Report No. 8 of 2026 - Subject Specific Compliance Audit on Direct Tax Vivad se Vishwas Sche…

It assessed whether the scheme achieved its objectives of reducing litigation and generating timely revenue, and whether internal controls and IT systems were effective.

Who it concerns: Union Government, Department of Revenue – Direct Taxes (Income Tax Department)

What the auditor found

• 389 cases involving ₹1,675.65 crore were found to have non-compliance with DTVsV Act/Rules by the Designated Authority.
• In 63% of audited sample cases, Form-3 was issued after the 15-day limit, with delays up to 868 days.
• In 45% of cases where Form-5 was issued, there was a time gap of up to 954 days, delaying refunds to taxpayers.
• In 1,676 cases, essential documents were missing from files, meaning the veracity of the payable amount was not ensured.
• In 208 cases involving ₹423.47 crore, the Designated Authority incorrectly determined the amount payable.
• In 55 cases involving ₹1,168.27 crore, the Department failed to withdraw interest paid to assessees, resulting in revenue loss.
• In 34 cases involving ₹6.17 crore, disputed tax was calculated at 100% instead of the required 125% for search cases.
• In 8 cases involving ₹37.89 crore, the Department incorrectly allowed the carry forward of loss or unabsorbed depreciation.
• Internal audit was conducted by the Department for only two PCsITs out of 91 that responded to the CAG.
• 20 PCsITs stated they had not received Standard Operating Procedures (SOPs) from the Department, leading to non-uniform case disposal.
• CAG recommended fixing specific timelines for issuing forms and orders, auto-populating data to reduce manual errors, and issuing clarifications for uniform interpretation.

Also in the document

• As of January 2020, disputed direct tax arrears locked in 4.15 lakh appeal cases amounted to ₹10.09 lakh crore, which was 88.7% of the direct tax collection for FY 2018-19.
• Only 31.8% of the total pending cases (1.32 lakh cases) involving ₹0.99 lakh crore in revenue were applied for under the scheme.
• In over 13,000 cases, despite taxpayers making payments and submitting Form-4, the Department failed to settle these cases in a timely manner.
• In 12,327 cases where Form-4 was not submitted, the Department's non-pursuance might result in loss to the government exchequer.
• The Department could not furnish details of eligible cases and locked revenue, stating that eligibility depends on several conditions, which prevented the CAG from determining the scheme's overall efficacy against total eligible cases.