What is e-Dispute Resolution Scheme, 2022?
Premium- This scheme is meant for taxpayers with I-T disputes not exceeding ₹10 lakh
In order to facilitate faster resolution of tax disputes for small taxpayers, the Central Board of Direct Taxes (CBDT) notified the e-Dispute Resolution Scheme, 2022, on 5 April. This scheme is meant for taxpayers with a total income of up to ₹50 lakh and income tax disputes not exceeding ₹10 lakh. The taxpayer need not appear before tax officials either in person or through an authorized representative in connection with any proceedings under this scheme, and the entire communication will be electronic.
The Dispute 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 post for five years and one serving officer not below the rank of Principal Commissioner of Income-Tax. The tenure for these members will be three years.
How to avail this scheme?
Taxpayers who fulfil the stated conditions may file an application electronically along 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 an appeal is already pending or filed before the Commissioner (Appeals), or within one month from the date of receipt of order by the taxpayer in other cases.
Examination by DRC
If the committee decides that the application for dispute resolution should be rejected, it shall serve a notice calling upon the taxpayer to show cause as to why their application should not be rejected, specifying a date and time for filing a response.
The decision of the committee on whether the application should be accepted or rejected will be communicated to the taxpayer’s registered email address. When the application is accepted, the taxpayer is required to submit a proof of withdrawal of appeal filed with the CIT(A) or of the application filed with the DRC within 30 days of receipt of the communication. Failing to do this will result in the application getting rejected.
The DRC shall have the power to waive the penalty or grant immunity from the prosecution provisions of the Act on fulfilment of certain conditions.
Impact on tax litigations
An alternative dispute resolution forum will give small taxpayers a chance to settle their tax matters at the initial level and not go through the rigorous appellate process. Since the scheme provides a definite period of six months for the committee to settle an application, faster settlement of tax disputes is expected. These factors are likely to significantly reduce the burden of tax litigation cases on tax authorities and judicial courts and in turn, cut down litigation costs and time for both taxpayers and for tax authorities.
Further, this settlement scheme may create an inflow of taxes that would otherwise be stuck due to pending appeals. As per the communication shared by the ministry of finance with Rajya Sabha on 5 April, more than ₹8.40 trillion of tax demands are outstanding with respect to individuals as of 1 April.
Benefit to NRI taxpayers
The e-Dispute Resolution Scheme, 2022, may also benefit non resident Indian (NRI) taxpayers who,otherwise, have to depend on tax consultants to represent them before the tax authorities. NRIs will be able to represent their matter personally as the proceedings are to be carried out electronically and the resolution of tax disputes at the initial level would provide them certainty with respect to their taxation issues.
Possible challenges ahead
Similar to the faceless assessment proceedings, the proceedings before the DRC may also face practical challenges such as excessive reliance on written submission, possible compromise in the quality of dispute resolution due to crunched timelines and technical challenges with the IT infrastructure of income tax online portal, among other things.
Amit Maheshwari, tax partner, AKM Global, a tax and consulting firm. With inputs from Yeeshu Sehgal, senior tax associate, AKM Global.