Section 275: reference to the Dispute Resolution Panel (DRP)

Introduction

Section 275 provides the draft-assessment and Dispute Resolution Panel route for an eligible assessee. The assessee’s choice to accept or object sets the later procedure.

The Panel’s directions and the Assessing Officer’s final order have distinct time and appeal consequences.

Key takeaways

The draft order and the assessee's options

Where the Assessing Officer proposes any variation prejudicial to an eligible assessee, he must first forward a draft of the proposed assessment order (the "draft order") to the assessee, irrespective of anything else in the Act.

Within thirty days of receiving the draft order, the eligible assessee must either file acceptance of the variations with the Assessing Officer, or file objections with both the Dispute Resolution Panel and the Assessing Officer.

If the assessee accepts, or does not object

If the assessee intimates acceptance of the variation, or no objection is received within the thirty-day period, the Assessing Officer completes the assessment on the basis of the draft order.

The assessment order must then be passed within one month from the end of the month in which the acceptance is received, or the objection-filing period expires.

Under the amended subsection (4)(b), where the draft order was forwarded within the section 286 period, the further time for completing the subsection (3) assessment is governed by subsection (4), notwithstanding section 286.

If the assessee objects: the DRP's role

Where an objection is received, the Dispute Resolution Panel issues directions, in writing, stating the points for determination, its decision on each, and the reasons for the decision, to guide the Assessing Officer in completing the assessment.

Before issuing directions, the DRP may make further enquiry itself, or have an income-tax authority make the enquiry and report back.

The DRP may confirm, reduce or enhance the variations proposed in the draft order - including considering matters arising from the assessment proceedings even if not raised by the assessee - but it cannot set aside a proposed variation or send it back for further enquiry.

If DRP members differ in opinion, the majority view prevails. Every DRP direction is binding on the Assessing Officer.

Subsection (12) requires a hearing opportunity for the assessee on directions prejudicial to the assessee, and for the Assessing Officer on directions prejudicial to revenue, respectively.

The DRP must issue its directions within nine months from the end of the month in which the draft order was forwarded to the eligible assessee.

After the DRP directs

On receiving the DRP's directions, the Assessing Officer must complete the assessment in conformity with those directions, without giving the assessee any further hearing, within one month from the end of the month in which the direction is received.

The amended subsection (14)(b) applies where the draft order was forwarded within section 286’s time period. The time to make the final order after directions is then governed by subsection (13) and subsection (14), notwithstanding section 286.

Who is an "eligible assessee" and when this section does not apply

"Dispute Resolution Panel" means a collegium of three Principal Commissioners or Commissioners of Income-tax constituted by the Board.

"Eligible assessee" means: (i) any person whose variation arises from an order of the Transfer Pricing Officer under section 166(6), and (ii) any non-resident (other than a company), or any foreign company - subject to certain exclusions.

This section does not apply where the assessment or reassessment order is passed with the prior approval of the Principal Commissioner or Commissioner under section 274(12) (the GAAR-approval route), nor to proceedings under Chapter XVI-B (the block-assessment provisions covered by sections 292 to 300 of this Act).

Subsection (18) expressly excludes the person referred to in section 292(1) and the other person referred to in section 295 from eligible-assessee status. Subsection (19) separately excludes Chapter XVI-B proceedings.

Step-by-step flow for a Dispute Resolution Panel reference under Section 275

1. 1

   Is the person an eligible assessee and is the order within Section 275?

   Eligible: a person whose variation arises from a Transfer Pricing Officer's order under section 166(6), or a non-resident (not being a company), or a foreign company (Section 275(17)(b)). Excluded: persons referred to in section 292(1) or 295 (Section 275(18)), proceedings under Chapter XVI-B (Section 275(19)), and orders passed with approval under section 274(12) (Section 275(16)).

   • No: Section 275 does not apply.
   • Yes: Go to the next step.
2. 2

   Does the AO propose a variation prejudicial to the assessee?

   • No: No draft order is required under Section 275(1).
   • Yes: The AO first forwards a draft order to the assessee. Go to the next step.
3. 3

   Within thirty days of receiving the draft, does the assessee object?

   Objections are filed with both the Dispute Resolution Panel and the AO (Section 275(2)(b)).

   • No, it accepts or files nothing: The AO completes the assessment on the draft within one month from the end of the month in which the acceptance is received or the thirty-day period expires (Sections 275(3) and (4)).
   • Yes: Go to the next step.
4. 4

   The Panel decides

   It may make further enquiry (Section 275(7)), and may confirm, reduce or enhance the variations, including on matters the assessee did not raise, but cannot set a variation aside or send the case back for further enquiry (Sections 275(8) and (9)). It must hear both sides on prejudicial directions (Section 275(12)), decide by majority (Section 275(10)) and give written reasons (Section 275(6)), within nine months from the end of the month in which the draft was forwarded (Section 275(13)).

5. 5

   The AO completes the assessment

   In conformity with the directions, which are binding (Section 275(11)), without a further hearing, within one month from the end of the month in which the directions are received (Section 275(14)(a)).

Practical checklist

Frequently asked questions