Under the Income Tax Act, 1961, Section 245MA provides taxpayers with an opportunity to resolve their tax disputes through the Dispute Resolution Committee (DRC). This mechanism aims to provide an alternative to lengthy and expensive litigation, offering a more efficient and transparent way to address disagreements with tax authorities. However, not all taxpayers are automatically eligible to approach the DRC for dispute resolution. There are specific conditions that must be met for a taxpayer to qualify.

In this blog, we will delve into the specified conditions for a person to be eligible for dispute resolution under Section 245MA, helping taxpayers understand the criteria they must meet to take advantage of this valuable mechanism.

Overview of Section 245MA

Section 245MA empowers the Central Government to constitute Dispute Resolution Committees (DRCs) for resolving tax disputes that arise from specified orders issued by tax authorities. This mechanism allows taxpayers to resolve their disputes without resorting to prolonged litigation in courts. The primary objective is to expedite the resolution process while ensuring fairness and transparency.

However, not every taxpayer can automatically approach the DRC. There are specific eligibility conditions laid down by the Board that must be met for a person to opt for dispute resolution under Section 245MA.

Key Specified Conditions for Eligibility

To be eligible for dispute resolution under Section 245MA, a taxpayer must meet the following specified conditions:

1. Type of Order:
   • The dispute must arise from a specified order issued by the tax authorities. A specified order refers to a specific kind of assessment, reassessment, or other order that the taxpayer wishes to challenge, such as:
     • A draft order of assessment issued under Section 144C(1).
     • An intimation under Sections 143(1) or 200A(1).
     • Orders under Section 154 of the Income Tax Act that modify assessments.
     • Orders of assessment or reassessment that are not passed in accordance with the DRP’s (Dispute Resolution Panel) directions.
   • If the order is not one of these specified orders, the taxpayer may not be eligible to apply for dispute resolution under this provision.
2. Income Threshold:
   • The total income of the taxpayer for the assessment year relevant to the specified order must not exceed ₹50 lakh. This income threshold is set to ensure that the DRC focuses on medium or small taxpayers rather than large, complex cases that require more extensive litigation.
   • Additionally, the aggregate sum of variations proposed in the specified order must not exceed ₹10 lakh. This ensures that the DRC is addressing more manageable disputes rather than large-scale tax matters that may be better suited for court resolution.
3. Not Involved in Serious Offenses:
   • A taxpayer cannot opt for dispute resolution if they have been involved in serious offenses, including:
     • Prosecution under laws like the Prevention of Corruption Act or Prevention of Money Laundering Act.
     • Conviction for any offense punishable under the Indian Penal Code (IPC) related to tax evasion.
   • These conditions ensure that the DRC is used primarily for resolving genuine disputes and not cases involving willful tax evasion or criminal activities.
4. No Ongoing Prosecution or Detention:
   • The taxpayer must not be under any form of detention or facing prosecution under laws like the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act.
   • If a taxpayer is under detention or prosecution, they are not eligible for dispute resolution through the DRC, as these cases require legal proceedings beyond the scope of the DRC’s capabilities.
5. Taxpayer’s Compliance:
   • To be eligible, the taxpayer must be in compliance with all the Income Tax Act provisions. This includes submitting returns, paying taxes due, and fulfilling all other regulatory requirements. Failure to comply with basic tax filing obligations may disqualify a taxpayer from using the DRC for dispute resolution.
6. No Pending Action Based on Search or Survey:
   • If the specified order is based on a search initiated under Section 132 or a survey under Section 133A, or if it involves information gathered through international agreements under Sections 90 or 90A, the taxpayer will not be eligible for dispute resolution under Section 245MA.
   • This condition ensures that the DRC only deals with disputes arising from routine assessments and not those that involve extensive investigations or complex audits.
7. Specific Exclusions for Certain Persons:
   • Taxpayers who are subject to certain exclusions under the law may also be ineligible for dispute resolution under Section 245MA. These exclusions include individuals or entities who have been involved in fraudulent activities, significant tax avoidance schemes, or have been convicted of serious financial crimes.

What Happens After Eligibility is Met?

Once a taxpayer meets all the specified conditions for eligibility, they can apply to the Dispute Resolution Committee using the prescribed forms and procedures. The DRC will then review the application and the specifics of the dispute before making a determination. If the dispute is resolved, the Assessing Officer is required to implement the DRC’s decision within the specified time frame, which helps expedite the resolution process.

Benefits of Dispute Resolution Under Section 245MA

For eligible taxpayers, the Dispute Resolution Scheme offers several benefits:

• Reduced Penalties: The DRC has the power to reduce or waive penalties, offering taxpayers significant financial relief.
• Faster Resolution: By avoiding lengthy litigation, the DRC provides a quicker resolution to tax disputes, allowing taxpayers to move forward with their tax affairs.
• Immunity from Prosecution: In some cases, the DRC can grant immunity from prosecution for offenses related to the disputed tax matter, further reducing the legal burden on the taxpayer.

Conclusion

The Dispute Resolution Scheme under Section 245MA offers a valuable alternative to traditional litigation for taxpayers who meet the specified eligibility conditions. By providing a more efficient, transparent, and cost-effective way to resolve tax disputes, the DRC helps ease the burden on taxpayers while ensuring that the dispute resolution process is fair and accessible.

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Additional Resources

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