Lok Sabha Question No. 1678 (UNSTARRED), answered on 2020-03-02
Subject: ‘Vivad Se Vishwas’ Scheme
Ministry: FINANCE
Asked by: Raja Amareshwara Naik, Sukanta Majumdar, Jayanta Kumar Roy, Bhola Singh, Vinod Kumar Sonkar, Sangeeta Kumari Singh Deo

## GOVERNMENT OF INDIA MINISTRY OF FINANCE

## DEPARTMENT OF REVENUE

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## LOK SABHA UNSTARRED QUESTION NO.1678 TO BE ANSWERED ON MONDAY THE 2 ND  MARCH, 2020 PHALGUNA 12, 1941 (SAKA)

## 'VIVAD SE VISHWAS' SCHEME

## 1678:  SHRI RAJA AMARESHWARA NAIK:

DR. SUKANTA MAJUMDAR:

DR. JAYANTA KUMAR ROY:

SHRI BHOLA SINGH:

SHRI VINOD KUMAR SONKAR:

SHRIMATI SANGEETA KUMARI SINGH DEO:

Will the Minister of FINANCE be pleased to state:

- (a) whether the litigation and tax disputes in direct taxes are on the rise in the country and if so, the details thereof during the last five years;
- (b) the details of appeals pending and arrears recovered during the last five years;
- (c) whether  the  Government  has  proposed  to  launch  'Vivad  se  Vishwas'  scheme  to reduce litigation in direct taxes and if so, the details thereof;
- (d) whether  the  Government  has  proposed  to  introduce  Taxpayers'  Charter  containing taxpayers rights and if so, the details thereof; and
- (e) the  steps  being  taken  by  the  Government  to  improve  the  tax  administration  in  the country?

## MINISTER OF STATE IN THE MINISTRY OF FINANCE

## ANSWER (SHRI ANURAG SINGH THAKUR)

(a) & (b) The details of pendency of Income Tax appeals at various judicial fora for last five years is as below:

| F.Y.    | CIT (A)   | ITAT     | HC     | SC    | Total    |
|---------|-----------|----------|--------|-------|----------|
| 2014-15 | 2,32,126  | 1,03,238 | 34,281 | 5,661 | 3,75,306 |
| 2015-16 | 2,58,898  | 91,971   | 32,138 | 5,399 | 3,88,406 |
| 2016-17 | 2,90,227  | 92,386   | 38,481 | 6,357 | 4,27,451 |
| 2017-18 | 3,21,841  | 92,817   | 39,066 | 6,224 | 4,59,948 |
| 2018-19 | 3,41,484  | 92,205   | 38,758 | 6,354 | 4,78,801 |

## Source:

- i)  The figures for pendency of appeals for CIT(A) till 2016-17 and HC and SC pendency is as  per  data  provided  by  R&S  Wing,  CBDT.    However,  for  FY  2017-18  and  2018-19  the figures of CIT(A) are as per ITBA data, DGIT(Systems).
2. ii)  The  figures  of  pendency  for  ITAT  are  based  upon  the  flash  figures  of  ITAT  Registry, Mumbai

Hence, as shown in above table the total numbers of Income Tax appeals have risen in the last five years.

Total recovery of arrear demand during last 5 years is as below:

| Sl. No.   | Sl. No.   | Recovery of arrear demand (Collection)(in crores)   | Recovery of arrear demand (Collection)(in crores)   | Recovery of arrear demand (Collection)(in crores)   |
|-----------|-----------|-----------------------------------------------------|-----------------------------------------------------|-----------------------------------------------------|
| Year      | Year      | IT                                                  | CT                                                  | Total                                               |
| 1.        | 2015      | 7,758                                               | 28,835                                              | 36,593                                              |
| 2.        | 2016      | 8,734                                               | 22,800                                              | 31,534                                              |
| 3.        | 2017      | 9,594                                               | 29,351                                              | 38,944                                              |
| 4.        | 2018      | 8,971                                               | 35,662                                              | 44,633                                              |
| 5.        | 2019      | 8,496                                               | 32,103                                              | 40,599                                              |

Source: DOMS, CBDT

(c)      During  the  Union  Budget,  2020  presentation,  a  scheme  namely  'Vivad  se  Vishwas' Scheme  was  announced  by  Hon'ble  Finance  Minister  to  provide  for  dispute  resolution  in respect  of  pending  income tax  litigation.  Pursuant  to  this  Budget  announcement  the  Direct Tax Vivad se Vishwas Bill, 2020 (the Bill) was introduced in the Lok Sabha on 05.02.2020. The objective of the Bill is to inter alia reduce pending income tax litigation, generate timely revenue  for  the  Government  and  benefit  taxpayers  by  providing  them  peace  of  mind, certainty and savings on account of time and resources that would otherwise be spent on the long-drawn and vexatious litigation process.

