November 13, 2026
Section 144C of the Income Tax Act leaves thirty days to object
I advise Indian and multinational groups on transfer pricing and cross-border structuring, and I write these notes for the tax head who has just been handed an order with an adjustment annexed to it.
Section 144C gives an eligible assessee thirty days from the draft order to choose a route. He either accepts the variation, and the draft stands as the assessment, or he files objections, which go to the Dispute Resolution Panel, three Commissioners sitting as a collegium. The window opens on the day the draft reaches him, so what the covering letter dates matters less than what the acknowledgment shows.
The order reads like a demand and is not one. Nothing is payable while the draft stands, and the draft on its own is not appealable. It fixes the variation the department will defend and the record on which that defence will be tested.
The sequence runs from the draft to the panel's directions to the final order, and the documents I ask for in the first week are set out at the end of this note.
Key takeaways
The draft is compulsory where the department proposes a variation against an eligible assessee, and an assessment finished without one is a defect the department cannot cure later.
The thirty days start when the draft arrives. If nothing is filed, the officer finishes on the draft.
The panel can confirm a variation, cut it or increase it, and the power to increase reaches a matter nobody raised.
Directions must issue nine months after the draft goes out, counted from that month's close; the final order falls due in the month after the directions arrive.
From tax year 2026-27 the provision sits at section 275 in the 2025 Act.
What section 144C does, and when a draft order must come
Where the officer wants to change the income or loss the assessee returned, to that assessee's disadvantage, he must send a draft of the order first, before the assessment is completed (Income Tax Department). The assessee then answers inside thirty days. It is a compulsory step and not a courtesy: the Gujarat High Court in C-Sam (India) refused to let the department treat the procedure under the section as skippable (Bombay Chartered Accountant Journal).
Parliament added the procedure in 2009 through the Finance (No. 2) Act (Tax Garden), for transfer pricing and non-resident cases. The objection goes to a bench of Commissioners instead of the officer who made the adjustment. Where the assessment is finished without a draft, the assessee is left arguing a defect the department will call procedural, and I have set out that argument in the IBS Software ruling.
Who is an eligible assessee under section 144C
The definition has two limbs, and only the first is about transfer pricing. An eligible assessee is someone whose variation follows from the Transfer Pricing Officer's determination under section 92CA(3), or a foreign company (Income Tax Department). Section 275 of the 2025 Act is reported to take the second limb to a non-resident that is not a company as well, so test the limb against the year in hand (Sunil Maloo).
The second limb matters more than its drafting suggests. A foreign company facing a disallowance of interest, or a characterisation of a receipt under a treaty, still gets a draft and the panel route even where no transfer pricing adjustment exists at all. A domestic company on the same facts gets neither, and its first forum is the Commissioner (Appeals).
One exclusion sits in sub-section (14A) of section 144C: an assessment passed with the sanction of the Commissioner under sub-section (12) of section 144BA is outside the section (Income Tax Department). A case outside the two limbs takes the ordinary assessment and appeal, with no draft and no panel.
The two options, and the thirty days that close them
The thirty days end in one of two filings. Either a written acceptance goes to the Assessing Officer, or objections are filed with the Dispute Resolution Panel, with a copy to that officer, and each variation in the draft and its annexure is answered on its own.
Pin down the date of receipt. The clock starts with delivery, not with the date typed on the order, so keep the portal trail, the email header or the postal proof. The date you accept in writing is the date you will have to establish later.
Read the draft against its annexure. The variation is stated in the draft, and the officer's order travels with it. An adjustment that sits in the annexure but not in the draft is a point to take at the threshold.
File the acceptance, if that is the call. Send it to the Assessing Officer. The draft then stands as the assessment, and the order falls due within the month that follows the acceptance (Income Tax Department).
Or object, on the same thirty days. The objections go to the panel and, in parallel, to the officer. Both statutes count the thirty days from the day the assessee receives the draft: sub-section (2) of section 275 in the 2025 Act (TaxcodeIN), and sub-section (2) of section 144C in the 1961 Act before it.
File, or take the default. With nothing filed in time, the officer finishes the assessment on the draft, and the order falls due within the following month (Income Tax Department). A faceless setting changes where the papers go, not what has to be filed.
What the Dispute Resolution Panel can direct, and what it cannot
The panel can confirm a variation, cut it or increase it, and the section forbids it from setting a variation aside or from sending the file back for a fresh assessment (Income Tax Department). Its power to increase reaches further than most objections assume: the Explanation to sub-section (8) of section 144C extends that power to any matter arising out of the assessment proceedings, even if the assessee never raised it (Income Tax Department). Every direction binds the officer who receives it (TaxcodeIN).
