New DTC: Speculated to Include Alternate Dispute Resolution Mechanism

More and more speculations are surfacing as the submission date for the new Direct Tax Code (DTC) is getting delayed. One such speculation is that it includes an alternate dispute resolution mechanism. The tax code committee headed by Akhilesh Ranjan, Principal Chief Commissioner of Income Tax is expected to be submitted on August 16, 2019. 

Consider that a person has received 20 tax demand orders. The assessee can agree to 10 of these notices and pay taxes for the ones he has agreed upon. Further, he can take a negotiated settlement approach to clear the notices he has not agreed with. In this case, he gets exemption on the payment of penalty applicable; it is enough to pay the tax and interest. 

The negotiation happens based on the number of cases the department wins. If the department wins about 25% of the cases, it may ask the assessee to pay 25% of the demand amount for settlement. When an assessee litigates a few cases and loses the appeal, he still gets an opportunity to settle it with the department. 

Also Read: Tax for Middle-Income Earners Likely to Change under Direct Tax Code

Dinesh Kanabar, CEO of a tax advisory firm expressed in an interview with Business Today that such a provision in the Direct Tax Code will make a remarkable change. He said that such a dispute resolution mechanism is adopted in many countries and not unique to India.

The number of tax litigations has been rising in recent years and posing as a big issue for the income tax department. In its action plan for 2019-20, the department has prioritised litigation management as one of the significant ways to achieve its vision for 2020.

IT department has increased monetary limits for filing appeals from Rs.20 lakh to Rs.50 lakh in Income Tax Appellate Tribunal (ITAT), from Rs.50 lakh to Rs.1 crore in high courts, and from Rs.1 crore to Rs.2 crore in the Supreme Court as a means to reduce the litigations.