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Dispute Resolution Committee (DRC)

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Introduction

Dispute Resolution Committee (DRC) provides an opportunity to the assessee, deductor or collector to resolve a dispute arising from any variation in the assessment order or an order relating to TDS/TCS matters. The DRC shall dispose of the application filed for dispute resolution in a faceless manner.

1. About

1.1. What is the Dispute Resolution Committee?

Dispute Resolution Committee ('DRC') is a committee constituted by the Central Government for every region of the Principal Chief Commissioner for dispute resolution arising from the orders passed by the AO.

1.2. Who constitutes DRC?

Rule 196 of the Income-tax Rules, 2026 provides that each DRC shall consist of 3 members, as follows:

(a) Two members shall be retired officers from the Indian Revenue Services (Income-tax) and held the post of Commissioner of Income-tax or any equivalent or higher post for 5 years or more; and

(b) One ex officio member not below the rank of Principal Commissioner or Commissioner of Income-tax specified by the Board.

The Central Government shall appoint the members of the DRC for a term of three years. The Central Government may, by recording reasons in writing and after giving an opportunity of being heard, remove any member from the DRC.

1.3. Who can approach DRC?

A specified person may approach the DRC. As per Rule 199 of the Income-tax Rules, 2026, a 'specified person' means a person who fulfils the following condition:

(a) He is not a person in respect of whom an order of detention has been made under the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974 (COFEPOSA). If an order of detention has been made, it has been revoked or set aside by the competent authority or court.

(b) He is not a person in respect of whom prosecution has been instituted and has been convicted of any offence punishable under any of the following Acts:

(c) He is not a person in respect of whom prosecution has been initiated by an income-tax authority for any offence punishable under the provisions of the Act or the Bharatiya Nyaya Sanhita, 2023 or for the purpose of enforcement of any civil liability under any law for the time being in force;

(d) He is not a person who has been convicted of any such offence consequent to the prosecution initiated by an Income-tax authority;

(e) He is not notified under Section 3 of the Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992; or

(f) He is not a person in respect of whom proceedings under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 have been initiated for the tax year for which resolution of the dispute is sought.

1.4. Which order can be raised for resolution before DRC?

An application can be filed with the DRC in respect of the following orders ('specified orders') as provided in Rule 199 of the Income-tax Rules, 2026.

1.4-1. Relating to the assessment orders

An assessee can approach the DRC against the following orders relating to the assessment:

(a) A draft assessment order as referred to in Section 275(1);

(b) An intimation under Section 270(1), where the assessee objects to the adjustments made in the said order;

(c) An order of assessment or reassessment, except an order passed in pursuance of directions of the Dispute Resolution Panel; or

(d) An order made under Section 287 that has the effect of enhancing the assessment or reducing the loss.

Alternatively, the assessee can also file an appeal against the order listed above with the Joint Commissioner (Appeals) or the Commissioner (Appeals), except against the draft assessment referred to in Section 275(1).

1.4-2. Relating to the TDS/TCS matters

An assessee can approach the DRC against the following orders relating to the TDS/TCS matters:

(a) An intimation under Section 399(1), where the deductor or collector objects to the adjustments made in the said order;

(b) An order made under Section 398 treating a deductor or collector as an assessee in default.

Alternatively, the assessee can also file an appeal against the order listed above with the Joint Commissioner (Appeals) or the Commissioner (Appeals).

1.5. When can an application be filed before DRC against specified orders?

An assessee can approach the DRC against the specified orders only when the following conditions are satisfied:

(a) The aggregate amount of variations proposed or made in such order does not exceed Rs. 10 lakhs. In case the order relates to a default in deduction or collection of tax, the variation shall refer to the amount on which tax has not been deducted or collected;

(b) The assessee has furnished the return for the tax year relevant to such order, and the total income as per such return does not exceed Rs. 50 lakhs; and

(c) The order is not based on a search initiated under Section 247, requisition under Section 248, survey under Section 253, or on information received under an agreement referred to in Section 159.

1.6. How to approach DRC?

Rule 197, Income-tax Rules, 2026 provides that an application to the DRC shall be made in Form No. 119 on the e-filing portal of the Income-tax department in respect of the dispute arising from any variation in the specified order. Such an application shall be accompanied by a fee of Rs. 1,000.

1.7. Time limit to apply to DRC

The application shall be filed with the DRC within 1 month from the date of receipt of the order

1.8. Procedure to be followed by DRC

Section 532 empowers the Central government to make a scheme for any purpose of the Act so as to impart greater efficiency, transparency and accountability by:

(a) Eliminating the interface with the assessee or any other person to the extent technologically feasible.

(b) Optimising utilisation of the resources through economies of scale and functional specialisation.

This provision also provides that where a scheme has been notified under the Income-tax Act 1961, the Central Government may amend or modify the said scheme. This indicates that the schemes notified under the ITA 1961 will continue to apply, which is also in line with the repeal and saving provision of Section 536(2)(j) that provides that any scheme issued under any provision of the repealed Income-tax Act shall, so far as it is not inconsistent with the corresponding provisions of this Act, be deemed to have been issued under the corresponding provision of this Act and shall continue in force accordingly.

Under the ITA 1961, the CBDT has notified the e-Dispute Resolution Scheme 2022

1.9. Powers of DRC

The DRC has the following powers in respect of a person whose dispute is resolved under this provision:

(a) Make modifications to the variations in the specified order;

(b) Reduce or waive any penalty imposable or imposed

(c) Grant immunity from prosecution for any offence punishable under this Act.