So an objection is not a one-way bet. A panel that reads the comparables differently can leave the company worse off than the draft did, and an appeal opens only once the final order exists. The safeguard is procedural: a direction that goes against the assessee comes after a hearing (Income Tax Department), which is why the argument belongs in the objections themselves.
The panel decides on the material that sub-section (6) of section 144C lists, which covers the objections, the evidence the assessee filed, the officer's report and the records behind the draft. Where remand directions have been ignored once already, that history belongs in the objections, and the Schneider Electric remand ruling sets out what the tribunal did with it.
The clock: nine months, one month, and the Act it sits under
Once objections are filed, directions cannot issue beyond nine months, counted from the last day of the month when the draft went to the assessee (TaxcodeIN). The officer then finishes in line with those directions within the month that follows their receipt, and sub-section (13) of section 144C allows no further hearing at that stage (Income Tax Department). Where the draft is accepted or the window lapses, the order is due within the month after that (Income Tax Department).
The Finance Act 2026 answered an argument that had run for years about which limitation provision governs the stage after the draft. It confined sections 153 and 153B to the stage up to the draft, and left the closing stage to this machinery; the change operates retrospectively, from 1 April 2009 for section 153 and 1 October 2009 for section 153B (TaxGuru). Those provisions are reported to be under challenge, and the larger-bench reference that followed a split verdict had not been constituted when I closed this note, so I would not treat the point as settled.
The provision moves for a tax year that opens on or after 1 April 2026. Section 275 of the Income-tax Act, 2025 carries it, and under clause (c) of sub-section (2) of section 536 the 1961 Act continues to govern a year that began before that date (Sunil Maloo). The thirty days and the nine months reappear in the new numbering, and an earlier year is still argued under section 144C. Where a limitation point turns on the date of an order and not on the merits, I send the Karnataka High Court ruling alongside this note.
What to hand an adviser in the first week
I ask for the same documents on day one of every case. Before the objections can be drafted, two questions have to be settled: what the record already holds, and whether anything can still be added to it. Sub-section (13) leaves the assessee no further hearing once the directions arrive, so what the company puts on file now is what the panel, and then the tribunal, will read.
Document | What it has to prove at the panel stage |
|---|---|
The study that fixes the tested party, with its functions, assets and risks analysis | That the tested party and the characterisation still describe the Indian entity. Where the officer has recast a transaction, this is the first paper the panel reads. |
The comparables set, the search process and every rejection | That each comparable went out on a stated filter and not on its result. The panel can increase as well as cut, so a comparables argument run carelessly can be turned around. |
The show-cause, the replies, and the evidence filed with each | That every point in the adjustment was answered, and with which paper. A point first made in the objections has nothing behind it on the record. |
The draft, with every annexure | That the variation is stated precisely, and that no adjustment sits in the annexure outside it. |
The remand and appellate history on the same issues | That a higher forum has already answered the point. That is the shortest route to a reduction at panel stage. |
Whatever went to the officer before the draft went out travels with the file, first to the panel and then to the tribunal. I set out that earlier stage in why every submission in an assessment now shapes the litigation.
Where this leaves you, and what to do with the order
Twenty days is enough to decide a forum and not enough to build a record from scratch. Diarise the thirtieth day from the date of receipt, work back from it, and settle the forum with your adviser by day twenty, so the objections and their annexures can be drafted and filed, with the officer's copy, at the same time.
If the variation turns on the method, the panel is the cheaper forum, because it sits before the appeal and its directions bind the officer. If it turns on a document the company has never produced, part of the thirty days is better spent assembling that document, and acceptance is a real option.
Watch the limitation point as well. The challenge to the 2026 clarification can change the answer for orders already in the pipeline, and a tax year opening on or after 1 April 2026 moves the argument to section 275 and its own transition. If the order is in front of you now, contact us, and we will take it from the draft through the panel's directions; for the stage after the final order, the work sits under transfer pricing litigation and dispute support.
Research for this note closed on 13 November 2026, and it rests on the whole of section 144C, on the 2025 Act's section 275, on clause (c) of sub-section (2) of section 536, and on the Finance Act 2026.
I advise Indian and multinational groups on transfer pricing and cross-border structuring, and I write these notes for the tax head who has just been handed an order with an adjustment annexed to it.
