Income Tax: What is e-Dispute Resolution Scheme, 2022?

e-Dispute Resolution scheme: The Central Board of Direct Taxes (CBDT) announced the e-Dispute Resolution Scheme, 2022, to help small taxpayers resolve tax disputes more quickly. This programme is for taxpayers with a total income of up to Rs 50 lakh and income tax disputes of up to Rs 10 lakh. In connection with any proceedings under this scheme, the taxpayer will not be required to appear before tax officials in person or through an authorised representative, and all communication will be done electronically.

Composition of DRC

The Dispute Resolution Committee (DRC) will be comprised of three members: two retired Indian Revenue Service officers who have held the position of Commissioner of Income-Tax or higher for at least five years, and one serving officer with the rank of Principal Commissioner of Income-Tax. These members will have a three-year term.

Taxpayers who meet the requirements can submit an application electronically to the designated DRC, along with a minimal charge. In cases where an appeal is already pending or filed before the Commissioner (Appeals) or within one month of the taxpayer receiving the order, the application must be filed in Form 34BC and sent to the DRC’s official email address.

Examination by DRC

If the committee decides that the application for dispute resolution should be denied, it will send a notice to the taxpayer requesting to show cause why their application should not be denied, specifying with a deadline for filing a response.

The committee’s decision on whether or not to accept or reject the application will be sent to the taxpayer’s registered email address. The taxpayer must submit proof of withdrawal of appeal filed with the CIT(A) or application filed with the DRC within 30 days of receiving the communication if the application is accepted. If you don’t do this, your application will be turned down.

The DRC will have the authority to waive the penalty or grant immunity from prosecution under the Act if certain conditions are met.

Impact on tax disputes

Small taxpayers will be able to settle their tax disputes at the initial level rather than going through the lengthy appeals process if they use an alternative dispute resolution forum. Because the scheme specifies a six-month time limit for the committee to decide on an application, tax disputes are expected to be resolved more quickly. These factors are likely to reduce the burden of tax litigation cases on tax authorities and judicial courts, reducing litigation costs and time for taxpayers and tax authorities.

Furthermore, this settlement plan could result in an inflow of taxes that would otherwise be stalled due to pending appeals. According to a communication shared with the Rajya Sabha on 5 April by the ministry of finance, as of 1 April, more than Rs8.40 trillion in tax demands were outstanding with respect to individuals.

Read Also: Income Tax Calendar

Benefit to NRI taxpayers

Non-resident Indian (NRI) taxpayers who would otherwise have to rely on tax consultants to represent them before the tax authorities may benefit from the e-Dispute Resolution Scheme, 2022. Because the proceedings will be conducted electronically, NRIs will be able to represent themselves in court, and the resolution of tax disputes at the initial level will provide them with certainty regarding their taxation issues.

Possible challenges ahead

Similar to faceless assessment proceedings, the DRC proceedings may face practical challenges such as an over-reliance on written submissions, a possible compromise in the quality of dispute resolution due to pressed timelines, and technical issues with the income tax online portal’s IT infrastructure, among other things.