CHAPTER XIX-AA — DISPUTE RESOLUTION COMMITTEE IN CERTAIN CASES
CHAPTER XIX-AA — DISPUTE RESOLUTION COMMITTEE IN CERTAIN CASES
Section 245MA — Dispute Resolution Committee
Case Laws & Commentary · Income-tax Act, 1961 (as amended by the Finance Act, 2026) · bharattax.co Treatise
Status: Live. The only section in Chapter XIX-AA. Inserted by the Finance Act, 2021 with effect from 1 April 2021 as part of the package that discontinued the Income-tax Settlement Commission and introduced faceless, small-taxpayer dispute resolution. Operationalised by the e-Dispute Resolution Scheme, 2022 (Notification No. 27/2022 dated 5 April 2022, S.O. 1642(E)) and rule 44DAB / Form No. 34BC.
FA 2026: Amended. In sub-section (2), for the words “waive any penalty imposable” the words “waive any penalty imposed or imposable” are substituted, deemed to have effect from 1 March 2026. The Dispute Resolution Committee’s waiver power now reaches a penalty already imposed, not merely one that is still only imposable.
Successor: Section 379 of the Income-tax Act, 2025 substantially re-enacts section 245MA — same objective, the Rs 10 lakh variation and Rs 50 lakh returned-income thresholds, and the same power to waive penalty and grant immunity from prosecution.
A. SECTION COMMENTARY
1. Placement and purpose
Chapter XIX-AA contains a single section, section 245MA, headed “Dispute Resolution Committee”. It sits between Chapter XIX-A (Settlement of Cases, now in wind-down through the Interim Boards) and Chapter XIX-B (Advance Rulings). The Dispute Resolution Committee (DRC) is a new, optional, early-stage alternative dispute resolution forum designed for small and medium taxpayers. Its object is to take low-value disputes out of the conventional appellate channel — Commissioner (Appeals), Income-tax Appellate Tribunal, High Court and Supreme Court — and to dispose of them quickly, facelessly and with the inducement of penalty relief and immunity from prosecution.
2. Legislative genesis
The Finance Act, 2021 carried out a structural re-engineering of the dispute-resolution architecture of the Act. The Income-tax Settlement Commission was discontinued for applications made on or after 1 February 2021, with pending cases routed to Interim Boards for Settlement (sections 245M and 245AA onwards). In its place, for small disputes, Parliament created the DRC. Whereas the Settlement Commission was a one-time, high-value, confession-based mechanism, the DRC is a recurring, low-value, variation-based mechanism. The two share a family resemblance — both can waive penalty and grant immunity from prosecution — but the DRC is deliberately confined to modest cases and is built on the faceless template introduced for assessment (section 144B) and appeals (section 250).
3. The scheme of the section, sub-section by sub-section
Sub-section (1) empowers the Central Government to constitute one or more Dispute Resolution Committees in accordance with rules, for persons or a class of persons specified by the Board who opt for dispute resolution in respect of a dispute arising from any variation in a “specified order” and who fulfil the “specified conditions”. The forum is therefore opt-in: it is the assessee who elects to take a qualifying dispute to the DRC.
Sub-section (2) confers the DRC’s defining powers — subject to prescribed conditions, to reduce or waive any penalty imposable under the Act, and to grant immunity from prosecution for any offence punishable under the Act, in the case of a person whose dispute is resolved under the Chapter. After the Finance Act, 2026 (with effect from 1 March 2026), the waiver power extends to a penalty “imposed or imposable”, closing the gap where penalty proceedings had already culminated in an order.
Sub-section (2A), inserted by the Finance Act, 2022, contains a non-obstante clause overriding section 144C. On receipt of the DRC’s order, the Assessing Officer must — where the specified order was a draft order under section 144C(1), pass an order of assessment, reassessment or recomputation; and in any other case, modify the order — in conformity with the DRC’s directions, within one month from the end of the month in which the DRC order is received. This is the consequential machinery that gives the DRC’s decision legal effect in the assessment record.
Sub-sections (3) and (4) provide for a faceless scheme. The Central Government may notify a scheme to impart greater efficiency, transparency and accountability by eliminating the interface between the DRC and the assessee to the extent technologically feasible, by optimising resources through economies of scale and functional specialisation, and by introducing dynamic jurisdiction. To give effect to the scheme, the Government may direct that provisions of the Act shall not apply, or shall apply with modifications — but no such directing notification could be issued after 31 March 2023. A proviso inserted by the Finance Act, 2023 (with effect from 1 April 2023) preserves the power to amend a direction already issued on or before that date. Sub-section (5) requires every notification under sub-sections (3) and (4) to be laid before each House of Parliament.
The Explanation defines the two gateway expressions. “Specified conditions” exclude persons tainted by detention under COFEPOSA, conviction under specified penal statutes (IPC / BNS, UAPA, NDPS, Benami, Prevention of Corruption, PMLA), prosecution or conviction at the instance of an income-tax authority, or notification under the Special Court (TORTS) Act, 1992 — plus such other conditions as may be prescribed. “Specified order” means an order (including a draft order) specified by the Board where (i) the aggregate variation does not exceed Rs 10 lakh; (ii) the order is not based on a search under section 132, a requisition under section 132A, a survey under section 133A, or information received under an agreement under section 90 or 90A; and (iii) where a return has been filed, the total income returned does not exceed Rs 50 lakh.
4. Eligibility — the three quantitative gates and the integrity filters
In practice three numbers govern access: the variation in the specified order must be Rs 10 lakh or less; the returned total income must be Rs 50 lakh or less; and the dispute must not originate in search, requisition, survey or treaty-exchanged information. The integrity filters in clause (a) of the Explanation keep out persons with serious criminal or smuggling antecedents. The design is consciously narrow — the DRC is a small-taxpayer remedy, not a general settlement window.
