New Delhi, Feb 29 Terming tax disputes as a scourge of tax-friendly regime, Finance Minister Arun Jaitley, presenting the Union Budget for 2016-17, on Monday unveiled a new dispute resolution mechanism to minimise litigation.
He also said Income Tax officials will be responsible for higher interest payout if there is a delay in implementing the orders of appellate authority.
He said there are around 300,000 tax cases pending with the First Appellate Authority involving a tax dispute of around Rs.550,000 crore.
As per the new dispute resolution mechanism unveiled by Jaitley, a tax-payer who has an appeal pending as of today before the Commissioner (Appeals) can settle his case by paying the disputed tax and interest up to the date of assessment.
There will be no penalty in respect of income tax cases with a disputed tax up to Rs.10 lakh.
According to Jaitley, the cases with disputed tax exceeding Rs.10 lakh will be subjected to only 25 percent of the minimum of the imposable penalty for both direct and indirect taxes.
He said any pending appeal against a penalty order can also be settled by paying 25 percent of the minimum of the imposable penalty.
However, certain categories of persons including those who are charged with criminal offences under specific Acts are proposed to be barred from availing this scheme.
With special reference to government's assurance not to create retrospectively fresh tax liability, Jaitley reiterated the government's commitment to provide a stable and predictable taxation regime and not creating fresh tax liability retrospectively.
He proposed one-time scheme of dispute resolution for past cases ongoing under retrospective amendment.
One can settle the case by paying only the tax arrears in which case liability of the interest and penalty shall be waived. This is subject to agreeing to withdraw any pending case lying in any Court or Tribunal or any proceeding for arbitration, mediation under Bilateral Investment Protection and Promotion Agreements (BIPA).
Identifying that levy of heavy penalty as a cause of large number of disputes, Jaitley proposed to modify the scheme of penalty by providing different categories of misdemeanor with graded penalty and thereby substantially reducing the discretionary power of the tax officers.
The penalty rates will now be 50 percent of tax in case of underreporting of income and 200 percent of the tax where there is misreporting of facts. Remission of penalty is also proposed where taxes are paid and appeal is not filed.
Quantification of disallowance of expenditure relatable to exempt income in terms of Section 14A of the Income Tax Act is another issue led to number of disputes. Hence, it has been proposed to rationalise formula in Rule 8D governing such quantification.
Jaitley said the Income Tax department is also issuing instructions making it mandatory for the assessing officer to grant stay of demand once the assessee pays 15 percent of the disputed demand, while the appeal is pending before Commissioner of Income Tax (Appeals).
Jaitley also said the government has accepted many of the recommendations of Justice Easwar Committee.
To make the Income Tax officials responsible, Jaitley said the government will pay nine percent interest on where there is a delay in implementing the Appellate orders beyond 90 days.
"The officers who delay it will be accountable for this loss to the government," Jaitley said.
