Reference to Dispute Resolution Panel (DRP)
Introduction
The Dispute Resolution Panel (DRP) provides a fast-track mechanism for resolving disputes arising from draft assessment orders issued to non-residents, foreign companies, or assessee with Transfer Pricing Officer (TPO) adjustments. DRP proceedings are conducted in a faceless manner. It is a panel of three Principal Commissioners or Commissioners of Income-tax, constituted by the Board.
Who Can Approach the DRP?
- Non-residents (excluding companies) and foreign companies.
- Assessees facing transfer pricing adjustments (Section 92CA(3)).
- Not available for assessees subject to search/requisition underSections 132or 132A
Process for Filing Objections
- The Assessing Officer (AO) issues a draft assessment order to the assessee.
- Within 30 days, the assessee must:
o Accept the order, or
o File objections with DRP (Form 35A) and the AO.
- If the assessee accepts the order or does not object, the AO finalizes the assessment within one month.
DRP’s Role and Powers
- Reviews the draft order, objections, supporting evidence, and reports from AO, TPO, or other authorities.
- Can confirm, reduce, or enhance variations, but cannot set aside the assessment or order further inquiries.
- Issue directions within 9 months from the end of the month in which the draft order was forwarded to the assessee.
- The AO must complete the assessment within one month from the end of the month in which such directions are received.
Binding Nature of DRP Directions
- The AO must comply with DRP’s directions.
- If the directions prejudice the assessee, an opportunity for a hearing is provided.
Appeal Against DRP Orders
- The assessee can appeal before ITAT against the final order.
- No appeal to CIT(A) is allowed.
Faceless DRP Proceedings
- DRP directions are issued digitally, using automated case allocation and a dynamic jurisdiction system.
Alternative to DRP: Dispute Resolution Committee (DRC)
- Assessees with income up to ₹50 lakh and disputed additions up to ₹10 lakh may opt for DRC instead of DRP.
- An assessee may approach either the DRP or the DRC, but not both
- If admitted by the DRC, proof of DRP withdrawal or no pending proceedings must be given.
- No DRP reference is allowed against the AO’s modified order passed as per DRC resolution.