5. Operational framework — the e-Dispute Resolution Scheme, 2022
The Central Government notified the e-Dispute Resolution Scheme, 2022 in exercise of the powers under sub-sections (3) and (4) of section 245MA, vide Notification No. 27/2022 dated 5 April 2022 (S.O. 1642(E)), read with the Income-tax (Seventh Amendment) Rules, 2022 which inserted rule 44DAB and Form No. 34BC. An eligible person applies in Form No. 34BC on the e-filing portal, ordinarily within one month of receipt of the specified order (or within the period allowed where an appeal is already pending before the Commissioner (Appeals)), with a fee of Rs 1,000 and proof of payment of tax on the returned income where available. Dispute Resolution Committees have been constituted region-wise. The Scheme is faceless and is intended to deliver a final, time-bound resolution, the DRC being required to pass its order within six months of the end of the month of admission of the application.
6. Relationship with section 144C (DRP) and with the appellate route
Section 245MA must be read alongside, and distinguished from, the Dispute Resolution Panel under section 144C. Both intercept a draft order before it crystallises, but the DRP is confined to eligible assessees (transfer-pricing cases and foreign companies) with no monetary ceiling, whereas the DRC is open to specified small taxpayers regardless of subject-matter, subject to the Rs 10 lakh / Rs 50 lakh caps. The non-obstante clause in sub-section (2A) makes clear that, where the specified order is itself a section 144C(1) draft, the DRC route displaces the ordinary 144C(13) machinery. Critically, opting for the DRC is mutually exclusive with pursuing the same variation in appeal: the DRC is meant for disputes not already being agitated before the Tribunal, High Court or Supreme Court, and its object is to prevent such disputes from reaching those fora at all.
7. Finality and the remedy against a DRC order
The Act provides no statutory appeal against an order of the Dispute Resolution Committee. The consequential assessment passed by the Assessing Officer under sub-section (2A) is, to the extent it merely conforms to the DRC’s directions, the executory product of the DRC’s decision. A taxpayer aggrieved by the DRC’s order — for example, by rejection of the application on eligibility, or by refusal of relief — is therefore left to the constitutional remedy of a writ petition under Article 226 before the jurisdictional High Court. This places a premium on the DRC observing the principles of natural justice and acting within jurisdiction, because judicial review, not appeal, is the only check.
8. The Finance Act, 2026 amendment — “imposed or imposable”
Before the Finance Act, 2026, sub-section (2) empowered the DRC to “reduce or waive any penalty imposable”. The word “imposable” is forward-looking; read strictly it covered only a penalty not yet levied, leaving doubt where a penalty order had already been passed by the time the dispute reached the DRC. The Finance Act, 2026 substitutes “imposed or imposable”, with effect from 1 March 2026, so that the DRC can now waive or reduce a penalty already imposed as well as one still to be imposed. The amendment is curative and beneficial: it removes a technical bar and aligns the DRC’s waiver power with the broad immunity it can grant from prosecution.
9. Transition to the Income-tax Act, 2025
Section 379 of the Income-tax Act, 2025 re-enacts the DRC scheme in substantially identical terms — the optional, faceless, small-taxpayer character; the Rs 10 lakh variation and Rs 50 lakh returned-income thresholds; and the twin powers to waive penalty and grant immunity from prosecution — so that the jurisprudence and administrative practice developed under section 245MA will carry forward.
10. Practitioner note
For a client with a small adjustment — say a disallowance of Rs 6 lakh on a Rs 30 lakh return — the DRC can be a faster and cheaper exit than a CIT(A) appeal, with the added prospect of penalty waiver and protection from prosecution. The election must be weighed carefully: it is time-bound (one month), it forecloses the ordinary appellate route on the same variation, and the resulting order carries no statutory appeal, only writ review. Eligibility should be confirmed against all three gates and the integrity filters before Form 34BC is filed.
B. STATUTORY POSITION (verbatim text)
Reproduced from the local Act (base text to the Finance Act, 2025). The Finance Act, 2026 substitution in sub-section (2) is shown by an editorial note immediately below that sub-section; the verbatim words from the local Act are preserved.
245MA. (1) The Central Government shall constitute, one or more Dispute Resolution Committees, as may be necessary, in accordance with the rules made under this Act, for dispute resolution in the case of such persons or class of persons, as may be specified by the Board, who may opt for dispute resolution under this Chapter in respect of dispute arising from any variation in the specified order in his case and who fulfils the specified conditions.
(2) The Dispute Resolution Committee, subject to such conditions, as may be prescribed, shall have the powers to reduce or waive any penalty imposable under this Act or grant immunity from prosecution for any offence punishable under this Act in case of a person whose dispute is resolved under this Chapter.
[Finance Act, 2026 — in sub-section (2), for “waive any penalty imposable”, read “waive any penalty imposed or imposable”, with effect from 1 March 2026.]
(2A) Notwithstanding anything contained in section 144C, upon receipt of the order of the Dispute Resolution Committee under this section, the Assessing Officer shall,—
(a) in a case where the specified order is a draft of the proposed order of assessment under sub-section (1) of section 144C, pass an order of assessment, reassessment or recomputation; or
(b) in any other case, modify the order of assessment, reassessment or recomputation,
in conformity with the directions contained in the order of the Dispute Resolution Committee within a period of one month from the end of the month in which such order is received.
(3) The Central Government may make a scheme, by notification in the Official Gazette, for the purposes of dispute resolution under this Chapter, so as to impart greater efficiency, transparency and accountability by—
(a) eliminating the interface between the Dispute Resolution Committee and the assessee in the course of dispute resolution proceedings to the extent technologically feasible;
(b) optimising utilisation of the resources through economies of scale and functional specialisation;
(c) introducing a dispute resolution system with dynamic jurisdiction.
(4) The Central Government may, for the purposes of giving effect to the scheme made under sub-section (3), by notification in the Official Gazette, direct that any of the provisions of this Act shall not apply or shall apply with such exceptions, modifications and adaptations as may be specified in the said notification:
Provided that no such direction shall be issued after the 31st day of March, 2023:
Provided further that the Central Government may amend any direction, issued under this sub-section on or before the 31st day of March, 2023, by notification in the Official Gazette.
(5) Every notification issued under sub-sections (3) and (4) shall, as soon as may be after the notification is issued, be laid before each House of Parliament.
