The DRP is an Alternative Dispute Resolution (ADR) mechanism for resolving disputes related to Transfer Pricing in International Transactions. Appeal can be filed before CIT(A), when an assessee is adversely affected by Orders passed by various Income tax authorities
the taxpayer, being a foreign company or facing TP adjustment (eligible taxpayer), has an option to opt for either CIT (A) route or the DRP mechanism.
If DRP is opted: the assessing officer (AO) has to pass the draft assessment order. Within 30 days of receipt of months from the end of the month in which the draft order is forwarded to the taxpayer. Subsequently, final order is issued by the AO within 1 month.
If CIT (A) is opted: An appeal is to be filed within 30 days of receipt of final assessment order. No time limit is prescribed for disposal of the appeal. However, CIT(A) may dispose of the appeal within 1 year from the end of the financial year in which appeal was filed.
An appeal against the final assessment order (pursuant to DRP directions)/CIT(A)’s order may be filed before the Income Tax Appellate Tribunal (ITAT) within 60 days of the date of communication of the impugned order. ITAT is the final fact finding authority and further appeal before the High Court (HC) and subsequent appeal before the Supreme Court (SC) against HC can only be filed on a question of law.
The Income Tax Act, 1961 (“the Act”) mandates the DRP to pass its directions within 9 months from the end of the month in which AO’s draft order is received. On the other hand, no time limit is laid down in case of CIT(A). However, based on the practical experience an appeal is generally disposed of within 2-4 years