1.10. Conditions to provide relief from penalty or prosecution by DRC

Rule 198 of the Income-tax Rules, 2026 provides that the DRC shall grant a waiver of penalty or immunity from prosecution or both, in respect of the order, which is the subject matter of resolution, if it is satisfied that such person has:

(a) Paid the tax due on the returned income in full; and

(b) Co-operated with the DRC in the proceedings before it.

However, no reduction, waiver or immunity shall be granted by the DRC in a case where the proceedings for the prosecution for an offence have been initiated before the date of receipt of the application.

The reduction, waiver or immunity granted to a person shall stand withdrawn if such person fails to comply with any of the conditions subject to which such reduction, waiver or immunity was granted. Thereupon, the provisions of the Act shall apply as if such reduction, waiver or immunity had never been granted.

1.11. Time limit to pass the order of resolution

The DRC shall pass an order of resolution within 6 months from the end of the month in which an application for dispute resolution is admitted.

1.12. Modification of the order by the Assessing Officer

The Assessing Officer shall, upon receipt of the order of the DRC:

(a) Pass an order of assessment, reassessment, or recomputation, where the specified order is a draft of the proposed order of assessment under Section 275(1); or

(b) In any other case, modify the order of assessment, reassessment, or recomputation.

The Assessing Officer shall, in conformity with the directions contained in the order of the DRC, be required to pass or modify the above order within 1 month from the end of the month in which the order of the DRC is received by him.

1.13. Decision by majority

If the members of the DRC differ in opinion, the decision shall be taken by the majority.

1.14. Appeal or revision against the modified order

No appeal or revision shall lie against the order passed by the Assessing Officer to give effect to the order of resolution of the DRC.

Further, where the specified order is an order of the eligible assessee as referred to in Section 275(1), the assessee shall not be eligible to file any reference to the Dispute Resolution Panel against the modified order passed by the AO to give effect to the order of resolution of the DRC.

2. Alternative to Dispute Resolution

Instead of approaching the DRC, the assessee can also approach the Joint Commissioner (Appeals), Commissioner (Appeals) or Dispute Resolution Panel (DRP). However, the assessee cannot approach them simultaneously. If he approaches the DRC and his application is admitted, he has to submit proof of withdrawal of the appeal or of an application filed before the JCIT(A), CIT(A), or DRP, and to convey that no proceedings are pending in his case. Similarly, the assessee shall not be eligible to file any reference to the DRP or CIT (A) or JCIT(A) against the modified order passed by the AO to give effect to the order of resolution of the DRC.

A comparison of all provisions relating to these dispute resolutions has been enumerated in the table below:

Points of comparison Appeal to JCIT(A) Appeal to CIT(A) Application to DRC Filing an objection to DRP
Can approach against draft assessment order under Section 275(1)? No No Yes Yes
Against intimation under Section 270(1)? Yes Yes Yes No
Against assessment order? Yes Yes Yes No
Against rectification order under Section 287? Yes Yes Yes No
Can approach where the assessee denies his liability to be assessed? No Yes No No
Against an order under Section 306 treating the assessee as the agent of a non-resident? No Yes No No
Against an order under Section 313 for recovery of tax? No Yes No No
Against an order under Section 315 for assessment after partition of HUF? No Yes No No
Against adjustments made at the time of processing of TDS Statement? Yes Yes Yes No
Against adjustments made at the time of processing of TCS Statement? Yes Yes Yes No
Against an order passed under Section 398 treating an assessee in-default? Yes Yes Yes No
Against other orders as specified under Section 356? Yes Yes No No
Against other orders as specified under Section 357? No Yes No No
Who can approach? Any person aggrieved by the order Any person aggrieved by the order Any person aggrieved by the order

(a) Non-resident or foreign company

(b) Any person in whose case variation arises due to TPO's order
Time-limit to approach Within 30 days from the date on which intimation/order is served Within 30 days from the date on which intimation/order is served Within 1 month from the date of receipt of intimation/order Within 30 days from the date of receipt of the draft order
Monetary limit to approach No Limit No Limit

(a) Variations proposed or made in order should not exceed Rs. 10 lakhs; and

(b) Returned income should not exceed Rs. 50 lakhs.

 No Limit
Disqualification due to prosecution No No Yes No
Power to condone the delay Delay in filing an appeal can be condoned by JCIT(A) Delay in filing an appeal can be condoned by CIT(A) DRC cannot condone any delay in making the application No
Filing fees Rs. 250 to Rs. 1,000 Rs. 250 to Rs. 1,000 Rs. 1,000 No filing fees
Time-limit for dispute resolution Not time-bound Not time-bound 6 months 9 months
Power to make variations prejudicial to the assessee Yes Yes No Yes
Appeal against outcome Yes Yes No Yes, Appeal can be filed before ITAT
Application under Section 378 for revision of AO's order - - No Yes

References

The time-limit has been specified in the e-Dispute Resolution Scheme, 2022 read with Press Release, dated 30-08-2024

Notification No. 27/2022, dated 05-04-2022

The Finance Act, 2026, w.e.f. 01-04-2026 extends the powers of the DRC to reduce or waive not only penalties that are imposable, but also those that have already been imposed under the Act.

This article is general information and not tax advice. Provisions change. Confirm your position with a qualified professional before acting.

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