Explanation.— For the purposes of this section,—
(a) “specified conditions” in relation to a person means a person who fulfils the following conditions, namely:—
(I) where he is not a person,—
(A) in respect of whom an order of detention has been made under the provisions of the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974 (52 of 1974):
Provided that—
(i) such order of detention, being an order to which the provisions of section 9 or section 12A of the said Act do not apply, has been revoked on the report of the Advisory Board under section 8 of the said Act or before the receipt of the report of the Advisory Board; or
(ii) such order of detention being an order to which the provisions of section 9 of the said Act apply, has not been revoked before the expiry of the time for, or on the basis of, the review under sub-section (3) of section 9, or on the report of the Advisory Board under section 8, read with sub-section (2) of section 9, of the said Act; or
(iii) such order of detention, being an order to which the provisions of section 12A of the said Act apply, has not been revoked before the expiry of the time for, or on the basis of, the first review under sub-section (3) of the said section, or on the basis of the report of the Advisory Board under section 8, read with sub-section (6) of section 12A, of the said Act; or
(iv) such order of detention has not been set aside by a court of competent jurisdiction;
(B) in respect of whom prosecution for any offence punishable under the provisions of the Indian Penal Code (45 of 1860), the Unlawful Activities (Prevention) Act, 1967 (37 of 1967), the Narcotic Drugs and Psychotropic Substances Act, 1985 (61 of 1985), the Prohibition of Benami Transactions Act, 1988 (45 of 1988), the Prevention of Corruption Act, 1988 (49 of 1988) or the Prevention of Money-laundering Act, 2002 (15 of 2003) has been instituted and he has been convicted of any offence punishable under any of those Acts;
(C) in respect of whom prosecution has been initiated by an income-tax authority for any offence punishable under the provisions of this Act or the Indian Penal Code (45 of 1860) or for the purpose of enforcement of any civil liability under any law for the time being in force, or such person has been convicted of any such offence consequent upon the prosecution initiated by an income-tax authority;
(D) who is notified under section 3 of the Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992 (27 of 1992);
(II) such other conditions, as may be prescribed.
(b) “specified order” means such order, including draft order, as may be specified by the Board, and,—
(i) aggregate sum of variations proposed or made in such order does not exceed ten lakh rupees;
(ii) such order is not based on search initiated under section 132 or requisition under section 132A in the case of assessee or any other person or survey under section 133A or information received under an agreement referred to in section 90 or section 90A;
(iii) where return has been filed by the assessee for the assessment year relevant to such order, total income as per such return does not exceed fifty lakh rupees.
C. AUTHORITIES
Candour note. Section 245MA was inserted only with effect from 1 April 2021 and was operationalised through the e-Dispute Resolution Scheme, 2022 from April 2022. By its very design the DRC route exits the dispute before it can reach the Appellate Tribunal, and an order of the DRC carries no statutory appeal. As at the date of compilation there is, accordingly, no reported decision of the Supreme Court, a High Court or the Tribunal directly construing section 245MA on its merits. The authorities below are therefore presented expressly as cognate and analogical — they govern the kindred features of the DRC scheme (the immunity-and-waiver model of an alternative forum; the mandatory draft-order machinery the DRC plugs into; the validity of faceless procedures; and the writ remedy that is the only check on the DRC). They are not direct rulings on section 245MA, and are flagged as such. This treatment follows the candour rule adopted throughout the Treatise: accuracy is not sacrificed to a case-count.
Cluster 1 — The immunity-and-waiver model: lessons from the Settlement Commission
The DRC’s twin powers — to waive penalty and to grant immunity from prosecution — mirror those of the erstwhile Settlement Commission under Chapter XIX-A. The Supreme Court’s exposition of the nature and limits of those powers is the closest principled guidance available.
CIT v. Anjum M. H. Ghaswala (2002) 252 ITR 1 (SC) [Constitution Bench]
Court: Supreme Court of India, five-Judge Bench; (2002) 252 ITR 1 / 119 Taxman 352.
Held: An alternative dispute-resolution forum created by statute exercises only the powers the statute confers; it cannot waive a levy that the Act makes mandatory. The Settlement Commission could not waive interest chargeable under sections 234A, 234B and 234C because that interest is mandatory; its settlement jurisdiction did not enlarge its power to override mandatory provisions.
Relevance to s.245MA: Cognate. It marks the outer boundary of a special forum’s discretionary relief. The DRC’s express statutory power to “reduce or waive any penalty” and to grant immunity is the very kind of conferred power Ghaswala demands — and equally, the DRC cannot travel beyond what section 245MA grants. The Finance Act, 2026 widening of the waiver to a penalty “imposed or imposable” is best read against this backdrop: the relief must be rooted in the words Parliament has used.
Court: Supreme Court of India, five-Judge Bench; judgment dated 21 October 2010.
Held: Chapter XIX-A is a self-contained code whose object is settlement, not regular determination, of liability. The Settlement Commission cannot reopen its concluded order by invoking section 154; finality is integral to the settlement scheme. Interest under sections 234A to 234C is computable up to the date of the section 245D(1) order.
Relevance to s.245MA: Cognate. Two principles carry across. First, an alternative forum’s order is intended to be final — which, for the DRC, explains the absence of any statutory appeal and the confinement of challenge to writ. Second, such a forum is a creature of, and bounded by, its own Chapter; the DRC must act within Chapter XIX-AA and the e-DRS Scheme, 2022.
Cluster 2 — The mandatory draft-order machinery the DRC plugs into (section 144C)
Section 245MA(2A) operates “notwithstanding anything contained in section 144C”, and a “specified order” expressly includes a section 144C(1) draft order. The jurisprudence on the mandatory character of that draft-order mechanism therefore directly informs the procedural setting in which the DRC functions.
ACIT v. Shelf Drilling Ron Tappmeyer Ltd. (2025) 177 taxmann.com 262 (SC) / 2025 INSC 946
Court: Supreme Court of India (Nagarathna and Satish Chandra Sharma JJ.); judgment dated 8 August 2025 — split verdict; matter referred for a larger Bench.
