THE DIRECT TAX DISPUTE RESOLUTION SCHEME, 2016
BY
SANJAY CHOKSHI
CHAMBER OF TAX CONSULTANTS
BACK GROUND AND PURPOSE
 Endeavour to reduce litigation
 Various steps by present government like increase in
monetary limits of filing appeals with various authorities
 Ease of Doing Business
 Giving opportunity to assessee to clear disputes arising due
to retrospective amendment
LEGISLATION
 Scheme
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Known as “THE DIRECT TAX DISPUTE
RESOLUTION SCHEME, 2016.”
Section 200 to 211 of the Finance Act, 2016
DIRECT TAX DISPUTE RESOLUTION RULES, 2016
notified on 26th May 2016
Notification No. 34/2016 – declaration of the last day before
which the declaration can be made
Circular No 33 of 2016 with respect to FAQ’s on the scheme
DISCUSSION
 Duration of Scheme
 Key Definitions - Section 201
 Non Application of the scheme - Section 208
 Specified Tax
 Tax Arrears Declaration – Section 202
 Applicable Forms – based on rules notified
 Effect of declaration - Section 203
 Timelines - Section 204
 Immunity and Refund - Section 205, 206 & 207
 Issues based on FAQ’s
 Other Issues
DURATION OF THE SCHEME
START DATE : 1/06/2016 Section 201
END DATE : 31/12/2016 Notification No. 34/2016 issued on
26th May 2016
KEY DEFINITIONS
(a) “declarant” means a person making a declaration under
section 202;
(b) “designated authority” means an officer not below the rank
of a Commissioner of Income-tax and notified by the
Principal Chief Commissioner for the purposes of this
Scheme;
(c) “disputed income”, in relation to an assessment
year, means the whole or so much of the total
income as is relatable to the disputed tax;
KEY DEFINITIONS
(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;
(e) “disputed wealth”, in relation to an assessment
year, means the whole or so much of the net wealth
as is relatable to the disputed tax;
(f) “Income-tax Act” means the Income-tax Act, 1961;
KEY DEFINITIONS
(g) ‘‘specified tax’’ means a tax—
(i) the determination of which is in consequence
of or validated by any amendment made to the
Income-tax Act or the Wealth-tax Act with
retrospective effect and relates to a period prior to
the date on which the Act amending the Income-tax
Act or the Wealth-tax Act, as the case may be,
received the assent of the President;
and
(ii) a dispute in respect of such tax is pending as
on the 29th day of February, 2016;
KEY DEFINITIONS
(h) “tax arrear” means, the amount of tax, interest or
penalty determined under the Income-tax Act or
the Wealth-tax Act, in respect of which appeal is
pending before the Commissioner of Income-tax
(Appeals) or the Commissioner of Wealth-tax
(Appeals) as on the 29th day of February, 2016;
(i)“Wealth-tax Act” means the Wealth-tax Act, 1957.
NON APPLICATION OF THE SCHEME
 Assessment under section 153A and 153C of IT Act
 Assessment under section 37A and 37C of WT Act
 Survey proceedings having bearing on the assessments and
the tax arrears
 Prosecution has been initiated before filing of the declaration
 Undisclosed income from a source located outside India
 Assessments or reassessments made on the basis of
information received under any agreement referred to in
section 90 or 90A of the IT Act
NON APPLICATION OF THE SCHEME
 Person on whom an order of detention has been made under the
provisions of Conversion of Foreign Exchange and Prevention of
Smuggling Activities Act, 1974
 To any person in respect of whom prosecution for any offence
punishable has been instituted or such person has been convicted
of any such offence punishable under the provisions of the Indian
Penal Code, the Unlawful Activities (Prevention) Act, 1967, the
Narcotic Drugs and Psychotropic Substances Act, 1985, the
Prevention of Corruption Act, 1988 or for the purpose of
enforcement of any civil liability any of these Acts;
 To any person notified under section 3 of the Special Court (Trial
of Offences Relating to Transactions in Securities) Act, 1992.
