The Direct Tax Dispute Resolution Scheme, 2016 introduces a one-time dispute resolution scheme to reduce pending direct tax litigation. Key points: 1) It allows declarants to settle pending tax disputes by paying 100% disputed tax if under Rs. 10 lakhs, and 100% principal plus 25% minimum penalty and interest otherwise. 2) For cases of retrospective taxation, only the disputed tax amount needs to be paid. 3) Declarants must withdraw all appeals and legal proceedings to avail the scheme. 4) The scheme aims to reduce the 3 lakh pending direct tax cases involving Rs. 5.5 lakh crores in disputed taxes.

1. THE DIRECT TAX DISPUTE RESOLUTION SCHEME, 2016
1) Timeline Date of commencement June 1st
, 2016
Last date for filing the
declaration
Yet to be notified by CG in
Official Gazette
2) Definitions Declarant A person who makes the declaration under this
scheme.
Designated
Authority
Officer not below CIT and notified by the Principal
CIT for the purposes of this scheme.
Disputed
Income
Whole or so much of the total income of an
assessment year as is relatable to the “Disputed
Tax”.
Disputed
Tax
Tax determined as per the Income Tax Act or
Wealth Tax Act which is impunged by the assessee
or the declarant as the case may be.
Disputed
Wealth
Definition of Disputed Income shall apply here
mutatis mutandis.
Specified
Tax
Tax demands arising as a consequence of
retrospective amendments made to the Direct Tax
Regime read in consonance with the section 119 of
Finance Act 2012(Validation clause) and which are
disputed and are pending as on February 29th
,
2016.
Tax Arrear Amount of tax dues (includes interest, penalty)
determined under the Income/Wealth Tax Act(s),
in respect of which an appeal is pending before the
First Appellate Authority [Commissioner(Appeals)]
of the Acts mentioned herein as on February 29th
,
2016.
Other words
not defined
As per the relevant definitions of the applicable
Acts.
3) Declaration of tax
payable
Amount payable notwithstanding anything contained in any act for
the time being in force shall be:
1. Cases of pending appeal related to tax arrears being:
Tax and interest Disputed tax upto 1,000,000 INR:
100% of such amounts till the
date of assessment or
reassessment.
Other cases: 100% disputed tax;
25% of minimum penalty leviable
and interest on disputed tax till
the date of assessment or
reassessment.
Penalty 25% of the minimum penalty leviable
and interest on disputed tax till the
date of assessment or reassessment.
2. Specified Tax: Amount of such tax so determined.

2. THE DIRECT TAX DISPUTE RESOLUTION SCHEME, 2016
4) Particulars to be
furnished
A. Declaration in prescribed form and manner.
B. Declarations in respect of tax arrears will render the appeals
before the First Appellate authority to be withdrawn (deemed)
in respect of disputed income/wealth as the case may be.
C. Declaration is in respect of the following cases and the declarant
has:
Filed an appeal to the First Appellate authority or any other further
appellate authority or Court(s) as the case may be, he shall withdraw his
appeals and furnish the proof of such along with the declaration filed.
Initiated any proceeding for arbitration or other forms of settlement
recognized under any law for the time being in force he shall withdraw
the application in respect of such and furnish proof of such along with the
declaration filed.
D. Where declarations have been filed in respect of specified tax,
the declarant shall furnish an undertaking in the prescribed
manner, which states that he waives his right (direct or indirect)
to seek any of the remedies mentioned in point C) above or
otherwise.
E. Where it is found that the declarant has resorted to any
fraudulent means to make a declaration or has violated any
conditions in this scheme or any other manner which is violative
of the Scheme, it shall be deemed that the declaration was never
made and the provisions of the Income Tax Act and/or Wealth
Tax Act shall apply accordingly and the proceedings shall stand
revived.
F. Once a declaration has been made as per this Scheme, then no
authority shall have jurisdiction over the matters disclosed
therein.
5) Time and manner of
payment
A. Designated authority to determine the amount payable by the
declarant and grant a certificate within 60 days from the date of
receipt of the declaration setting forth the particulars of the tax
arrears or specified tax and the sum payable.
B. Declarant to pay the sum determined above within 30 days of
the receipt of the certificate and intimate such to the Designated
Authority.
C. Every order passed by the Designated Authority under point B)
shall be conclusive to the matters stated therein and such
matters cannot be reopened in any subsequent proceedings
under any law for the time being in force or under an agreement
entered into by India with any other country.

3. THE DIRECT TAX DISPUTE RESOLUTION SCHEME, 2016
6) Immunity from
initiation of
proceedings in respect
of offence and
imposition of penalty
in certain cases
Subject to the conditions specified in point 5), the designated
authority shall grant:
Immunity from instituting any proceedings for offences under the Income
Tax Act or Wealth Tax Act; or
Immunity from imposition or waiver of penalty under the acts mentioned
herein in respect of specified tax or tax arrear subject to limits specified.
Waiver of interest under the acts mentioned herein in respect of specified
tax or tax arrear subject to limits specified.
7) No refund of amount
paid under scheme
Any payment of dues shall be non-refundable. (Any excess payments
shall not be refunded back to the declarant. In simple words any
amount paid as dues under this scheme shall not be refundable in
any case.)
8) No other benefit,
concession or
immunity to declarant
Benefits, concessions or immunity under this scheme shall be
available only to the proceedings in relation to which declaration has
been made.