Held: On whether the time consumed in section 144C Dispute Resolution Panel proceedings falls within the section 153 limitation, the Bench divided. Sharma J. held the section 144C timelines operate independently of section 153(3) by virtue of the non-obstante clauses in sub-sections (4) and (13); Nagarathna J. held that section 153(3) continues to cap the overall limitation. The Registry was directed to place the matter before the Chief Justice of India for a larger Bench.
Relevance to s.245MA: Cognate. It is the leading current authority on the inter-play of the 144C draft-order machinery with limitation — the same machinery the DRC steps into under sub-section (2A). It also illustrates the interpretive weight courts give to non-obstante clauses, the very drafting device section 245MA(2A) uses to override section 144C. The point of law remains unsettled pending the larger Bench.
Vijay Television (P) Ltd. v. Dispute Resolution Panel (2014) 369 ITR 113 (Madras)
Court: High Court of Madras; (2014) 369 ITR 113.
Held: Passing a draft assessment order under section 144C(1) is mandatory, not a procedural formality. Failure to do so renders the final assessment order without jurisdiction, null and void; the defect cannot be cured by a subsequent corrigendum. The assessee cannot be denied the statutory benefit of the alternative forum on a prejudicial variation.
Relevance to s.245MA: Cognate. The draft order is the gateway to the alternative forum, and that gateway is mandatory. Read into Chapter XIX-AA, it underscores that where a specified order is a 144C(1) draft, the taxpayer’s right to elect the DRC on that variation cannot be defeated by procedural short-cuts.
Zuari Cement Ltd. v. ACIT (Andhra Pradesh High Court) — SLP dismissed by the Supreme Court
Court: High Court of Andhra Pradesh; the Revenue’s Special Leave Petition was dismissed by the Supreme Court (SLP(C) No. 16694 of 2013, order dated 27 September 2013).
Held: An assessment finalised without first passing the mandatory section 144C(1) draft order is without jurisdiction and a nullity; the omission is not a curable irregularity under section 292B.
Relevance to s.245MA: Cognate, and SLP-affirmed. It fixes the consequence of bypassing the draft-order stage — invalidity — and so reinforces the integrity of the procedural entry-point that section 245MA shares with section 144C.
Cluster 3 — Validity and limits of faceless procedure
Section 245MA(3)–(4) builds the DRC on the faceless template — no interface, dynamic jurisdiction, economies of scale. The courts’ insistence that faceless schemes still obey natural justice supplies the standard against which a DRC order will be tested on writ.
Mantra Industries Ltd. v. National Faceless Assessment Centre (2023) 452 ITR 244 (SC)
Court: Supreme Court of India; (2023) 452 ITR 244, affirming the Bombay High Court.
Held: Faceless assessment does not dispense with the statutory and natural-justice safeguards. An order passed in breach of the prescribed procedure — for instance, without the mandatory draft order or opportunity of hearing — is liable to be set aside; the faceless format is no answer to a denial of fair procedure.
Relevance to s.245MA: Cognate. The DRC operates facelessly under the e-DRS Scheme, 2022. Mantra Industries supplies the controlling principle that a faceless forum must still hear the assessee and follow the prescribed steps — the yardstick for judicial review of a DRC order.
Sanjay Aggarwal v. National Faceless Assessment Centre (2022) 442 ITR 188 (Delhi)
Court: High Court of Delhi; (2022) 442 ITR 188.
Held: Where the faceless scheme gives the assessee a right to seek a personal hearing, denial of that hearing vitiates the order. The word “may” in the procedure was read to oblige the authority to grant a hearing on request; the order was quashed for breach of natural justice.
Relevance to s.245MA: Cognate. It establishes that the right to be heard survives the faceless design — directly material to how a DRC must conduct an e-DRS proceeding and to the grounds on which its order may be challenged on writ.
Cluster 4 — The remedy against a DRC order: writ, and the alternative-remedy rule
Because no appeal is provided against a DRC order, the assessee’s recourse is a writ petition. The two authorities below frame both ends of that remedy — the procedure for objecting to action by the Department, and the discipline of alternative remedy where a statutory appeal does exist.
GKN Driveshafts (India) Ltd. v. ITO (2003) 259 ITR 19 (SC)
Held: Laying down the now-standard procedure for challenging reassessment: the assessee must be supplied the reasons, may file objections, and the authority must dispose of those objections by a speaking order before proceeding — a writ being premature until that procedure is exhausted.
Relevance to s.245MA: Cognate and procedural. It models how courts channel disputes with the Department — reasoned, speaking disposal before judicial intervention. A DRC, and the Assessing Officer giving effect to its order under sub-section (2A), are expected to act by reasoned orders; departures are the stuff of writ review.
Genpact India (P) Ltd. v. DCIT (2019) 419 ITR 440 (SC)
Court: Supreme Court of India; (2019) 419 ITR 440 / 111 taxmann.com 402, affirming the Delhi High Court.
Held: Where the Act provides an efficacious statutory appeal — there, against the determination of buy-back tax liability under section 115QA, the expression “denies his liability to be assessed” in section 246A being read widely — a writ petition under Article 226 will not ordinarily be entertained.
Relevance to s.245MA: Cognate, and instructive by contrast. The DRC is the mirror image of Genpact: precisely because the Act provides no appeal against a DRC order, the alternative-remedy bar does not apply and the High Court’s writ jurisdiction is the available — indeed the only — forum for challenge. Genpact thus locates the DRC within the larger architecture of appeal versus writ.
Note on the Tribunal level. There is, and by design will be, no body of Income-tax Appellate Tribunal jurisprudence on section 245MA: the DRC route is intended to resolve the dispute before it can travel to the Tribunal, and the Tribunal has no appellate jurisdiction over a DRC order. Where a DRC declines or rejects an application and the assessee instead pursues the ordinary appellate channel on the underlying assessment, any resulting Tribunal decision turns on the substantive section in issue, not on section 245MA.
Compiled for the bharattax.co Treatise on the Income-tax Act, 1961 (as amended by the Finance Act, 2026). Statutory text reproduced from the local Act; all citations independently web-verified. Direct merits authority on section 245MA is, as noted, not yet available; cognate authorities are flagged as such under the candour rule.