Section 144C gives an eligible assessee thirty days from the draft order to choose a route. He either accepts the variation, and the draft stands as the assessment, or he files objections, which go to the Dispute Resolution Panel, three Commissioners sitting as a collegium. The window opens on the day the draft reaches him, so what the covering letter dates matters less than what the acknowledgment shows.
The order reads like a demand and is not one. Nothing is payable while the draft stands, and the draft on its own is not appealable. It fixes the variation the department will defend and the record on which that defence will be tested.
The sequence runs from the draft to the panel's directions to the final order, and the documents I ask for in the first week are set out at the end of this note.
Key takeaways
The draft is compulsory where the department proposes a variation against an eligible assessee, and an assessment finished without one is a defect the department cannot cure later.
The thirty days start when the draft arrives. If nothing is filed, the officer finishes on the draft.
The panel can confirm a variation, cut it or increase it, and the power to increase reaches a matter nobody raised.
Directions must issue nine months after the draft goes out, counted from that month's close; the final order falls due in the month after the directions arrive.
From tax year 2026-27 the provision sits at section 275 in the 2025 Act.
What section 144C does, and when a draft order must come
Where the officer wants to change the income or loss the assessee returned, to that assessee's disadvantage, he must send a draft of the order first, before the assessment is completed (Income Tax Department). The assessee then answers inside thirty days. It is a compulsory step and not a courtesy: the Gujarat High Court in C-Sam (India) refused to let the department treat the procedure under the section as skippable (Bombay Chartered Accountant Journal).
Parliament added the procedure in 2009 through the Finance (No. 2) Act (Tax Garden), for transfer pricing and non-resident cases. The objection goes to a bench of Commissioners instead of the officer who made the adjustment. Where the assessment is finished without a draft, the assessee is left arguing a defect the department will call procedural, and I have set out that argument in the IBS Software ruling.
Who is an eligible assessee under section 144C
The definition has two limbs, and only the first is about transfer pricing. An eligible assessee is someone whose variation follows from the Transfer Pricing Officer's determination under section 92CA(3), or a foreign company (Income Tax Department). Section 275 of the 2025 Act is reported to take the second limb to a non-resident that is not a company as well, so test the limb against the year in hand (Sunil Maloo).
The second limb matters more than its drafting suggests. A foreign company facing a disallowance of interest, or a characterisation of a receipt under a treaty, still gets a draft and the panel route even where no transfer pricing adjustment exists at all. A domestic company on the same facts gets neither, and its first forum is the Commissioner (Appeals).
One exclusion sits in sub-section (14A) of section 144C: an assessment passed with the sanction of the Commissioner under sub-section (12) of section 144BA is outside the section (Income Tax Department). A case outside the two limbs takes the ordinary assessment and appeal, with no draft and no panel.
The two options, and the thirty days that close them
The thirty days end in one of two filings. Either a written acceptance goes to the Assessing Officer, or objections are filed with the Dispute Resolution Panel, with a copy to that officer, and each variation in the draft and its annexure is answered on its own.
Pin down the date of receipt. The clock starts with delivery, not with the date typed on the order, so keep the portal trail, the email header or the postal proof. The date you accept in writing is the date you will have to establish later.
Read the draft against its annexure. The variation is stated in the draft, and the officer's order travels with it. An adjustment that sits in the annexure but not in the draft is a point to take at the threshold.
File the acceptance, if that is the call. Send it to the Assessing Officer. The draft then stands as the assessment, and the order falls due within the month that follows the acceptance (Income Tax Department).
Or object, on the same thirty days. The objections go to the panel and, in parallel, to the officer. Both statutes count the thirty days from the day the assessee receives the draft: sub-section (2) of section 275 in the 2025 Act (TaxcodeIN), and sub-section (2) of section 144C in the 1961 Act before it.
File, or take the default. With nothing filed in time, the officer finishes the assessment on the draft, and the order falls due within the following month (Income Tax Department). A faceless setting changes where the papers go, not what has to be filed.
What the Dispute Resolution Panel can direct, and what it cannot
The panel can confirm a variation, cut it or increase it, and the section forbids it from setting a variation aside or from sending the file back for a fresh assessment (Income Tax Department). Its power to increase reaches further than most objections assume: the Explanation to sub-section (8) of section 144C extends that power to any matter arising out of the assessment proceedings, even if the assessee never raised it (Income Tax Department). Every direction binds the officer who receives it (TaxcodeIN).
