Dispute Resolution Committee (DRC)

The e-Dispute Resolution Scheme 2022 was introduced to facilitate the disposal of dispute resolution applications filed by assessees. These applications typically arise due to disagreements with assessment orders or orders related to Tax Deducted at Source (TDS) or Tax Collected at Source (TCS) matters. The scheme aims to provide a faceless, efficient, and transparent mechanism for resolving such disputes, reducing the need for physical appearances and lengthy litigation

What is the Dispute Resolution Committee (DRC)?

The Dispute Resolution Committee (DRC) is constituted by the Central Government for each region under the Principal Chief Commissioner. The DRC is empowered to resolve disputes arising from orders passed by the Assessing Officer (AO). Taxpayers can approach the DRC against:

• Draft assessment orders under Section 144C(1)

• Assessment orders

• Rectification orders under Section 154

• Orders relating to TDS or TCS matters

Alternatively, except for draft assessment orders under Section 144C(1), taxpayers may also appeal to the Joint Commissioner (Appeals) or Commissioner (Appeals).

Who Can Apply? (Eligibility Criteria)

Any assessee who fulfills the specified conditions under Section 245MA of the Income-tax Act can apply for dispute resolution in respect of a specified order. The eligibility is determined by the nature of the order and the status of any pending appeals

Specified Conditions under Section 245MA (Eligibility Criteria)

Section 245MA of the Income-tax Act lays down the “specified conditions” that an assessee must satisfy to be eligible to file an application before the DRC. These conditions are as follows:

A. Eligible Assessee

An assessee shall be considered eligible if:

Total Income: The total income as per the return filed for the relevant assessment year does not exceed ₹50 lakh.

Variation Amount: The aggregate amount of variation in the specified order does not exceed ₹10 lakh.

Not Involving Serious Offences: The case does not involve any serious fraud, tax evasion, or major economic offences. Specifically, the following persons are not eligible:

• Persons detained under the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974, unless such detention order has been revoked.

• Persons convicted of any offence under any law for the time being in force.

• Persons prosecuted for any offence punishable with imprisonment for two years or more under any law.

• Persons notified under Section 3 of the Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992.

• Persons in respect of whom an order of detention has been made under the Prevention of Illicit Traffic in Narcotic Drugs and Psychotropic Substances Act, 1988.

• Persons involved in cases relating to undisclosed foreign income and assets under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015.

• Persons against whom prosecution has been initiated by an income-tax authority for any offence under the Income-tax Act or any other law.

B. Specified Order

The order against which the application is made must be:

• A draft assessment order under Section 144C(1)

• An assessment order

• A rectification order under Section 154

• An order relating to TDS or TCS matters

C. Appeal Status

• The specified order must be pending in appeal before the Joint Commissioner (Appeals) or Commissioner (Appeals), or the time limit for filing such an appeal must not have expired.

Time Limits for Filing Applications

• For orders passed on or before 31-08-2024: Application must be filed by 30-09-2024, provided the order is pending in appeal or the appeal period has not expired.

• For orders passed after 31-08-2024: Application must be filed within one month from the date of receipt of the order.

How to Apply: Step-by-Step Procedure

1.     Filing the Application:

• Use Form No. 34BC, submitted electronically via the Income-tax department’s e-filing portal.

• Attach proof of tax payment on returned income (if available) and pay a fee of ₹1,000.

2.    Screening by DRC:

• The DRC examines the application for eligibility.

• If the application is likely to be rejected, a show-cause notice is issued, and the assessee can respond and request a virtual hearing.

3.     Communication of Decision:

• The DRC communicates its decision (admission or rejection) to the assessee’s registered email address.

• If admitted, the assessee must submit proof of withdrawal of any pending appeals or confirm that no such proceedings are pending within 30 days.

4.     Proceedings by DRC:

• The DRC may call for records from the tax authority and seek reports or additional information.

• The assessee must respond electronically within the specified time.

Possible Outcomes of DRC Proceedings

The DRC, after considering all records and responses, may decide as follows:

• Modification and Immunity: The DRC may modify the order (not prejudicial to the assessee), waive penalties, and grant immunity from prosecution if the assessee has paid due taxes and cooperated fully.

• No Modification but Immunity: The DRC may choose not to modify the order but still grant waiver of penalties and immunity.

• No Modification: The DRC may decide not to modify the order and dispose of the application accordingly

Timelines for Resolution

• The DRC must pass an order of resolution within six months from the end of the month in which the application is admitted.

• The order is served to both the assessee and the Assessing Officer for further action

Post-Resolution Steps

• The Assessing Officer issues a modified order and demand notice as per the DRC’s resolution.

• The assessee must pay the demand and provide proof to both the DRC and Assessing Officer.

• Upon confirmation of payment, the DRC grants immunity from prosecution and waives the penalty, if applicable

• No immunity is granted if prosecution proceedings had already started before the DRC application

Termination of Proceedings

The DRC may terminate proceedings if:

• The assessee fails to cooperate or respond to notices

• Conceals material facts or provides false evidence

• Fails to pay the demand as decided by the DRC1

In such cases, the DRC informs the income-tax authority for further action.

Powers and Nature of DRC Proceedings

• Proceedings before the DRC are judicial in nature and not open to the public.

• All communications are electronic, authenticated by digital signatures.

Personal appearance is not required, but virtual hearings can be requested and will be facilitated if technologically feasible

Appeals and Finality

• No appeal or revision is allowed against the modified order passed by the Assessing Officer to give effect to the DRC’s resolution.

For draft assessment orders under Section 144C(1), no reference to the Dispute Resolution Panel is permitted after DRC resolution

Conclusion

The e-Dispute Resolution Scheme 2022 is a landmark move towards a more taxpayer-friendly, efficient, and transparent tax administration in India. By embracing digital processes and faceless proceedings, the scheme offers significant relief and convenience to taxpayers, especially those seeking quick and amicable resolution of tax disputes. Taxpayers are encouraged to familiarize themselves with the scheme and utilize its benefits for effective dispute resol