s.144C — Reference to the Dispute Resolution Panel
The draft order and objection route that applies to a non-resident and to anyone facing a transfer pricing variation, and the provision whose interaction with limitation has been among the most heavily litigated questions in international tax.
Sub-sections (4A) and (13A) were inserted by the Finance Act 2026 with retrospective effect from 1 April 2009, and sub-sections (4B) and (13B) with retrospective effect from 1 October 2009, confining the limits in sections 153 and 153B to the draft order stage. The question those amendments address produced a split verdict of the Supreme Court in Shelf Drilling Ron Tappmeyer on 8 August 2025 and stands referred to a larger bench.
Income-tax Act, 1961
s.144C
Income-tax Act, 2025
s.275
In force from 1 April 2026, but s.536(2)(c) preserves the 1961 Act for tax years beginning before that date.
In short
Section 144C of the Income-tax Act, 1961 requires the Assessing Officer, before making any variation prejudicial to an eligible assessee, to forward a draft order rather than assess. The assessee has thirty days to accept the variation or to object to the Dispute Resolution Panel, whose directions bind the Assessing Officer. The Panel may confirm, reduce or enhance the variation but cannot set it aside and direct a fresh order. It must issue directions within nine months from the end of the month in which the draft order was forwarded, and the final order follows within one month from the end of the month in which they are received. An eligible assessee under sub-section (15) is a person in whose case the variation arises from an order of the Transfer Pricing Officer under section 92CA(3), or a non-resident not being a company, or a foreign company. The corresponding provision in the Income-tax Act, 2025 is section 275.
What the provision does
Interposes a draft order and an objection stage between the proposed variation and the assessment, and fixes the timetable for each step. It confers no power to set aside and remand, and it does not cure a want of jurisdiction at the reference stage, though an objection taken before the Panel preserves the point.
Threshold questions
- Is the assessee an eligible assessee, that is a person facing a variation arising from an order under section 92CA(3), a non-resident not being a company, or a foreign company
- Was a draft order forwarded at all, or did the Assessing Officer pass a final order directly
- Was the draft order made within the time allowed by section 153 or section 153B, including the twelve-month extension under section 153(4) where a reference was made
- Were the Panel's directions issued within nine months from the end of the month in which the draft order was forwarded
- Was the final order passed within one month from the end of the month in which the directions were received
- Did the Panel purport to set aside the variation and direct a fresh order, which sub-section (8) forbids
In practice
The recurring disputes.
The interaction with sections 153 and 153B
Whether the time taken by the Panel falls inside or outside the limitation period for completing the assessment produced the Bombay High Court decision in Shelf Drilling Ron Tappmeyer, a split verdict of the Supreme Court on 8 August 2025 and a reference to a larger bench that has not been constituted. The Finance Act 2026 has now legislated the Revenue's position retrospectively, and that retrospectivity is itself reported to be under challenge.
Omission of the draft order
Where a variation prejudicial to an eligible assessee is proposed, the draft order is mandatory, and an assessment made without one is not saved as a procedural irregularity. The question recurs where the Assessing Officer treats an order giving effect to appellate directions as falling outside the section.
The limits of the Panel's powers
Sub-section (8) permits the Panel to confirm, reduce or enhance the proposed variation and expressly denies it the power to set the variation aside and direct a fresh order. The Explanation allows enhancement on any matter arising out of the proceedings, whether or not the assessee raised it, which is why an objection can cost more than it recovers.
Whether the section applies again after a remand
Where the Tribunal sets an assessment aside and the Assessing Officer proposes a variation afresh, the draft order requirement applies again, which is why orders in such proceedings are commonly recited as passed under section 143(3) read with sections 144C(13) and 254.