The dispute resolution mechanisms is a directive that lays down rules for swiftly and efficiently resolving disputes related to the interpretation and application of tax treaties for both businesses and citizens.
There are various aids being provided to the taxpayers by the government to resolve their any kind of dispute, and in this article we will try to understand the concept of Dispute Resolution Mechanism. These mechanisms ensure that disputes between taxpayers and tax authorities are addressed fairly and efficiently. Under mentioned are the key dispute resolution mechanisms in India :-

• Administrative Mechanism:
  • At the very first level, the tax authorities try to resolve any kind of disputes with the help of administrative mechanisms.
     
• Taxpayer Assistance and Helpdesks:
  • The income tax department and other tax authorities provide various websites, helplines, and dedicated grievance redressal cells where a taxpayer can seek aid about tax-related queries, errors, or misinterpretations.
     
• Rectification of Mistakes:
  • As per Section 154 of the Income Tax Act, 1961, a taxpayer can apply to the assessing officer for rectification of mistakes that are apparent from the record in their tax returns or assessments.
     
• Appeals Process:
  • If a taxpayer does not agree with the tax assessment, he/she can appeal the decision through different levels within the tax authority.
  • 1st Appeal: If a taxpayer feels that the assessment order is not correct, then he/she can file an appeal with the Commissioner of Income Tax (Appeals) and request the authority to review the case and either confirm, modify, or cancel the assessment order.
  • 2nd Appeal: If the taxpayer is not satisfied even with the decision of the CIT(A), he/she can file a second appeal to the Income Tax Appellate Tribunal (ITAT). As ITAT is an independent body, it works on appeals related to tax matters and holds the power to adjudicate cases questioning the law and fact.
     
• Dispute Resolution Panel (DRP):
  • It is a mechanism designed to resolve matters related to transfer pricing and international tax disputes, primarily for taxpayers with foreign business transactions.
  • A taxpayer can file an objection with the DRP, which is comprised of senior-level officers of the Income Tax Department. If the taxpayer disagrees with the DRP's decision, he/she can appeal to the ITAT.
     
• Advance Ruling Mechanism:
  • The Authority for Advance Ruling (AAR) is a mechanism for taxpayers to seek clarity and get a binding decision on certain tax issues before conducting a transaction.
  • Rulings: AAR issues rulings on questions related to the tax liability of taxpayers regarding proposed transactions. The ruling is binding on the applicant and the tax authorities.
  • Applicability: This mechanism helps non-resident taxpayers understand Indian tax implications before starting any business.
• Settlement Commission:
  • The Income Tax Settlement Commission (ITSC) was introduced to allow taxpayers to resolve tax disputes by making a full disclosure of income and paying taxes along with interest. In recent years, ITSC has been replaced by the Faceless Taxation Scheme.
  • Procedure: A taxpayer can directly approach the Settlement Commission to disclose unreported income and seek a settlement of their tax liability. The commission can abate penalties and provide a fair resolution.
  • Scope: It is mainly used by taxpayers wishing to settle large or high-value tax disputes, especially those involving large-scale tax evasion.
     
• Mutual Agreement Procedure (MAP):
  • Mutual Agreement Procedure is a tax dispute resolution mechanism that facilitates the resolution of disputes related to international taxation.
  • Procedure: A taxpayer can initiate MAP proceedings if they are dissatisfied with the tax treatment of their income in India. This procedure allows disputes to be resolved through discussions between the tax authorities of the respective countries.
     
• High Court Appeals:
  • A taxpayer can approach the High Court if he/she is not satisfied with the decision of the ITAT.
  • Scope: The High Court reviews ITAT's decision and evaluates it based on the law.

Conclusion:
In the recent past years, India has made a lot of changes and advancements in the field of dispute resolution mechanisms related to taxation, and as the society needs, these changes have to be made compulsory. So, with all these ongoing reforms and digitalization in the field of taxation, India is moving forward towards more attainable dispute resolution pr
ocess for the taxpayers of India.