The Direct Tax Dispute resolution scheme has become operational from 1st June, 2016. The Government has notified [vide Notification No.34/2016] 31st December,2016  as the last date by which a Taxpayer can make a declaration to settle Direct Tax disputes.

The procedure and format for making a declaration under the Scheme is also notified vide Notification No.35/206.  The Scheme, which was announced in the Budget for the year 2016-17 covers disputes in the following two categories:

(A) Disputes arising out of retrospective amendment to Tax law and pending before any appellate or artibration  forum

(B) All other disputes pending before the Commissioner of Income-tax (Appeals)

All disputes which were pending as on the date of presentation of Union Budget [i.e.February 29, 2016] qualify for settlement. While disputes under category (A) can be settled by payment of Tax component alone, in respect of Disputes falling under category (B), interest till date of assessment and 25% of minimum leviable penalty would also have to be paid. No penalty is payable where the Tax component is less than Rs. 10 lacs.

The brief procedure for filing a declaration under the scheme is set-out below:

(i) The declarant has to furnish the details of the Taxes and income under dispute in Form 1 alongwith an undertaking in Form 2 to forego all remedies available to declarant to agitate the dispute. The Tax authority designated to receive the declaration would furnish an acknowledgement with respect to every declaration received.

(ii)  The designated Tax authority would issue a certificate in Form 3, setting-out the payment to be made by the declarant pursuant to the filing of declaration under the Scheme. The said payment has to be made within a period of 30 days of receipt of the Form.

(iii) After effecting the payment, intimation of the same has to be filed by the declarant in     Form 4

(iv) Upon receipt of intimation of payment in Form 4, the designated Tax authority would issue a certificate of settlement of dispute either in Form 5 [for category (B) disputes] or in Form 6 [Category  (A) disputes].

A declarant under the scheme is granted immunity from prosecution and penalty in relation to the dispute which is settled under the Scheme.