In order to facilitate faster resolution of tax disputes for small taxpayers, the Central Board of Direct Taxes (CBDT) on April 5 notified the e-Dispute Resolution Scheme, 2022. This scheme is for those taxpayers whose total income is less than Rs. Till then 50 lakh and not more than income tax dispute 10 lakhs. The taxpayer is not required to appear before the tax authorities in person or through an authorized representative in respect of any proceeding under this scheme, and the entire communication shall be electronic.
The Disputes Resolution Committee (DRC) will consist of three members—two retired officers from the Indian Revenue Service who have held the post of Commissioner of Income-tax or higher for five years and one serving officer not below the rank of Principal Commissioner of Income-tax. The term of these members will be three years.
How to take advantage of this scheme?
Taxpayers meeting the specified conditions may file an application electronically with a nominal fee to the designated DRC. The application is to be filed in Form 34BC and sent to the official email id of the DRC in cases where the appeal is already pending or filed before the Commissioner (Appeals), or one from the date of receipt of the order by the taxpayer. In other cases within the month.
Examination by DRC
If the Committee decides that the application for dispute resolution should be rejected, it will issue a notice to the taxpayer to show cause why his application should not be rejected, specifying the date and time of filing the response .
The decision of the Committee on acceptance or rejection of the application will be communicated to the registered email address of the taxpayer. When the application is accepted, the taxpayer has to submit proof of withdrawal of the appeal filed with the CIT(A) or the application filed with the DRC within 30 days of the receipt of the communication. Failure to do so will result in the application being rejected.
The DRC shall have the power to waive the penalty or grant exemption from the prosecution provisions of the Act on fulfillment of certain conditions.
impact on tax litigation
An alternative dispute resolution platform would give an opportunity to small taxpayers to settle their tax cases at an early stage and not go through a rigorous appellate process. Since the scheme provides a fixed period of six months for the committee to dispose of an application, speedy settlement of tax disputes is expected. These factors are likely to significantly reduce the burden of tax litigation cases on the tax authorities and judicial courts and, in turn, cut the cost and time of litigation for both taxpayers and tax authorities.
In addition, this settlement scheme may create an influx of taxes which would otherwise get stuck due to pending appeals. According to the communication shared with the Rajya Sabha by the Ministry of Finance on April 5, more than 8.40 trillion tax demand arrears in respect of individuals as of April 1.
Benefits to NRI Taxpayers
The e-Dispute Resolution Scheme, 2022, may also benefit non-resident Indian (NRI) taxpayers, who otherwise have to rely on tax advisors to represent them before the tax authorities. NRIs will be able to represent their case in person as the proceedings have to be done electronically and resolution of tax disputes at the initial stage will provide them certainty with respect to their taxation issues.
Potential challenges ahead
Similar to faceless assessment proceedings, proceedings before the DRC may also face practical challenges such as excessive reliance on written submissions, potential compromise in the quality of dispute resolution due to timeliness and technical challenges with the IT infrastructure of the Income Tax Online portal. may have to face. among other things.
Amit Maheshwari, Tax Partner, AKM Global, a tax and consulting firm. With inputs from Yeshu Sehgal, Senior Tax Associate, AKM Global.