(d)   With the objective of enhancing the efficiency of the delivery system of the Income Tax Department,  Hon'ble  Finance  Minister  in  her  Budget  Speech-2020  proposed  to  amend  the provisions of the Income Tax Act to mandate the Central Board of Direct Taxes (the Board) to  adopt  a  Taxpayers'  Charter.  Pursuant  to  this  Budget  announcement,  vide  Finance  Bill2020, a new section 119A has been proposed to be introduced in the Income-tax Act,1961 empowering  the  Board  to  adopt  and  declare  a  Taxpayer's  Charter  and  issue  such  orders, instructions, directions or guidelines to other income-tax authorities as it may deem fit for the administration of Charter.

(e)  Improvement in tax administration is a continuous process and the Government has been taking several steps to bring about such an improvement.  In this regard several steps taken to improve tax administration in the country are as follows:

## 1.   Introduction of e-assessment scheme in the income-tax Department:

The Hon'ble Finance Minister in a Budget Speech on 5 th July, 2019 announced a new and innovative measure to improve the working of the IT Department in the form of Faceless Assessment. The new scheme called the 'E-assessment Scheme, 2019' was notified on 12 th September, 2019 and was launched on 3 rd   October, 2019. The E-assessment Scheme, 2019 outlines faceless scrutiny  assessment in an electronic mode, where notices are to be issued electronically and cases are to be allocated to assessment unit in a random manner. It ensures no human interface and single point contact between the taxpayer and the department through National E-assessment Centre (NeAC), created specifically for this purpose.

## 2.   Introduction of e-appeal and e-penalty scheme in the Income-tax Department:

In  the  Budget  2020,  in  order  to  ensure  that  reforms  initiated  by  the  income-tax department  reaches  next  level,  e-penalty  scheme  and  e-appeal  scheme  have  also  been introduced by the Central Government in Finance Bill, 2020.

## 3.   Project Insight:

In  order  to  strengthen  the  non-intrusive  information  driven  approach  for  improving compliance and effective utilization of information in all areas of tax administration, a project insight  is  being  implemented  by  the  Income-tax  Department.   Under  Project  Insight,  an integrated data warehousing and business intelligence platform is being rolled out in phased manner to enable ITD in meeting the three goals namely (i) to promote voluntary compliance and deter noncompliance; (ii) to impart confidence that all eligible persons pay appropriate tax; and (iii) to promote fair and judicious tax administration.

## 4.   Centralized Processing Centre  2.0 Project:

The  Government  has  approved  Integrated  E-filing  &  Centralized  Processing  Centre (CPC) 2.0 Project of the Income Tax Department. CPC 2.0 Project envisages pre-filling of ITRs  by  the  Income-tax  Department  and  its  acceptance  by  the  taxpayer  so  as  to  improve accuracy  of  information  contained  in the Return  and  drastically reduce  the existing turnaround  time  taken  in  processing  of  Returns  and  issuance  of  refunds. CPC  2.0  Project besides promoting the Government objective of promoting voluntary tax-compliance culture would also  smoothen  the  process  of  e-filing  and  processing  of  ITRs  and  will    also    bring about a significant enhancement in services to the taxpayers.

## 5.   Centralized Processing Centre (TDS) 2.0 Project:

CPC(TDS) project has undertaken end-to-end processing of TDS statements through a rule-based technology enabled system for seamless flow of data for tax-credits. In the next phase of CPC (TDS) i.e. CPC (TDS) 2.0, focus has been made on recognizing technology led innovations with respect to emerging technologies such as Artificial Intelligence, Analytics and Blockchain to bring further improvement in service delivery.

## 6.   Prefilled ITRs:

Pre-filled ITR forms have been launched during this Assessment Year 2019-20 covering certain categories of taxpayers.

## 7.   Instant PAN allotment:

Initiatives  are  being  taken  to  launch  a  new  system  under  which  PAN shall be instantly allotted online on the basis of Aadhaar.

## 8.   Document Identification Number(DIN):

To  maintain  proper  audit  trail  of  all  communication  in  Income-tax  Department  in pursuance of various e-governance initiatives taken by the Government, vide Circular No. 19/2019 dated 14-08-2019 ,  Central Board of Direct  Taxes (CBDT)  had directed that no communication shall be issued by any income-tax authority relating to assessment, appeals, exemptions, enquiry, investigation, verification of information, penalty, prosecution, rectification,  approval  etc.  to  the  assessee  or  any  other  person,  on  or  after  the  1 st day  of October, 2019 unless a computer-generated Document Identification Number (DIN) has been allotted  and  is  duly  quoted  in  the  body  of  such  communication  subject  to    certain conditions/exceptions stipulated therein.

## 9. Scheme  for  felicitating best performing  officers/officials  in  the  Income-tax Department:

In  order  to  enhance  morale  and  motivation  and  to  promote  and  appreciate  the outstanding  work  of  Officers/Officials  or  group  of  Officers/Officials  in  the  Income-tax Department, CBDT has issued instructions to felicitate the best performing 'Officers/Officials who have achieved excellence in the prime areas, namely 'investigation', 'collection', 'administration', 'audit' or 'innovation in the organizational  functioning'.

