New scheme notified to help reduce tax litigation

The Ministry of Finance has notified the Direct Tax Vivad Se Vishwas Scheme, 2024 which will come into effect from October 1, 2024. This scheme aims to reduce income tax litigation and allows taxpayers to settle income tax appeals, writs and petitions that are pending before various appellate authorities including the Supreme Court and high courts as of July 22, 2024.

“In exercise of the powers conferred by sub-section (2) of section 88 of the Finance (No. 2) Act, 2024 (15 of 2024), the Central Government hereby appoints the 1st day of October, 2024 as the date on which the Direct Tax Vivad Se Vishwas Scheme, 2024 shall come into force,” read the notification by the Ministry of Finance dated September 19, 2024.

This much-anticipated relief was announced in Budget 2024 presented in July this year. The finance minister announced this scheme and said, “It is proposed to introduce a new scheme for settlement of pending appeals.” The scheme's operational date has been announced, but the final date for the scheme is still pending announcement.

“The pendency of litigation at various levels has been on the rise due to a larger number of cases going for appeal than the number of disposals. Keeping in view the success of the previous Vivaad Se Vishwas Act, 2020 and the mounting pendency of appeals at CIT(A) level, introduction of a Direct Tax Vivad se Vishwas Scheme, 2024 is proposed with the objective of providing a mechanism of settlement of disputed issues, thereby reducing litigation without much cost to the exchequer,” as per the explanatory memorandum to Budget 2024.
Details of the Direct Tax Vivad Se Vishwas Scheme, 2024

You can only use the Direct Tax Vivad Se Vishwas Scheme, 2024, if your appeals, writs and petitions are pending as of July 22, 2024.

Who will benefit from this scheme?

As per the Finance Act, 2024 the Direct Tax Vivad Se Vishwas Scheme, 2024 can be used by the following appellants:

• A person in whose case an appeal or a writ petition or special leave petition has been filed either by him or by the income-tax authority or by both, before an appellate forum and such appeal or petition is pending as on the specified date; or
• A person who has filed his objections before the Dispute Resolution Panel under section 144C of the Income-tax Act and the Dispute Resolution Panel has not issued any direction on or before the specified date; or
• A person in whose case the Dispute Resolution Panel has issued direction under sub-section (5) of section 144C of the Income-tax Act and the Assessing Officer has not completed the assessment under sub-section (13) of that section on or before the specified date; or
• A person who has filed an application for revision under section 264 of the Income-tax Act and such application is pending as on the specified date;

Vivad Se Vishwas Scheme: Tax demands and litigations eligible for settlement
The table below shows a summary of the specified timelines for the appeals, which can be filed under the Vivad Se Vishwas Scheme, 2024

Source: EY Budget Highlights document
How the Vivad Se Vishwas Scheme may help you

According to Mihir Tanna, Associate Director- direct tax, S.K Patodia & Associates LLP, a CA firm, “After providing relief to many taxpayers in previous Vivaad Se Vishwas Scheme, 2020; the Finance Bill, 2024 introduced Vivad Se Vishwas Scheme, 2024 to curtail the pendency of cases at CIT(A), ITAT, HC and SC.”

Tanna says that the scheme will be helpful for taxpayers. “All pending cases as on July 22, 2024 (day before budget presented) will be eligible for the new Scheme and eligible persons can apply from October 1, 2024. Online process is likely to be in place by October 1, 2024, similar to the 2020 scheme with the same name. This scheme offers the taxpayers the opportunity to settle disputed tax, interest, or penalties at the rates lower than the actual total demand.”

It received a good response when the scheme was launched last time. “It has been the endeavour of the Central Board of Direct Taxes to provide expeditious disposal of appeals by appellate authorities under its administrative control. One such measure 56 was the Direct Tax Vivaad Se Vishwas Act, 2020 launched for appeals pending as on 31.01.2020. The Scheme got a very encouraging response from the taxpayers and also resulted in garnering substantial revenue for the Government,” as per the explanatory memorandum to Budget 2024.

However, some taxpayers needed further follow-ups as their issues were not resolved despite making the desired payment. Tanna says that while some of his clients got relief under the 2020 Vivad se Vishwas Scheme, in some cases, the tax demand notices did not get cancelled until many months later despite the 2020 scheme passing its resolution. “In the 2020 scheme, my experience was that even after making payment of required tax, there was substantial delay in deleting the tax demand notice online at the income tax portal,” says Tanna.