Chapter 17: Dispute Resolution Committee (DRC)
1. DRC Scheme Overview & Eligibility Filters (Sec 245MA / Sec 379)
Constituted by the Central Government to provide an alternative dispute resolution mechanism for small and medium taxpayers to resolve tax disputes without protracted litigation.
| Eligibility Criteria | Statutory Ceiling / Benchmark |
|---|---|
| Returned Income Ceiling | Aggregate returned income for the previous year does NOT EXCEED ₹ 50 Lakhs. |
| Aggregate Variation Ceiling | Aggregate amount of variation proposed in the order does NOT EXCEED ₹ 10 Lakhs. |
| Nature of Order | Draft order or final assessment order determining additional liability. |
2. Specific Statutory Disqualifications
DRC mechanism is STRICTLY BARRED if:
- Search proceedings u/s 132 or requisition u/s 132A have been initiated against the assessee.
- Survey proceedings u/s 133A were initiated in respect of the previous year.
- Information has been received under an agreement u/s 90/90A (Exchange of information from foreign jurisdictions).
- Detention, prosecution, or conviction proceedings under PMLA, Black Money Act, Prohibition of Benami Property Transactions Act, or IPC.
3. Powers of the Dispute Resolution Committee
• Reduction or Waiver of Penalty: DRC has the statutory power to reduce or waive penalty imposable under the Act.
• Immunity from Prosecution: DRC can grant complete immunity from prosecution for any offence under the Income-tax Act.
• Binding Nature: The order of the DRC is final and binding on both the assessee and the Department. No appeal or revision lies against the DRC order!
• Immunity from Prosecution: DRC can grant complete immunity from prosecution for any offence under the Income-tax Act.
• Binding Nature: The order of the DRC is final and binding on both the assessee and the Department. No appeal or revision lies against the DRC order!
4. Step-by-Step DRC Procedure
| Step | Action Required | Time Limit |
|---|---|---|
| Step 1 | Assessee files application in Form 34BC electronically. | Within 1 month from receipt of draft/specified order. |
| Step 2 | DRC issues notice to assessee and Assessing Officer. | Within 30 days of application receipt. |
| Step 3 | AO submits report and verified records to DRC. | Within 30 days of notice. |
| Step 4 | DRC passes final disposal order modifying or confirming variation. | Within 6 months from end of month of application. |
5. High-Yield Exam Traps
Trap 1: Assessee cannot pursue DRC and CIT(Appeals) simultaneously!
Filing an application before the DRC requires an explicit waiver of the right to file an appeal before the CIT(Appeals). Once DRC passes an order, no appeal lies before any appellate forum!
Filing an application before the DRC requires an explicit waiver of the right to file an appeal before the CIT(Appeals). Once DRC passes an order, no appeal lies before any appellate forum!
Trap 2: Variation threshold of ₹ 10 Lakhs is AGGREGATE!
The ₹ 10 Lakhs ceiling applies to the sum total of all additions proposed in the order, NOT individual disallowances!
The ₹ 10 Lakhs ceiling applies to the sum total of all additions proposed in the order, NOT individual disallowances!