CHAPTER XIX-AA — DISPUTE RESOLUTION COMMITTEE IN CERTAIN CASES
Section 245MA — Dispute Resolution Committee
Case Laws & Commentary · Income-tax Act, 1961 (as amended by the Finance Act, 2026) · bharattax.co Treatise
Status: Live. The only section in Chapter XIX-AA. Inserted by the Finance Act, 2021 with effect from 1 April 2021 as part of the package that discontinued the Income-tax Settlement Commission and introduced faceless, small-taxpayer dispute resolution. Operationalised by the e-Dispute Resolution Scheme, 2022 (Notification No. 27/2022 dated 5 April 2022, S.O. 1642(E)) and rule 44DAB / Form No. 34BC.
FA 2026: Amended. In sub-section (2), for the words “waive any penalty imposable” the words “waive any penalty imposed or imposable” are substituted, deemed to have effect from 1 March 2026. The Dispute Resolution Committee’s waiver power now reaches a penalty already imposed, not merely one that is still only imposable.
Successor: Section 379 of the Income-tax Act, 2025 substantially re-enacts section 245MA — same objective, the Rs 10 lakh variation and Rs 50 lakh returned-income thresholds, and the same power to waive penalty and grant immunity from prosecution.
A. SECTION COMMENTARY
1. Placement and purpose
Chapter XIX-AA contains a single section, section 245MA, headed “Dispute Resolution Committee”. It sits between Chapter XIX-A (Settlement of Cases, now in wind-down through the Interim Boards) and Chapter XIX-B (Advance Rulings). The Dispute Resolution Committee (DRC) is a new, optional, early-stage alternative dispute resolution forum designed for small and medium taxpayers. Its object is to take low-value disputes out of the conventional appellate channel — Commissioner (Appeals), Income-tax Appellate Tribunal, High Court and Supreme Court — and to dispose of them quickly, facelessly and with the inducement of penalty relief and immunity from prosecution.
2. Legislative genesis
The Finance Act, 2021 carried out a structural re-engineering of the dispute-resolution architecture of the Act. The Income-tax Settlement Commission was discontinued for applications made on or after 1 February 2021, with pending cases routed to Interim Boards for Settlement (sections 245M and 245AA onwards). In its place, for small disputes, Parliament created the DRC. Whereas the Settlement Commission was a one-time, high-value, confession-based mechanism, the DRC is a recurring, low-value, variation-based mechanism. The two share a family resemblance — both can waive penalty and grant immunity from prosecution — but the DRC is deliberately confined to modest cases and is built on the faceless template introduced for assessment (section 144B) and appeals (section 250).
3. The scheme of the section, sub-section by sub-section
Sub-section (1) empowers the Central Government to constitute one or more Dispute Resolution Committees in accordance with rules, for persons or a class of persons specified by the Board who opt for dispute resolution in respect of a dispute arising from any variation in a “specified order” and who fulfil the “specified conditions”. The forum is therefore opt-in: it is the assessee who elects to take a qualifying dispute to the DRC.
Sub-section (2) confers the DRC’s defining powers — subject to prescribed conditions, to reduce or waive any penalty imposable under the Act, and to grant immunity from prosecution for any offence punishable under the Act, in the case of a person whose dispute is resolved under the Chapter. After the Finance Act, 2026 (with effect from 1 March 2026), the waiver power extends to a penalty “imposed or imposable”, closing the gap where penalty proceedings had already culminated in an order.
Sub-section (2A), inserted by the Finance Act, 2022, contains a non-obstante clause overriding section 144C. On receipt of the DRC’s order, the Assessing Officer must — where the specified order was a draft order under section 144C(1), pass an order of assessment, reassessment or recomputation; and in any other case, modify the order — in conformity with the DRC’s directions, within one month from the end of the month in which the DRC order is received. This is the consequential machinery that gives the DRC’s decision legal effect in the assessment record.
Sub-sections (3) and (4) provide for a faceless scheme. The Central Government may notify a scheme to impart greater efficiency, transparency and accountability by eliminating the interface between the DRC and the assessee to the extent technologically feasible, by optimising resources through economies of scale and functional specialisation, and by introducing dynamic jurisdiction. To give effect to the scheme, the Government may direct that provisions of the Act shall not apply, or shall apply with modifications — but no such directing notification could be issued after 31 March 2023. A proviso inserted by the Finance Act, 2023 (with effect from 1 April 2023) preserves the power to amend a direction already issued on or before that date. Sub-section (5) requires every notification under sub-sections (3) and (4) to be laid before each House of Parliament.
The Explanation defines the two gateway expressions. “Specified conditions” exclude persons tainted by detention under COFEPOSA, conviction under specified penal statutes (IPC / BNS, UAPA, NDPS, Benami, Prevention of Corruption, PMLA), prosecution or conviction at the instance of an income-tax authority, or notification under the Special Court (TORTS) Act, 1992 — plus such other conditions as may be prescribed. “Specified order” means an order (including a draft order) specified by the Board where (i) the aggregate variation does not exceed Rs 10 lakh; (ii) the order is not based on a search under section 132, a requisition under section 132A, a survey under section 133A, or information received under an agreement under section 90 or 90A; and (iii) where a return has been filed, the total income returned does not exceed Rs 50 lakh.
4. Eligibility — the three quantitative gates and the integrity filters
In practice three numbers govern access: the variation in the specified order must be Rs 10 lakh or less; the returned total income must be Rs 50 lakh or less; and the dispute must not originate in search, requisition, survey or treaty-exchanged information. The integrity filters in clause (a) of the Explanation keep out persons with serious criminal or smuggling antecedents. The design is consciously narrow — the DRC is a small-taxpayer remedy, not a general settlement window.
5. Operational framework — the e-Dispute Resolution Scheme, 2022
The Central Government notified the e-Dispute Resolution Scheme, 2022 in exercise of the powers under sub-sections (3) and (4) of section 245MA, vide Notification No. 27/2022 dated 5 April 2022 (S.O. 1642(E)), read with the Income-tax (Seventh Amendment) Rules, 2022 which inserted rule 44DAB and Form No. 34BC. An eligible person applies in Form No. 34BC on the e-filing portal, ordinarily within one month of receipt of the specified order (or within the period allowed where an appeal is already pending before the Commissioner (Appeals)), with a fee of Rs 1,000 and proof of payment of tax on the returned income where available. Dispute Resolution Committees have been constituted region-wise. The Scheme is faceless and is intended to deliver a final, time-bound resolution, the DRC being required to pass its order within six months of the end of the month of admission of the application.