SPECIFIED TAX
 What is specified Tax
 An amendment in the Act have been made
 The dispute should be for a period prior to the amendment
 The amendment should be validated by the said amendment
 Dispute should be pending as on 29th February 2016
This is to mainly addresses issues as
covered in the case of Vodafone
TAX ARREARS DECLARATION
Case Particulars
Amount Payable
In case of Tax Arrears
Disputed Tax does not exceed Rs. 10 lacs
Disputed Tax
Interest till the date of assessment
Disputed Tax exceed Rs. 10 lacs
Disputed Tax
Interest till the date of assessment
25% of the minimum penalty leviable
No disputed Tax but only Penalty matter
25% of the minimum penalty leviable
Tax and interest on the total income finally
determined
In case of Specified Tax
Such Tax so determined
APPLICABLE FORMS
 Form 1 – Declaration u/s 203
 Form 2 – Undertaking u/s 203(4)
 Form 3 – Certificate of Intimation u/s 204(1)
 Form 4 – Intimation of Payment of dues u/s 204(2)
 Form 5 – Order of full and Final Settlement of Tax
Arrears u/s 204(2) read with s. 205
 Form 6 - Order of full and Final Settlement of Specified Tax
u/s 204(2) read with s. 205
 forms.pdf
EFFECT OF DECLARATION
Type of Cases
Effect of Declaration
In case of Tax Arrears
Dispute with respect of the disputed income,
disputed wealth and tax arrears pending before
CIT (Appeal) or CWT (Appeal) shall be
deemed to have been withdrawn.
In case of Specified Taxes
Appeal filed before the following shall be
withdrawn and proof of the same to be
furnished
CIT (Appeal) or CWT (Appeal)
Appellate Tribunal
High Court
Supreme Court
Writ Petition before High Court or Supreme
Court shall be withdrawn with the leave of the
court
Withdraw any proceeding for arbitration
initiated under any law or agreement
EFFECT OF DECLARATION
 Waiver of right to pursue any claim in relation to the
specified tax available to the declarant under any law or
agreement.
 No appellate authority or arbitrator conciliator or mediator
shall proceed to decide any issue relating to the specified tax
EFFECT OF DECLARATION
 Presumption of the declaration never made
 Material particular furnished in the declaration is found false
 Declarant violates any condition of the scheme
 Declarant initiates any proceedings under any law or agreement
in contradiction to the undertaken given by him
TIMELINES
 Grant of certificate and intimation of amount payable within
60 days of the declaration
 Payment should be made within 30 days of receipt of
certificate
 Within 30 days of payment intimate to the designated
authority the details of such payment
 Within 30 days there off the designated shall pass the final
order.
IMMUNITY AND REFUND
 No refund shall be granted with respect to amounts payable
under the scheme
 Immunity
 Against proceedings in respect of an offence under the IT Act or
the WT act
 Imposition or waiver of penalty
 Specified tax - complete waiver
 Tax Arrears – if tax less than 10 lacs – complete waiver
 Tax Arrears – if tax more than 10 lacs – in excess of 25% of minimum
penalty leviable
ISSUES
 Appeal Pending on 29/02/2016 but disposed off
before filing the declaration
Declaration cannot be filed
 Intimation to CIT Appeals of intention to file
declaration
CIT (Appeals) will keep the appeal pending as per Letter
F.No.279/Misc./M-30/2016 dated 30.03.2016
 Declaration of Quantum Appeal on Penalty matter
The Penalty matter gets disposed of automatically
ISSUES
 From what point of time the appeal shall be
deemed to be withdrawn
Issue of certificate under section 204(1)
 Addition results in reduction of loss but penalty
leviable
Declaration has to be made only for penalty
 Result of condonation of delay on appeal to be
filed before 29/02/2016
Can file the declaration if condonation filed and granted
ISSUES
 In case of notice of enhancement by CIT (Appeal)
Declaration cannot be filed
 In case of Survey – addition made on basis of
material found in survey and other enquiry
Not Eligible for scheme
 In case of Substantive and protective assessment
Declaration to be filed by person in whose case substantive
assessment is made
ISSUES
 Effect on other assessment years on same issue
Declaration does not decide judicial issue. It only calculates the
sum payable
 Non payment of Tax under the scheme
Tax should be paid in time to avail the benefit
 Refund in case of already recovered penalty
Yes eligible in case if paid in excess of the scheme. No Interest
under section 244A.
OTHER ISSUES
 Whether part of the issues in the appeal can be applied
under the scheme and balance issues can still be
contested.
 What shall be the effect of non payment of dues on
time – whether the appeal will have to be refilled or
the original appeal will prevail
 Why the scheme is applicable to 1st Appeal only in case
of tax arrears.
 In case of surveys – whether only issues based on
material found in surveys shall be out of the ambit of
the scheme or complete assessment