## 10.   Steps taken in the field of International Taxation.

In  the  field  of  tax  disputes,  the  Government  has  laid  equal  importance  on  'dispute prevention' and 'dispute resolution' so as to improve the ease of doing business in India.

## i)     Advance Pricing Agreement (APA).

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In this context,  an  important  and effective dispute  prevention measure  has  been  the introduction of an Advance Pricing Agreement (APA) Programme since 2012 and its successful implementation.

The primary goal of  the APA Programme  is  to provide  certainty  to taxpayers  in  respect  of the    transfer    price    of    cross-border    transactions    undertaken    by    such    taxpayers    with    their group  entities. Rapid growth  in  international  trade  through  an  increasing  number  of  Multi National  Enterprises  (MNEs)  has  given  rise  to  numerous  tax  disputes  on  the issue  of transfer  pricing. An  APA  is  a  mechanism  to  resolve  transfer  pricing disputes  in  advance, i.e.,  before  the  cross-border  related  party  transaction actually  takes  place.  The transfer  price of    goods    and    services    transacted  between  group  entities  is  decided  in  advance  by  the  tax authorities and the taxpayers, so as to prevent any dispute arising from such transfer pricing.

The   APA   programme   in   India   was launched in 2012 vide the Finance Act, 2012 through the insertion of sections 92CC  and  92CD  in  the  Income-tax  Act,  1961(the 'Act') and the  APA Scheme    [rules    10F    to    10T]  was  inserted    in  the  Income-tax  Rules,  1962  (the  'Rules')  to operationalize the APA programme. These  statutory  provisions, effective from  1st July, 2012, lent the legal backing to the Central Board of Direct Taxes (the 'CBDT') to enter into APAs with taxpayers for a maximum period of 5   years   in   respect   of   international   transactions   between Associated Enterprises(AEs) to  determine  the  Arm's  Length  Price  (ALP)  or  to  specify  the manner  in  which  the  ALP  is  to  be  determined. The  rules  lay  down  the  detailed  procedures for  filing  of  pre-filing consultation  application;  pre-filing  consultation;  payments  of  fees; filing    of  APA      application;      processing      of      APA      application;      withdrawal      of      APA application;  terms  and  conditions  of  APA;  filing  of   Annual  Compliance Report; Compliance Audit; revision, cancellation and renewal of APA; etc.

Legislative  changes  were made through the Finance (No. 2) Act, 2014 and the APA Scheme was amended to introduce Rollback of APAs.   The   Rollback   provisions are applicable for a maximum  of  four  years  prior  to  the  first  year  of  the  APA period.  Thus,  a  taxpayer  would be  able  to  have  certainty  in  matters  of transfer pricing for a maximum period of 9 years by applying  for  an  APA  with  Rollback  provisions.  Further,  Finance  Bill,  2020  has  proposed  an amendment  that  would  broaden  the  scope  of  APAs  to  determine  of  income  of  Permanent Establishments (PEs) of foreign companies in advance.

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An Indian taxpayer may apply for a unilateral APA or a bilateral APA or a multilateral APA. Till  date,  about  1,200  applications  have  been  made  by  the  Indian  taxpayers  for  APAs  and agreements have been entered into between the Government of India and taxpayers in more than 300 cases. India has successful bilateral APA programmes with many jurisdictions across the globe and  the  main  partners  are  USA,  UK,  Japan,  Australia,  The  Netherlands,  Canada,  Sweden, Switzerland, Denmark, Korea, Singapore, etc.

## ii)  Mutual Agreement Procedure (MAP)

Similarly, the Mutual Agreement Procedure (MAP) under the Double Taxation Avoidance Agreements (DTAAs) is an effective tool of alternate dispute resolution. It is a mechanism through which an action taken by one or both of the countries that results for a taxpayer in taxation not in accordance  with  DTAAs,  on  request  of  the  taxpayer,  will  be  discussed  by  the  Competent Authorities and resolved through mutual agreement to avoid double taxation. The issue of double taxation arises  in  instances  such  as  Transfer  Pricing  adjustments,  existence  of  Permanent Establishment, Attribution of profits to a Permanent Establishment, characterisation of income and withholding of taxes.

India  is  actively  involved  in  MAP  with  its  partner  jurisdictions  such  as  USA,  UK,  Japan, Australia,  Canada,  Singapore,  Switzerland,  Denmark,  Korea,  etc.  During  the  period  from  April, 2015  till  December,  2019  about  700  cases  (assessment  years)  have  been  resolved  under  MAP through mutual discussion and negotiation with the Competent Authorities of other jurisdictions, which result in reduction of litigation in India.

The Forum on Tax Administration ('FTA') has formed a MAP Forum, which works in accordance with a multilateral strategic  plan developed by FTA  to  collectively  improve  the  effectiveness of  our  mutual agreement procedures to meet the needs of both Governments and taxpayers.  India has been an important member of the MAP forum since its inception and has played a leading role in the finalisation of the procedures for the peer review. India's voice has been heard and its views have been accorded respect by all the member jurisdictions.  India  is  also  a  part  of  the  Steering Group of the MAP Forum.

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