6. Relationship with section 144C (DRP) and with the appellate route
Section 245MA must be read alongside, and distinguished from, the Dispute Resolution Panel under section 144C. Both intercept a draft order before it crystallises, but the DRP is confined to eligible assessees (transfer-pricing cases and foreign companies) with no monetary ceiling, whereas the DRC is open to specified small taxpayers regardless of subject-matter, subject to the Rs 10 lakh / Rs 50 lakh caps. The non-obstante clause in sub-section (2A) makes clear that, where the specified order is itself a section 144C(1) draft, the DRC route displaces the ordinary 144C(13) machinery. Critically, opting for the DRC is mutually exclusive with pursuing the same variation in appeal: the DRC is meant for disputes not already being agitated before the Tribunal, High Court or Supreme Court, and its object is to prevent such disputes from reaching those fora at all.
7. Finality and the remedy against a DRC order
The Act provides no statutory appeal against an order of the Dispute Resolution Committee. The consequential assessment passed by the Assessing Officer under sub-section (2A) is, to the extent it merely conforms to the DRC’s directions, the executory product of the DRC’s decision. A taxpayer aggrieved by the DRC’s order — for example, by rejection of the application on eligibility, or by refusal of relief — is therefore left to the constitutional remedy of a writ petition under Article 226 before the jurisdictional High Court. This places a premium on the DRC observing the principles of natural justice and acting within jurisdiction, because judicial review, not appeal, is the only check.
8. The Finance Act, 2026 amendment — “imposed or imposable”
Before the Finance Act, 2026, sub-section (2) empowered the DRC to “reduce or waive any penalty imposable”. The word “imposable” is forward-looking; read strictly it covered only a penalty not yet levied, leaving doubt where a penalty order had already been passed by the time the dispute reached the DRC. The Finance Act, 2026 substitutes “imposed or imposable”, with effect from 1 March 2026, so that the DRC can now waive or reduce a penalty already imposed as well as one still to be imposed. The amendment is curative and beneficial: it removes a technical bar and aligns the DRC’s waiver power with the broad immunity it can grant from prosecution.
9. Transition to the Income-tax Act, 2025
Section 379 of the Income-tax Act, 2025 re-enacts the DRC scheme in substantially identical terms — the optional, faceless, small-taxpayer character; the Rs 10 lakh variation and Rs 50 lakh returned-income thresholds; and the twin powers to waive penalty and grant immunity from prosecution — so that the jurisprudence and administrative practice developed under section 245MA will carry forward.
10. Practitioner note
For a client with a small adjustment — say a disallowance of Rs 6 lakh on a Rs 30 lakh return — the DRC can be a faster and cheaper exit than a CIT(A) appeal, with the added prospect of penalty waiver and protection from prosecution. The election must be weighed carefully: it is time-bound (one month), it forecloses the ordinary appellate route on the same variation, and the resulting order carries no statutory appeal, only writ review. Eligibility should be confirmed against all three gates and the integrity filters before Form 34BC is filed.
B. STATUTORY POSITION (verbatim text)
Reproduced from the local Act (base text to the Finance Act, 2025). The Finance Act, 2026 substitution in sub-section (2) is shown by an editorial note immediately below that sub-section; the verbatim words from the local Act are preserved.
245MA. (1) The Central Government shall constitute, one or more Dispute Resolution Committees, as may be necessary, in accordance with the rules made under this Act, for dispute resolution in the case of such persons or class of persons, as may be specified by the Board, who may opt for dispute resolution under this Chapter in respect of dispute arising from any variation in the specified order in his case and who fulfils the specified conditions.
(2) The Dispute Resolution Committee, subject to such conditions, as may be prescribed, shall have the powers to reduce or waive any penalty imposable under this Act or grant immunity from prosecution for any offence punishable under this Act in case of a person whose dispute is resolved under this Chapter.
[Finance Act, 2026 — in sub-section (2), for “waive any penalty imposable”, read “waive any penalty imposed or imposable”, with effect from 1 March 2026.]
(2A) Notwithstanding anything contained in section 144C, upon receipt of the order of the Dispute Resolution Committee under this section, the Assessing Officer shall,—
(a) in a case where the specified order is a draft of the proposed order of assessment under sub-section (1) of section 144C, pass an order of assessment, reassessment or recomputation; or
(b) in any other case, modify the order of assessment, reassessment or recomputation,
in conformity with the directions contained in the order of the Dispute Resolution Committee within a period of one month from the end of the month in which such order is received.
(3) The Central Government may make a scheme, by notification in the Official Gazette, for the purposes of dispute resolution under this Chapter, so as to impart greater efficiency, transparency and accountability by—
(a) eliminating the interface between the Dispute Resolution Committee and the assessee in the course of dispute resolution proceedings to the extent technologically feasible;
(b) optimising utilisation of the resources through economies of scale and functional specialisation;
(c) introducing a dispute resolution system with dynamic jurisdiction.
(4) The Central Government may, for the purposes of giving effect to the scheme made under sub-section (3), by notification in the Official Gazette, direct that any of the provisions of this Act shall not apply or shall apply with such exceptions, modifications and adaptations as may be specified in the said notification:
Provided that no such direction shall be issued after the 31st day of March, 2023:
Provided further that the Central Government may amend any direction, issued under this sub-section on or before the 31st day of March, 2023, by notification in the Official Gazette.
(5) Every notification issued under sub-sections (3) and (4) shall, as soon as may be after the notification is issued, be laid before each House of Parliament.
