Friday, 30 December 2016

CBDT issues further clarifications on Direct Tax Dispute Resolution Scheme, 2016

The Circular addresses some of the ambiguities and concerns of taxpayers in connection with the Scheme. Most clarifications, issued at the fag end of the Scheme period, largely highlight the limitations of the Scheme as to the ineligibility of penalty dispute in relation to tax withholding defaults and search assessment cases, and the requirement to withdraw writ petition challenging the constitutional validity of retrospective amendment.

Furthermore, in relation to settlement of disputes arising out of retrospective amendments, the Circular clarifies that where a dispute is at different stages of appeal for different tax years on the same issue, settlement under the Scheme for the tax year where the taxpayer furnishes the declaration under the Scheme, will not result in automatic settlement of disputes for the other tax years where the Tax Authority is in appeal against the order granting relief to the taxpayer.

However, there still exists ambiguity as to the revival of pending appeal/dispute filed by the taxpayer if the declaration in relation to settlement of the dispute arising out of retrospective amendments is rejected for being invalid by the DA. The taxpayer may find it challenging to restore the appeal/dispute withdrawn in the hope of settlement under the Scheme, since the reference is restricted in operation to the revival of proceedings “against” the taxpayers, and not the proceedings at the behest of the taxpayers.

Under Indian jurisprudence, a circular issued by the CBDT, for proper administration, is binding on the Tax Authority even if it is contrary to legal provisions. This Circular, however, will not bind taxpayers or Courts, if it is not in conformity with the law on any matter.

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