So an objection is not a one-way bet. A panel that reads the comparables differently can leave the company worse off than the draft did, and an appeal opens only once the final order exists. The safeguard is procedural: a direction that goes against the assessee comes after a hearing (Income Tax Department), which is why the argument belongs in the objections themselves.
The panel decides on the material that sub-section (6) of section 144C lists, which covers the objections, the evidence the assessee filed, the officer's report and the records behind the draft. Where remand directions have been ignored once already, that history belongs in the objections, and the Schneider Electric remand ruling sets out what the tribunal did with it.
The clock: nine months, one month, and the Act it sits under
Once objections are filed, directions cannot issue beyond nine months, counted from the last day of the month when the draft went to the assessee (TaxcodeIN). The officer then finishes in line with those directions within the month that follows their receipt, and sub-section (13) of section 144C allows no further hearing at that stage (Income Tax Department). Where the draft is accepted or the window lapses, the order is due within the month after that (Income Tax Department).
The Finance Act 2026 answered an argument that had run for years about which limitation provision governs the stage after the draft. It confined sections 153 and 153B to the stage up to the draft, and left the closing stage to this machinery; the change operates retrospectively, from 1 April 2009 for section 153 and 1 October 2009 for section 153B (TaxGuru). Those provisions are reported to be under challenge, and the larger-bench reference that followed a split verdict had not been constituted when I closed this note, so I would not treat the point as settled.
The provision moves for a tax year that opens on or after 1 April 2026. Section 275 of the Income-tax Act, 2025 carries it, and under clause (c) of sub-section (2) of section 536 the 1961 Act continues to govern a year that began before that date (Sunil Maloo). The thirty days and the nine months reappear in the new numbering, and an earlier year is still argued under section 144C. Where a limitation point turns on the date of an order and not on the merits, I send the Karnataka High Court ruling alongside this note.
What to hand an adviser in the first week
I ask for the same documents on day one of every case. Before the objections can be drafted, two questions have to be settled: what the record already holds, and whether anything can still be added to it. Sub-section (13) leaves the assessee no further hearing once the directions arrive, so what the company puts on file now is what the panel, and then the tribunal, will read.
Document | What it has to prove at the panel stage |
|---|---|
The study that fixes the tested party, with its functions, assets and risks analysis | That the tested party and the characterisation still describe the Indian entity. Where the officer has recast a transaction, this is the first paper the panel reads. |
The comparables set, the search process and every rejection | That each comparable went out on a stated filter and not on its result. The panel can increase as well as cut, so a comparables argument run carelessly can be turned around. |
The show-cause, the replies, and the evidence filed with each | That every point in the adjustment was answered, and with which paper. A point first made in the objections has nothing behind it on the record. |
The draft, with every annexure | That the variation is stated precisely, and that no adjustment sits in the annexure outside it. |
The remand and appellate history on the same issues | That a higher forum has already answered the point. That is the shortest route to a reduction at panel stage. |
Whatever went to the officer before the draft went out travels with the file, first to the panel and then to the tribunal. I set out that earlier stage in why every submission in an assessment now shapes the litigation.
Where this leaves you, and what to do with the order
Twenty days is enough to decide a forum and not enough to build a record from scratch. Diarise the thirtieth day from the date of receipt, work back from it, and settle the forum with your adviser by day twenty, so the objections and their annexures can be drafted and filed, with the officer's copy, at the same time.
If the variation turns on the method, the panel is the cheaper forum, because it sits before the appeal and its directions bind the officer. If it turns on a document the company has never produced, part of the thirty days is better spent assembling that document, and acceptance is a real option.
Watch the limitation point as well. The challenge to the 2026 clarification can change the answer for orders already in the pipeline, and a tax year opening on or after 1 April 2026 moves the argument to section 275 and its own transition. If the order is in front of you now, contact us, and we will take it from the draft through the panel's directions; for the stage after the final order, the work sits under transfer pricing litigation and dispute support.
Research for this note closed on 13 November 2026, and it rests on the whole of section 144C, on the 2025 Act's section 275, on clause (c) of sub-section (2) of section 536, and on the Finance Act 2026.
Financial Insights
Expert tips and emerging industry trends
Get started today
Let’s talk
If you are evaluating cross-border expansion, restructuring, or strengthening compliance and audit readiness, we can help you plan and execute with clarity.
Get started today
Let’s talk
If you are evaluating cross-border expansion, restructuring, or strengthening compliance and audit readiness, we can help you plan and execute with clarity.
Get started today
Let’s talk
If you are evaluating cross-border expansion, restructuring, or strengthening compliance and audit readiness, we can help you plan and execute with clarity.