No penalty shall be levied in case of quantum appeals in which the disputed tax does not exceed Rs.10 lakh: CBDT [Read Circular]

CBDT issues clarifications on Direct Tax Dispute Resolution scheme, 2016.

The Central Board of Direct Taxes releases clarifications on Direct Tax dispute Resolution Scheme, 2016. Recently, the Board has notified the said scheme with an aim to provide the tax payers who are under litigation, an opportunity to settle the dispute in accordance with the provisions of the Scheme.Following this, the Board has issued the present circular in order to clarify the provisions of the scheme.

As per the circular, in case of appeals pending before the CIT(A) as on 29.02.2016 and the CIT(A) has already disposed the same before filing declaration, then the a declaration cannot be filed under the scheme. It was further said that the CIT(A) shall not dispose a pending appeal if the assessee has filed a declaration under the Scheme or has intimated the CIT(Appeals) his intention to file declaration under the Scheme.

The Circular provides that no penalty shall be levied on in case of quantum appeals in which the disputed tax does not exceed Rs.10 lakh. In such cases, the assessee is liable to pay the disputed ax and interest only. Further, in cases where the disputed tax exceeds 10 lakh, 25% of penalty is leviable along with tax and interest. The circular further clarifies that “Section 205(b) of the Act provides immunity from imposition or waiver of penalty under the Income-tax Act or the Wealth-tax Act in respect of tax arrear covered in the declaration to the extent the penalty exceeds the amount of penalty referred to in section 202(I) of the Act. Hence, in both the situations (i.e. whether disputed tax in quantum appeal exceeds Rs.10 lakh or not), where a valid declaration under the Scheme is made in respect of quantum appeal, the appeal against penalty levied under section 271(1)(c) of the Income-tax Act, relating to the quantum appeal pending before the Commissioner (Appeals) shall be deemed to be withdrawn and the penalty or the balance amount of penalty, as the case may be, shall be deemed to be waived.”

As per the circular, an assessee is not eligible to file declaration in a case where notice of enhancement has been received by the declarant before the date of commencement of the Scheme.Similarly, the benefit is not available in cases where assessment or reassessment on which survey conducted under section 133A of the Income-tax Act.

It further clarifies that, in case of an appeal relating to penalty under section 271(1)(c), the amount payable under the Scheme is 25% of the penalty amount and also the tax and interest payable on the total income finally determined. For this purpose the total income finally determined shall be the total income as determined after giving effect to the last appellate order passed on or before the date of filing declaration under the Scheme. Any variation to the total income as a result of any appellate order passed subsequent to the date of declaration shall be ignored for the purposes of computing the amount of penalty payable under the Scheme.

The circular makes it clear that the scheme only provides for a dispute resolution mechanism in respect of cases for which declaration has been made. Further, it does not decide any judicial issue.

The assesses are further advised to pay tax to the Government on or before the due date as specified in the Scheme in order to avail the relief under the Scheme.The circular also provides that the assessee will be entitled to get refund in case of excess amount paid under the scheme. However, they will not be entitled to interest on such refund.

Read the full text of the clarification below.