4. THE DIRECT TAX DISPUTE RESOLUTION SCHEME, 2016
9) Scheme not to apply in
certain cases
The provisions of this scheme shall not apply: (Extract from the bill)
A. in respect of tax arrear or specified tax:
i. relating to an assessment year in respect of which an assessment has been made
under section 153A or 153C of the Income-tax Act or assessment or reassessment
for any of the assessment years, in consequence of a search initiated under section
37A or requisition made under section 37B of the Wealth-tax Act if it relates to any
tax arrear;
ii. relating to an assessment or reassessment in respect of which a survey conducted
under section 133A of the Income-tax Act or section 38A of the Wealth-tax Act, has
a bearing if it relates to any tax arrear;
iii. relating to an assessment year in respect of which prosecution has been instituted
on or before the date of filing of declaration;
iv. relating to any undisclosed income from a source located outside India or
undisclosed asset located outside India;
v. relating 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;
B. to any person in respect of whom an order of detention has been made under
the provisions of the Conservation of Foreign Exchange and Prevention of
Smuggling Activities Act, 1974, provided that:
i. such order of detention, being an order to which the provisions of section 9 or
section 12A of the said Act do not apply, has not been revoked on the report of the
Advisory Board under section 8 of the said Act or before the receipt of the report of
the Advisory Board; or
ii. such order of detention, being an order to which the provisions of section 9 of the
said Act apply, has not been revoked before the expiry of the time for, or on the
basis of, the review under sub-section (3) of section 9, or on the report of the
Advisory Board under section 8, read with sub-section (2) of section 9, of the said
Act; or
iii. such order of detention, being an order to which the provisions of section 12A of
the said Act apply, has not been revoked before the expiry of the time for, or on the
basis of, the first review under sub-section (3) of that section, or on the basis of the
report of the Advisory Board under section 8, read with sub-section (6) of section
12A, of the said Act; or
iv. such order of detention has not been set aside by a court of competent jurisdiction;
C. to any person in respect of whom prosecution for any offence punishable under
the provisions of the Indian Penal Code, the Unlawful Activities (Prevention)
Act, 1967, the Narcotic Drugs and Psychotropic Substances Act, 1985, the
Prevention of Corruption Act, 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;
D. to any person notified under section 3 of the Special Court (Trial of Offences
Relating to Transactions in Securities) Act, 1992.
10) Power of Government
to issue directions, etc.
CG may from time to time, issue such directions or orders for proper
administration of this scheme. However a direction cannot be issued
to any designated authority for disposing off a particular case in a
particular manner.
11) Power to remove
difficulties
CG may by notification in Official Gazette not inconsistent make rules
to remove the difficulty.
12) Power to make rules CG may by notification in Official Gazette make rules for carrying out
the provisions of the Act.

5. THE DIRECT TAX DISPUTE RESOLUTION SCHEME, 2016
Why is the Direct Tax Dispute Resolution Scheme introduced?
(Relevant extract from the Finance Minister’s Budget Speech, 2016)
A STEP TOWARDS REDUCING LITIGATIONS:
Litigation is a scourge for a tax friendly regime and creates an environment of distrust in addition to increasing the
compliance cost of the tax payers and administrative cost for the Government. There are about 3 lakh tax cases pending
with the 1st Appellate Authority with disputed amount being 5.5 lakh crores. In order to reduce this number, I propose
a new Dispute Resolution Scheme (DRS).
THE RETROSPECTIVE TAXATION ISSUE:
I had in my Budget speech of July, 2014 assured that this Government would not retrospectively create a fresh tax
liability. I had also hoped then that the cases pending in various courts and other legal for a relating to certain
retrospective amendments undertaken to the Income-tax Act, 1961, through the Finance Act, 2012 will soon reach their
logical conclusion. I would like to reiterate that we are committed to provide a stable and predictable taxation regime.
We will not resort to such amendments in future. I had also announced constitution of a High Level Committee which would
oversee any fresh case where the assessing officer proposes to assess or reassess the income in respect of indirect
transfers by applying the retrospective amendment. In order to allay any fears of tax adventurism, this Committee will
now be chaired by the Revenue Secretary and consist of Chairman, CBDT and an expert from outside. This Committee will
effectively oversee the implementation of the assurances.
THE PROPOSAL:
In order to give an opportunity to the past cases which are ongoing under the retrospective amendment, I propose a one-
time scheme of Dispute Resolution for them, in which, subject to their agreeing to withdraw any pending case lying in any
Court or Tribunal or any proceeding for arbitration, mediation etc. under BIPA, they can settle the case by paying only
the tax arrears in which case liability of the interest and penalty shall be waived.
NON-APPLICABILITY OF THE SCHEME IN CERTAIN CASES: (Extract from the Memorndum explaining the
Finance Bill, 2016)
Cases where prosecution has been initiated before 29.02.2016.
Search or survey cases where the declaration is in respect of tax arrears.
Cases relating to undisclosed foreign income and assets.
Cases based on information received under Double Taxation Avoidance Agreement under section 90 or 90A of
the Income-tax Act where the declaration is in respect of tax arrears.
Person notified under Special Courts Act, 1992.
Cases covered under Narcotic Drugs and Psychotropic Substances Act, Indian Penal Code, Prevention of
Corruption Act or Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974.