What do you need to know about Income Tax settlement?
The penetration of international businesses in the Indian markets suggests that there are chances of more tax collection. It simply implies that with the growing businesses the revenue department should be more equipped in resolving the income tax disputes. In 2009, the finance bill added a new option to solve the cases related to prices referred to as a Dispute Resolution Panel (DRP). The DRP is a mechanism for the income tax dispute settlement scheme to resolve the issues regarding the money transfer in International Transactions.
This body has been built in order to provide fast solutions in the income tax dispute cases.
Eligibility Criteria for Income Tax Dispute Settlement
Foreign Companies & individuals, against whom unfavorable orders have been released by a Pricing Officer, can opt for the solution under the Dispute Resolution Panel.
Headquarter to Resolve Income Tax Disputes
It is advised that the panel must have separate headquarters in the metro cities like Delhi, Mumbai & Bangalore with authorized jurisdiction committee.
Constitution of DRP
Governed by the Central Board of Direct Taxes, the Dispute Resolution Panel constitutes three commissioners of Income-tax settlement.
What cases come under DRP?
In the first step, the officer gives a draft of the assessment order to the assessee which depicts the order against the assessee. Within 30 Days of receiving the order, the assessee has to either accept it or reject the order.
In case the person decides to raise an object to the order, he can file the same with DRP. The DRP officer will then consider the case and will hear the assessee. DRP then assigns the case to the officer depending on the analysis and it is mandatory for the respective officer.
Matters under consideration of DRP
Specific queries can be generated by the authorized DRP officer and directed to the income-tax authority to make an enquiry and provide the results. The Panel has to consider the following:
- Draft Order
- Objection filed
- Evidence Furnished
- Reports from the authority (Like Assessing Officer, Pricing Officer)
- Records related to the drafts
- Evidence Collected
- Final results
Time limits for order passing
The DRP has to issue the direction to the Assessing Officer in command within the 9 months from when the assessee receives the draft order.
Once the order received by the officer, it is mandatory to complete the assessment within the 1-month time limit from the end of the month he receives the order from the DRP. There is no situation where the assessee can be heard between this time.
If the objection against the assessee is not entered within 30 days, or if the taxpayer accepts the order, then it is mandatory to complete the process within 30 days for the assessing officer who will be checking the case.
The government introduced the Income-tax dispute resolution scheme in Parliament in 2020, detailing the direct tax vivad se vishwas scheme. The income tax dispute resolution scheme 2020 was related to direct taxes, discount payments for direct settlements if it is settled before the end of the financial year.
Vivad se vishwas scheme 2020 bill has been upgraded with new changes and has been passed by the Lok Sabha on 4th March 2020. This scheme acts as a welcome scheme and helps reduce pending cases.
Originally, the idea for proposing vivad se vishwas scheme in income tax was to solve all pending appeals before CIT (A), ITAT, High court & Supreme Court. This scheme covers the following matters:
- Orders within the time limit of filing appeal till 31.1.2020
- Pending cases before DRP as on 31.1.2020
- Petition pending before CIT u/s 264 on 31.1.2020
- Cases where the disputed amount is less than Rs. 5 Crore
How the Vivad se Vishwas scheme works?
According to the income tax dispute scheme details, within 15 days of receiving the declaration, the authorities will determine the amount payable by the taxpayer, as per the guidelines of the scheme and grant a certificate to the taxpayer about the tax arrears to be paid after such calculations.
The assessee/ taxpayer have to pay the declared amount by the assigning authority within 15 days of resolving the dispute. After that, the authority has to pass an order stating that the taxpayer has paid the amount.
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