and surcharge at 7.5% and penalty at 7.5%. A dispute resolution scheme was also announced through which a taxpayer who has an appeal pending before the Commissioner (Appeals) can settle his case by paying the disputed tax and interest up to the date of assessment. No penalty in respect of income tax cases with disputed tax up to Rs 10 lakh was to be levied. Thanks to the IDS, amounts under dispute for cases between one and two years came down to Rs 93,648 crore relating to taxes on income other than corporation tax at the end of the reporting period 2017-18 from Rs 1.78 trillion at the end of 2016-17 but has since risen again.
Source: https://www.financialexpress.com/budget/fy24-budget-to-unveil-another-income-tax-amnesty-scheme-2956814/
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