Tax Advisory and Litigation, Articles, Income Tax


With a view to reduce the huge backlog of cases pending in courts, tribunal, arbitration and to enable the Government to realise its dues expeditiously, a one-time settlement scheme, known as Direct Tax Dispute Resolution Scheme, is proposed to be introduced in relation to tax arrears and specified tax.


-The Scheme shall be applicable to tax, interest or penalty determined under the Income-tax Act or the Wealth-tax Act, 1957 in respect of which appeal is pending before the Commissioner of Income-tax (Appeals) or the Commissioner of Wealth-tax (Appeals) as on 29.02.2016. The pending appeal could be against an assessment order or a penalty order.

-The declarant under the Scheme shall be required to pay tax along with interest up to the date of assessment. Further, if the disputed tax exceeds Rs.10 lakhs, 25% of penalty leviable shall also be paid

-In case of appeal pending against penalty order, 25% of the minimum penalty leviable shall be payable along with tax and interest


– A person can also make declaration in respect of any tax determined on account of retrospective amendment, for a period prior to the date of enactment of such amendment and dispute of which is pending as on 29.02.2016

– Once the declaration is made, appeal pending before Commissioner (Appeals) shall be deemed to be withdrawn

– If an assessee opts for this Scheme, he shall withdraw any appeals or writ petitions filed with Tribunal or Courts before making such declaration and furnish proof of withdrawal. Further, notices given by declarant and claims made pursuant to any agreement entered by India, shall be required to be withdrawn to entail benefits of this Scheme.

– An undertaking has to be given by declarant of waiving the right of any remedy or claim under any law or pursuant to any agreement entered by India

– The specified tax and the related matters mentioned in the declaration shall not be taken up by any authorities for the purpose of resolving or deciding on issue

– In case the declarant violates any provisions or conditions mentioned in this Scheme or provides any false particulars at the time of declaration, it shall be presumed that the said declaration was never made and the consequences, of pending proceedings under Income Tax Act or Wealth Tax Act pursuant to declaration, shall be deemed to have been revived


– Immunity from prosecution of any offence under the Income-tax Act or the Wealth-tax Act, subject to specified conditions

– Immunity from imposition of penalty in case of specified tax, subject to specified conditions. However, in case of tax arrears, immunity from penalty shall be of the amount exceeding the penalty payable as per the Scheme

– Waiver of interest in respect of specified tax, subject to specified conditions. However, in case of tax arrears, the waiver shall be of the amount exceeding the interest payable as per the Scheme

– Matter covered by order of designated authority shall not be reopened in any other proceeding

– Benefits under this Scheme shall be restricted to proceedings mentioned in the Scheme


-Cases where prosecution has been initiated before 29.02.2016.

– Search or survey cases where the declaration is in respect of tax arrears.

– Cases relating to undisclosed foreign income and assets.

– Cases based on information received under DTAA where the declaration is in respect of tax arrears.

– Person notified under Special Courts Act, 1992.

– Cases covered under Narcotic Drugs and Psychotropic Substances Act, Indian Penal Code, Prevention of Corruption Act or Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974


-A declaration shall be made to designated authority not below Commissioner in form and manner as may be prescribed

– The designated authority shall confirm the amount payable within 60 days from receipt of application

– The declarant shall pay the amount confirmed by the designated authority within 30 days from the day of determination of amount by the designated authority

– Amount paid under the Scheme shall not be refundable


– Central Government shall be vested with powers to make rules and administer the working of Scheme and it shall issue directions or orders to concerned persons for execution of the Scheme

– In case of any difficulty arising in relation to Scheme, the Central Government, through an order, may remove such difficulty; however, no such orders shall be passed after the expiry of 2 years from the date on which the Scheme comes into force. The order shall be required to be laid down before each House of Parliament.

– Further, any rules made by Central Government, for the purpose of Scheme, shall be laid down before each House of Parliament

The Scheme is a welcome move and it will be interesting to see how many assessees turn up and seek for declaration in order to buy peace from the harsh probable consequences.

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