Draft Income Tax Rule 197, 198 – Application for Dispute Resolution before DRC u/s 379; Power to Waive/Reduce Penalty or Grant Prosecution Immunity u/s 379
Extracts of Rules 197 and 198 of the Draft Income-tax Rules, 2026 lay down the procedure for seeking dispute resolution before the Dispute Resolution Committee (DRC) under section 379 and specify conditions for reduction or waiver of penalty and grant of immunity from prosecution. Rule 197 provides that a person opting for dispute resolution in respect of a dispute arising from any variation in a specified order, and fulfilling the prescribed conditions, must file an application in Form No. 119. Such application must be accompanied by a fee of ₹1,000. Rule 198 empowers the DRC, upon receipt of intimation under the e-Dispute Resolution Scheme, 2022 and subject to conditions it may impose with reasons recorded in writing, to grant reduction or waiver of penalty or immunity from prosecution, or both, in relation to the order under resolution. This relief can be granted only if the applicant has paid the tax due on the returned income in full and has cooperated in the proceedings before the Committee. However, immunity cannot be granted where prosecution proceedings were initiated before receipt of the application. Further, any immunity or penalty relief granted shall stand withdrawn if the applicant fails to comply with the stipulated conditions, and the provisions of the Act will apply as if such relief had never been granted.
Extract of Rule No. 197, 198 of Draft Income-tax Rules, 2026
Rule 197
Application for resolution of dispute before the Dispute Resolution Committee under section 379 of the Act.
(1) An application to the Dispute Resolution Committee shall be made in Form No. 119 by the person, who opts for dispute resolution under section 379 of the Act in respect of dispute arising from any variation in the specified order in his case and who fulfils the specified conditions.
(2) Every application in connection with resolution of dispute shall be accompanied by a fee of ₹ 1000.
Rule 198
Power to reduce or waive penalty imposable or grant immunity from prosecution or both under section 379 of the Act.
(1) The Dispute Resolution Committee shall, upon receipt of intimation as per paragraph 4(1)(xix) of the e-Dispute Resolution Scheme, 2022, and subject to such conditions as it may think fit to impose for the reasons to be recorded in writing, grant to the person who made the application for dispute resolution under section 379 of the Act, reduction or waiver of penalty imposable, or immunity from prosecution, or both, in respect of the order which is the subject matter of resolution, if it is satisfied that such person has,—
(i) paid the tax due on the returned income in full; and
(ii) co-operated with the Dispute Resolution Committee in the proceedings before it.
(2) Irrespective of anything contained in sub-rule (1), no immunity shall be granted by the Dispute Resolution Committee in a case where the proceedings for the prosecution for an offence have been initiated before the date of receipt of the application as referred to in paragraph 4(1)(i) of the e-Dispute Resolution Scheme, 2022.
(3) An immunity or reduction or waiver of penalty granted to a person under sub-rule (1) shall stand withdrawn, if such person fails to comply with any of the conditions subject to which the immunity or reduction or waiver of penalty was granted and thereupon the provisions of the Act shall apply as if such immunity or reduction or waiver of penalty had never been granted.
