Dispute Resolution Scheme 2016 has been made effective from 1st June 2016 is for the benefit of those tax payers who have disputed the tax demands by the assessing officer and appealed before CIT(A) or before ITAT , High Courts and Supreme Court. The government has brought in this scheme to provide an amicable settlement for tax so as to reduce the litigation between tax payer and the tax department.

1. What law regulates Dispute Resolution Scheme 2916?

Dispute Resolution Scheme 2016 starts from section 200 to section 211 under Chapter XI of the Finance Act 2016 . It is further supported by the Direct Tax Dispute Resolution Scheme Rules 2016 .

2. What type of tax disputed covered under DRS 2016 ?

There are two types of tax disputes covered under the scheme Specified Tax dispute and Tax Arrears  Dispute. The specified tax disputes are those tax demands which were created on account of the retrospective amendments . The definition is given in section 200(1)(g) of the Finance Act 2016

(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;

The second type of dispute that can be solved is Tax Arrear dispute .As per section 202(1) (h) of F.A 2016  “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;

3. How much tax required to be paid ?

It depends upon various factors .

(I) in case of pending appeal related to tax arrear being—
(a) tax and interest,—
(i) in a case where the disputed tax does not exceed ten lakh rupees, the whole of the disputed tax and the interest on disputed tax till the date of assessment or reassessment, as the case may be; or
(ii) in any other case, the whole of disputed tax, twenty-five per cent of the minimum penalty leviable and the interest on disputed tax till the date of assessment or reassessment, as the case may be;

4.Is penalty payable under DRS scheme ?

Yes, for tax arrears case 25% of the minimum penalty leviable a. , but for specified tax no penalty is required to be paid. Simply tax is payable.

5. How to apply ? Where to apply ?

As per Section 203 of the Finance Act 2016 read with Rules  , following procedure are required to be followed
1. Submit application in duplicate in Form-1 to designated authority . As per CBDT letter dt 01/06/2016 , the Pr.CIT or CIT having jurisdiction over assessee is the designated authority for DRS scheme 2016
2. Withdraw your appeal before appellate authority and furnish proof of such withdrawal along with the declaration
3. Where the declaration is in respect of specified tax, the declarant shall, without prejudice to the provisions of sub-section (3), furnish an undertaking, in Form 2 waiving his right, whether direct or indirect, to seek or pursue any remedy or any claim in relation to the specified tax which may otherwise be available to him under any law for the time being in force

6. Who can sign application ?

As per Rule 3(3) The declaration under sub-rule (1) and the undertaking under sub-rule (2), as the case may be, shall be signed by the declarant or any person competent to verify the return of income on his behalf in accordance with section 140 of the Income-tax Act, 1961.

7. Will I get a receipt of application under DRS 2016 ?

Yes , Rule 3(4) provides that the designated authority will provide the receipt.

8. What is the time limit for passing order in DRS 2016 scheme ?

As per section 204 , time limit for an order under the scheme is sixty days from the date of receipt of the declaration. The designated authority will be within that time limit

  • determine the amount payable by the declarant
  • grant a certificate in Form 3 to the declarant setting forth therein the particulars of the tax arrear or the specified tax, as the case may be, and the sum payable after such determination.

As per Rule 6 ,t the order by the designated authority under sub-section (2) of section 204 in respect of tax arrear shall be in Form-5 and in respect of specified tax shall be in Form-6.

9. Will amount be refunded if I withdrew my application?.

As per section 206. any amount paid in pursuance of a declaration made under section 202 shall not be refundable under any circumstances.

10. What  are the types of cases , DRS 2016 not applicable ?

Section 208 provides such exceptions

1. Where the assessment relates to search and seizure i.e done u/s 153A and 153C
2. Where assessment is done after survey for an assessment year.
3. Where prosecution proceeding is launched before filing application
4. Tax relates to any undisclosed income from a source located outside India or undisclosed asset located outside India;
5. Tax relates to an assessment or reassessment made on the basis of information received under an agreement referred to in section 90 or section 90A of the Income-tax Act, if it relates to any tax arrear;

6. Scheme 2016 will not apply to any person on whom

a. an order of detention has been made under the provisions of the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974 (52 of 1974):
b. to any person in respect of whom prosecution for any offence punishable under the provisions of the Indian Penal Code (45 of 1860), the Unlawful Activities (Prevention) Act, 1967 (37 of 1967), the Narcotic Drugs and Psychotropic Substances Act, 1985 (61 of 1985), the Prevention of Corruption Act, 1988 (49 of 1988) or for the purpose of enforcement of any civil liability has been instituted on or before the filing of the declaration or such person has been convicted of any such offence punishable under any of those Acts;
c. to any person notified under section 3 of the Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992 (27 of 1992)

11. Whether the Certificate under DRS scheme be issued ?

Yes, Rule 4 of The Direct Tax Dispute Resolution Scheme Rules, 2016 provides that the designated authority shall issue a certificate referred to in sub-section (1) of section 204 in Form-3.

12. Is there a prescribed form for payment of tax ?

There is none. But Rule 5 provides that The detail of payments alongwith proof thereof, made pursuant to the certificate issued by the designated authority shall be furnished by the declarant to the designated authority in Form-4.

13. What is the last Date for applying under DRS 2016?

The CBDT has notified vide notification no 34/2016 that 31st December 2016 as the last date for filing an application under DRS 2016 .