Explanation.— For the purposes of this section,—
(a) “specified conditions” in relation to a person means a person who fulfils the following conditions, namely:—
(I) where he is not a person,—
(A) in respect of whom an order of detention has been made under the provisions of the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974 (52 of 1974):
Provided that—
(i) such order of detention, being an order to which the provisions of section 9 or section 12A of the said Act do not apply, has been revoked on the report of the Advisory Board under section 8 of the said Act or before the receipt of the report of the Advisory Board; or
(ii) such order of detention being an order to which the provisions of section 9 of the said Act apply, has not been revoked before the expiry of the time for, or on the basis of, the review under sub-section (3) of section 9, or on the report of the Advisory Board under section 8, read with sub-section (2) of section 9, of the said Act; or
(iii) such order of detention, being an order to which the provisions of section 12A of the said Act apply, has not been revoked before the expiry of the time for, or on the basis of, the first review under sub-section (3) of the said section, or on the basis of the report of the Advisory Board under section 8, read with sub-section (6) of section 12A, of the said Act; or
(iv) such order of detention has not been set aside by a court of competent jurisdiction;
(B) in respect of whom prosecution for any offence punishable under the provisions of the Indian Penal Code (45 of 1860), the Unlawful Activities (Prevention) Act, 1967 (37 of 1967), the Narcotic Drugs and Psychotropic Substances Act, 1985 (61 of 1985), the Prohibition of Benami Transactions Act, 1988 (45 of 1988), the Prevention of Corruption Act, 1988 (49 of 1988) or the Prevention of Money-laundering Act, 2002 (15 of 2003) has been instituted and he has been convicted of any offence punishable under any of those Acts;
(C) in respect of whom prosecution has been initiated by an income-tax authority for any offence punishable under the provisions of this Act or the Indian Penal Code (45 of 1860) or for the purpose of enforcement of any civil liability under any law for the time being in force, or such person has been convicted of any such offence consequent upon the prosecution initiated by an income-tax authority;
(D) who is notified under section 3 of the Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992 (27 of 1992);
(II) such other conditions, as may be prescribed.
(b) “specified order” means such order, including draft order, as may be specified by the Board, and,—
(i) aggregate sum of variations proposed or made in such order does not exceed ten lakh rupees;
(ii) such order is not based on search initiated under section 132 or requisition under section 132A in the case of assessee or any other person or survey under section 133A or information received under an agreement referred to in section 90 or section 90A;
(iii) where return has been filed by the assessee for the assessment year relevant to such order, total income as per such return does not exceed fifty lakh rupees.
C. AUTHORITIES
Candour note. Section 245MA was inserted only with effect from 1 April 2021 and was operationalised through the e-Dispute Resolution Scheme, 2022 from April 2022. By its very design the DRC route exits the dispute before it can reach the Appellate Tribunal, and an order of the DRC carries no statutory appeal. As at the date of compilation there is, accordingly, no reported decision of the Supreme Court, a High Court or the Tribunal directly construing section 245MA on its merits. The authorities below are therefore presented expressly as cognate and analogical — they govern the kindred features of the DRC scheme (the immunity-and-waiver model of an alternative forum; the mandatory draft-order machinery the DRC plugs into; the validity of faceless procedures; and the writ remedy that is the only check on the DRC). They are not direct rulings on section 245MA, and are flagged as such. This treatment follows the candour rule adopted throughout the Treatise: accuracy is not sacrificed to a case-count.
Cluster 1 — The immunity-and-waiver model: lessons from the Settlement Commission
The DRC’s twin powers — to waive penalty and to grant immunity from prosecution — mirror those of the erstwhile Settlement Commission under Chapter XIX-A. The Supreme Court’s exposition of the nature and limits of those powers is the closest principled guidance available.
CIT v. Anjum M. H. Ghaswala (2002) 252 ITR 1 (SC) [Constitution Bench]
Court: Supreme Court of India, five-Judge Bench; (2002) 252 ITR 1 / 119 Taxman 352.
Held: An alternative dispute-resolution forum created by statute exercises only the powers the statute confers; it cannot waive a levy that the Act makes mandatory. The Settlement Commission could not waive interest chargeable under sections 234A, 234B and 234C because that interest is mandatory; its settlement jurisdiction did not enlarge its power to override mandatory provisions.
Relevance to s.245MA: Cognate. It marks the outer boundary of a special forum’s discretionary relief. The DRC’s express statutory power to “reduce or waive any penalty” and to grant immunity is the very kind of conferred power Ghaswala demands — and equally, the DRC cannot travel beyond what section 245MA grants. The Finance Act, 2026 widening of the waiver to a penalty “imposed or imposable” is best read against this backdrop: the relief must be rooted in the words Parliament has used.
Brij Lal v. CIT (2011) 1 SCC 1 / (2010) 328 ITR 477 (SC) [Constitution Bench]
Court: Supreme Court of India, five-Judge Bench; judgment dated 21 October 2010.
Held: Chapter XIX-A is a self-contained code whose object is settlement, not regular determination, of liability. The Settlement Commission cannot reopen its concluded order by invoking section 154; finality is integral to the settlement scheme. Interest under sections 234A to 234C is computable up to the date of the section 245D(1) order.
Relevance to s.245MA: Cognate. Two principles carry across. First, an alternative forum’s order is intended to be final — which, for the DRC, explains the absence of any statutory appeal and the confinement of challenge to writ. Second, such a forum is a creature of, and bounded by, its own Chapter; the DRC must act within Chapter XIX-AA and the e-DRS Scheme, 2022.
Cluster 2 — The mandatory draft-order machinery the DRC plugs into (section 144C)
Section 245MA(2A) operates “notwithstanding anything contained in section 144C”, and a “specified order” expressly includes a section 144C(1) draft order. The jurisprudence on the mandatory character of that draft-order mechanism therefore directly informs the procedural setting in which the DRC functions.
ACIT v. Shelf Drilling Ron Tappmeyer Ltd. (2025) 177 taxmann.com 262 (SC) / 2025 INSC 946
Court: Supreme Court of India (Nagarathna and Satish Chandra Sharma JJ.); judgment dated 8 August 2025 — split verdict; matter referred for a larger Bench.
