Dispute Resolution for Small Assessee’s

The Finance Act, 2022 has amended Section 245MA therein in the Income Tax Act, 1962 wef 01 April, 2022 creating for a new procedure for Dispute Resolution for Small Assessee’s. The CBDT has further amended the Income Tax Rules, 1962, to introduce Part IX-A and new Rules 44DAA, 44DAB, 44DAC and 44DAD and Form 34BC wef 05 April, 2022. The CBDT has further notified the e-Dispute Resolution Scheme, 2022 wef 05 April, 2022.

Author’s Remarks : Comparing, the procedure before the DRC u/s 245MA vis a vis Commissioner (A) u/s 246A –

1. There appears to be no bar to submit additional information or evidence before DRC whereas Rule 46A needs to complied with to furnish additional evidence and / or section 250(4) for further inquiry before Commissioner (Appeals).

2. The DRC is not empowered to pass an order enhancing the Assessment – ie., to say increase the Assessed Income; The Commissioner (A) may pass order enhancing the Assessment on Appeal u/s 246A.

3. The DRC is empowered to waive or reduce penalty and grant immunity from prosecution. No such power is available to the Commissioner (Appeal).

4. The orders of Commissioner (Appeal) can be appealed further by the Assessee or the Income Tax Department in ITAT. However, the order of the DRC is Final and cannot be appealed by the Assessee. Also Revision, at the instance of the Assessee or the Department, is also debarred.

The salient features of the Dispute Resolution Framework are ::-

Specified Order

  • Draft order u/s 144C(1)
  • Intimation u/s 143(1) or 200A(1) or 206CB(1)
  • Order of assessment or reassessment (except order passed in pursuance of Dispute Resolution Panel)
  • Order u/s 154 having effect of enhancing the assessment or reducing the loss
  • Order u/s 201 or 206C(6A)

Specified Criteria & Conditions

  1. The aggregate sum of variations proposed or made in such “specified order” does not exceed Rs 10 lakhs.
    • The the variation in the specified order relating to default in deduction or collection of tax at source, shall refer to the amount on which tax has not been deducted or collected in accordance with the Act
  2. The return has been furnished by the assessee for the assessment year relevant to such order and the total income as per such return does not exceed fifty lakh rupees.
  3. The order in case of the assessee is not based on search initiated u/s 132, requisition u/s 132A or survery u/s 133A, information received under agreement referred to in section 90 or 90A.
  4. No order or proceedings of
    • The Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (22 of 2015) have been initiated for the assessment year for which resolution of dispute is sought.
    • Detention under provisions of Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1973
    • 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 Prohibition of Benami Transactions Act, 1988, the Prevention of Corruption Act, 1988 or the Prevention of Money Laundering Act, 2002 has been instituted and he has been convicted of any offence punishable under any of those Acts.
    • Prosecution has been initiated by an income-tax authority for any offence punishable under the provisions of Income Tax Act or the Indian Penal Code or for the purpose of enforcement of any civil liability under any law for the time being in force, or such person has been convicted of any such offence consequent upon the prosecution initiated by an Income-tax authority.
    • “notified person” under section 3 of the Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992


1. Application for dispute resolution in Form 34BC shall be filed electronically within a period of 1 month from the date of receipt of [specified order]. The application shall be filed alongwith proof of payment of tax on returned income and also a Fees of Rs 1000/- only.

2. Screening of the Application by DRC – DRC shall examine the application wrt to specified conditions and criteria for specified order. If the DRC on examination considers that the application should be rejected, it shall serve a show cause notice on the assessee. The DRC after considering the response of the assessee, may reject the application or proceed to decide on merits. However, if no response is received from the assessee, the application shall be rejected.

3. Procedure in case of Admitted application

  1. Call for records from the Income-tax authority and further examine, as it may deem fit, with respect to the issues covered in the Application.
  2. May seek a report from the AO on the issues covered in the application or on any other issue arising during the course of proceeding.
  3. Call for further information from the assessee or any other person.

4. Decision of the DRC

The DRC, after considering the material available on record, including any further information or evidence received from the assessee, income-tax authority or any other person, may decide –

  1. make modifications to the variations in specified order – reduce or eliminate such variations but not enhance – and decide for waiver of penalty and immunity from prosecution;
  2. not make modifications – uphold additions to income – but decide for reduction or waiver of penalty and immunity from prosecution;
  3. not make any modification – uphold additions to income without any waiver of penalty or immunity from prosecution and pass an order of disposing the application.

5. Time-limit for disposal of application by DRC shall be 6 months from the end of the month in which the application is admitted by the DRC.

6. Service of Resolution Order of DRC and payment of demand, if any.

  1. The Order of the DRC shall be served upon the Assessee and the AO.
  2. The AO shall serve a copy of the modified Assessment Order in pursuance of the Resolution Order of the DRC along with notice of demand upon the assessee specifying a date for making payment of demand.
  3. The Assessee shall submit proof of payment of demand to the AO and to the DRC.

7. Grant of Reduction or Waiver of Penalty and Immunity from Prosecution.

On receipt of proof / confirmation of payment of demand by the DRC and subject to such conditions as it may think fit to impose for the reasons to be recorded in writing, grant to the person who made the application for dispute resolution under section 245MA of the Act, waiver of penalty imposable or immunity from prosecution or both, in respect of the
order which is the subject matter of resolution, if it is satisfied that such person has, –
(i) paid the tax due on the returned income in full if available; and
(ii) co-operated with the Dispute Resolution Committee in the proceedings before it.

8. Appeal or Revision – No appeal or revision shall lie against the modified order.

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