D.—Alternate Dispute Resolutions 1.—Dispute Resolution Committee in certain cases

Dispute Resolution Committee.

379(1)

The Central Government shall constitute, one or more Dispute Resolution Committees, as per the rules made under this Act, for dispute resolution in the case of such persons or class of persons, as specified by the Board, who opt for dispute resolution under this Chapter in respect of dispute arising from any variation in the specified order in his case and who fulfils the specified conditions, as prescribed.

379(2)

The Dispute Resolution Committee, subject to the conditions as prescribed, may make modifications to the variations in specified order or reduce or waive any penalty imposable under this Act, or grant immunity from prosecution for any offence punishable under this Act, in case of a person whose dispute is resolved under this Chapter.

379(3)

Irrespective of anything contained in section 275, upon receipt of the order of the Dispute Resolution Committee under this section, the Assessing Officer shall,—

• (a) in a case where the specified order is a draft of the proposed order of assessment under section 275(1), pass an order of assessment, reassessment or recomputation; or
• (b) in any other case, modify the order of assessment, reassessment or recomputation, in conformity with the directions contained in the order of the Dispute Resolution Committee within one month from the end of the month in which such order is received.

379(4)

“specified order” means such order, including draft order, as specified by the Board, and— (i) the aggregate sum of variations proposed or made in such order does not exceed ten lakh rupees; (ii) such order is not based on search initiated under section 247 or requisition under section 248 in the case of assessee or any other person or survey under section 253 or information received under an agreement referred to in section 159(1) or (2); and (iii) where the assessee has filed a return for the tax year relevant to such order, total income as per such return does not exceed fifty lakh rupees.

Explanation

Section Summary:

This section introduces the Dispute Resolution Committee (DRC), a mechanism established by the Central Government to resolve tax disputes for specific individuals or classes of individuals. The DRC is designed to address disputes arising from variations in specified orders (e.g., draft assessment orders) and can modify such orders, reduce or waive penalties, or grant immunity from prosecution. The section applies to taxpayers with disputes involving smaller amounts (up to ₹10 lakh in variations) and income thresholds (up to ₹50 lakh).

Key Changes:

1. Introduction of DRC: A new body, the Dispute Resolution Committee, is introduced to resolve disputes for small taxpayers, reducing the burden on higher appellate authorities.
2. Scope of Disputes: The DRC can only handle disputes where the variation in the specified order does not exceed ₹10 lakh, and the taxpayer’s total income does not exceed ₹50 lakh.
3. Powers of DRC: The committee can modify orders, reduce or waive penalties, and grant immunity from prosecution, which was not explicitly provided under the previous dispute resolution mechanisms.
4. Exclusions: Disputes arising from search, survey, or information received under international agreements are excluded from the DRC’s jurisdiction.

Practical Implications:

1. For Small Taxpayers: This section benefits small taxpayers by providing a faster and more efficient way to resolve disputes without lengthy litigation.
2. Reduced Litigation: The DRC aims to reduce the backlog of cases in higher appellate forums by resolving disputes at an early stage.
3. Compliance Burden: Taxpayers must ensure they meet the specified conditions (e.g., income threshold, variation limit) to opt for dispute resolution under this section.
4. Time-Bound Resolution: The Assessing Officer must implement the DRC’s order within one month, ensuring timely resolution.

Critical Concepts:

1. Specified Order: Refers to orders (including draft orders) where the variation does not exceed ₹10 lakh, and the taxpayer’s total income is below ₹50 lakh. It excludes cases involving search, survey, or international agreements.
2. Variation: The difference between the income or tax liability proposed by the tax authorities and what the taxpayer has declared.
3. Immunity from Prosecution: The DRC can grant immunity from legal action for offenses under the Income Tax Act, provided the dispute is resolved under this section.

Compliance Steps:

1. Eligibility Check: Taxpayers must verify if their dispute qualifies under the specified conditions (e.g., variation limit, income threshold, and exclusions).
2. Opting for DRC: If eligible, taxpayers can opt for dispute resolution under this section by following the prescribed procedure.
3. Submission of Documents: Provide necessary documentation to support the case before the DRC.
4. Implementation of Order: Once the DRC issues an order, the Assessing Officer must implement it within one month.

Examples:

1. Scenario 1: A taxpayer with a total income of ₹40 lakh receives a draft assessment order proposing a variation of ₹8 lakh. The taxpayer opts for dispute resolution under the DRC. The committee modifies the order, reducing the variation to ₹5 lakh and waives the penalty. The Assessing Officer implements the modified order within one month.
2. Scenario 2: A taxpayer with a total income of ₹60 lakh receives a draft assessment order proposing a variation of ₹9 lakh. Since the income exceeds ₹50 lakh, the taxpayer cannot opt for dispute resolution under this section.

This section provides a streamlined and taxpayer-friendly approach to resolving disputes for small taxpayers, reducing litigation and ensuring timely resolution.