Held: On whether the time consumed in section 144C Dispute Resolution Panel proceedings falls within the section 153 limitation, the Bench divided. Sharma J. held the section 144C timelines operate independently of section 153(3) by virtue of the non-obstante clauses in sub-sections (4) and (13); Nagarathna J. held that section 153(3) continues to cap the overall limitation. The Registry was directed to place the matter before the Chief Justice of India for a larger Bench.
Relevance to s.245MA: Cognate. It is the leading current authority on the inter-play of the 144C draft-order machinery with limitation — the same machinery the DRC steps into under sub-section (2A). It also illustrates the interpretive weight courts give to non-obstante clauses, the very drafting device section 245MA(2A) uses to override section 144C. The point of law remains unsettled pending the larger Bench.
Vijay Television (P) Ltd. v. Dispute Resolution Panel (2014) 369 ITR 113 (Madras)
Court: High Court of Madras; (2014) 369 ITR 113.
Held: Passing a draft assessment order under section 144C(1) is mandatory, not a procedural formality. Failure to do so renders the final assessment order without jurisdiction, null and void; the defect cannot be cured by a subsequent corrigendum. The assessee cannot be denied the statutory benefit of the alternative forum on a prejudicial variation.
Relevance to s.245MA: Cognate. The draft order is the gateway to the alternative forum, and that gateway is mandatory. Read into Chapter XIX-AA, it underscores that where a specified order is a 144C(1) draft, the taxpayer’s right to elect the DRC on that variation cannot be defeated by procedural short-cuts.
Zuari Cement Ltd. v. ACIT (Andhra Pradesh High Court) — SLP dismissed by the Supreme Court
Court: High Court of Andhra Pradesh; the Revenue’s Special Leave Petition was dismissed by the Supreme Court (SLP(C) No. 16694 of 2013, order dated 27 September 2013).
Held: An assessment finalised without first passing the mandatory section 144C(1) draft order is without jurisdiction and a nullity; the omission is not a curable irregularity under section 292B.
Relevance to s.245MA: Cognate, and SLP-affirmed. It fixes the consequence of bypassing the draft-order stage — invalidity — and so reinforces the integrity of the procedural entry-point that section 245MA shares with section 144C.
Cluster 3 — Validity and limits of faceless procedure
Section 245MA(3)–(4) builds the DRC on the faceless template — no interface, dynamic jurisdiction, economies of scale. The courts’ insistence that faceless schemes still obey natural justice supplies the standard against which a DRC order will be tested on writ.
Mantra Industries Ltd. v. National Faceless Assessment Centre (2023) 452 ITR 244 (SC)
Court: Supreme Court of India; (2023) 452 ITR 244, affirming the Bombay High Court.
Held: Faceless assessment does not dispense with the statutory and natural-justice safeguards. An order passed in breach of the prescribed procedure — for instance, without the mandatory draft order or opportunity of hearing — is liable to be set aside; the faceless format is no answer to a denial of fair procedure.
Relevance to s.245MA: Cognate. The DRC operates facelessly under the e-DRS Scheme, 2022. Mantra Industries supplies the controlling principle that a faceless forum must still hear the assessee and follow the prescribed steps — the yardstick for judicial review of a DRC order.
Sanjay Aggarwal v. National Faceless Assessment Centre (2022) 442 ITR 188 (Delhi)
Court: High Court of Delhi; (2022) 442 ITR 188.
Held: Where the faceless scheme gives the assessee a right to seek a personal hearing, denial of that hearing vitiates the order. The word “may” in the procedure was read to oblige the authority to grant a hearing on request; the order was quashed for breach of natural justice.
Relevance to s.245MA: Cognate. It establishes that the right to be heard survives the faceless design — directly material to how a DRC must conduct an e-DRS proceeding and to the grounds on which its order may be challenged on writ.
Cluster 4 — The remedy against a DRC order: writ, and the alternative-remedy rule
Because no appeal is provided against a DRC order, the assessee’s recourse is a writ petition. The two authorities below frame both ends of that remedy — the procedure for objecting to action by the Department, and the discipline of alternative remedy where a statutory appeal does exist.
GKN Driveshafts (India) Ltd. v. ITO (2003) 259 ITR 19 (SC)
Court: Supreme Court of India; (2003) 259 ITR 19 / 125 Taxman 963.
Held: Laying down the now-standard procedure for challenging reassessment: the assessee must be supplied the reasons, may file objections, and the authority must dispose of those objections by a speaking order before proceeding — a writ being premature until that procedure is exhausted.
Relevance to s.245MA: Cognate and procedural. It models how courts channel disputes with the Department — reasoned, speaking disposal before judicial intervention. A DRC, and the Assessing Officer giving effect to its order under sub-section (2A), are expected to act by reasoned orders; departures are the stuff of writ review.
Genpact India (P) Ltd. v. DCIT (2019) 419 ITR 440 (SC)
Court: Supreme Court of India; (2019) 419 ITR 440 / 111 taxmann.com 402, affirming the Delhi High Court.
Held: Where the Act provides an efficacious statutory appeal — there, against the determination of buy-back tax liability under section 115QA, the expression “denies his liability to be assessed” in section 246A being read widely — a writ petition under Article 226 will not ordinarily be entertained.
Relevance to s.245MA: Cognate, and instructive by contrast. The DRC is the mirror image of Genpact: precisely because the Act provides no appeal against a DRC order, the alternative-remedy bar does not apply and the High Court’s writ jurisdiction is the available — indeed the only — forum for challenge. Genpact thus locates the DRC within the larger architecture of appeal versus writ.
Note on the Tribunal level. There is, and by design will be, no body of Income-tax Appellate Tribunal jurisprudence on section 245MA: the DRC route is intended to resolve the dispute before it can travel to the Tribunal, and the Tribunal has no appellate jurisdiction over a DRC order. Where a DRC declines or rejects an application and the assessee instead pursues the ordinary appellate channel on the underlying assessment, any resulting Tribunal decision turns on the substantive section in issue, not on section 245MA.
Compiled for the bharattax.co Treatise on the Income-tax Act, 1961 (as amended by the Finance Act, 2026). Statutory text reproduced from the local Act; all citations independently web-verified. Direct merits authority on section 245MA is, as noted, not yet available; cognate authorities are flagged as such under the candour rule.