Section 144C — Reference to Dispute Resolution Panel (DRP)
Case Laws & Commentary · Income-tax Act, 1961 (as amended by the Finance Act, 2026) · bharattax.co Treatise
Status: Live, central for transfer-pricing and foreign-company assessments. Inserted by the Finance (No. 2) Act, 2009. Requires the Assessing Officer, in the case of an 'eligible assessee' (any person in whose case a transfer-pricing variation is proposed, and any foreign company/non-resident), to first pass a draft assessment order; the assessee may accept it or file objections before the Dispute Resolution Panel, whose directions (issued within nine months) are binding on the AO, who must then pass the final order.
FA 2026: The Finance Act, 2026 (with the FA 2026 reassessment-timeline refinement) does not alter the DRP architecture; the FA-2025 base text reflects the cut-off date for DRP directions inserted by earlier Finance Acts.
Limitation interplay: Whether the outer time-limit in section 153 governs the final order in a 144C case is the subject of a recent Supreme Court split verdict (Shelf Drilling Ron Tappmeyer, 2025), pending authoritative resolution.
A. SECTION COMMENTARY
Section 144C interposes an additional, pre-assessment dispute-resolution layer for eligible assessees. The scheme is mandatory and sequential: (i) the AO must pass a draft assessment order proposing the variation; (ii) within 30 days the eligible assessee either accepts it (whereupon the AO passes the final order) or files objections with the DRP and the AO; (iii) the DRP, a collegium of three Principal Commissioners/Commissioners, issues binding directions after such inquiry as it thinks fit, within nine months of the end of the month in which the draft order is forwarded; (iv) the AO passes the final order in conformity within one month from the end of the month in which the directions are received. The DRP may confirm, reduce or enhance the variation, but cannot set aside or remand.
The dominant litigation theme is the mandatory and jurisdictional character of the draft order: an AO who, in the case of an eligible assessee, passes a final order without first passing a draft order under section 144C(1) acts without jurisdiction, and the defect is not a curable irregularity under section 292B. The second, currently unsettled, theme is the interaction of the section 144C timelines with the outer limitation in section 153 — whether a final order that complies with the 144C(13) one-month limit but breaches the section 153 outer limit is time-barred. A two-Judge Bench of the Supreme Court delivered a split verdict on the point in 2025, and the question awaits authoritative resolution by a larger Bench.
B. STATUTORY POSITION (verbatim text)
Reproduced from the local Act (base text to the Finance Act, 2025), including the definition of 'eligible assessee', the DRP's powers and the time-limits.
144C. (1) The Assessing Officer shall, notwithstanding anything to the contrary contained in this Act, in the first instance, forward a draft of the proposed order of assessment (hereafter in this section referred to as the draft order) to the eligible assessee if he proposes to make, on or after the 1st day of October, 2009, any variation which is prejudicial to the interest of such assessee.
(2) On receipt of the draft order, the eligible assessee shall, within thirty days of the receipt by him of the draft order,—
(a) file his acceptance of the variations to the Assessing Officer; or
(b) file his objections, if any, to such variation with,—
(i) the Dispute Resolution Panel; and
(ii) the Assessing Officer.
(3) The Assessing Officer shall complete the assessment on the basis of the draft order, if—
(a) the assessee intimates to the Assessing Officer the acceptance of the variation; or
(b) no objections are received within the period specified in sub-section (2).
(4) The Assessing Officer shall, notwithstanding anything contained in section 153 or section 153B, pass the assessment order under sub-section (3) within one month from the end of the month in which,—
(a) the acceptance is received; or
(b) the period of filing of objections under sub-section (2) expires.
(5) The Dispute Resolution Panel shall, in a case where any objection is received under sub-section (2), issue such directions, as it thinks fit, for the guidance of the Assessing Officer to enable him to complete the assessment.
(6) The Dispute Resolution Panel shall issue the directions referred to in sub-section (5), after considering the following, namely:—
(a) draft order;
(b) objections filed by the assessee;
(c) evidence furnished by the assessee;
(d) report, if any, of the Assessing Officer, Valuation Officer or Transfer Pricing Officer or any other authority;
(e) records relating to the draft order;
(f) evidence collected by, or caused to be collected by, it; and
(g) result of any enquiry made by, or caused to be made by, it.
(7) The Dispute Resolution Panel may, before issuing any directions referred to in sub-section (5),—
(a) make such further enquiry, as it thinks fit; or
(b) cause any further enquiry to be made by any income-tax authority and report the result of the same to it.
(8) The Dispute Resolution Panel may confirm, reduce or enhance the variations proposed in the draft order so, however, that it shall not set aside any proposed variation or issue any direction under sub-section (5) for further enquiry and passing of the assessment order.
Explanation.—For the removal of doubts, it is hereby declared that the power of the Dispute Resolution Panel to enhance the variation shall include and shall be deemed always to have included the power to consider any matter arising out of the assessment proceedings relating to the draft order, notwithstanding that such matter was raised or not by the eligible assessee.
(9) If the members of the Dispute Resolution Panel differ in opinion on any point, the point shall be decided according to the opinion of the majority of the members.
(10) Every direction issued by the Dispute Resolution Panel shall be binding on the Assessing Officer.
(11) No direction under sub-section (5) shall be issued unless an opportunity of being heard is given to the assessee and the Assessing Officer on such directions which are prejudicial to the interest of the assessee or the interest of the revenue, respectively.
(12) No direction under sub-section (5) shall be issued after nine months from the end of the month in which the draft order is forwarded to the eligible assessee.
(13) Upon receipt of the directions issued under sub-section (5), the Assessing Officer shall, in conformity with the directions, complete, notwithstanding anything to the contrary contained in section 153 or section 153B, the assessment without providing any further opportunity of being heard to the assessee, within one month from the end of the month in which such direction is received.
(14) The Board may make rules for the purposes of the efficient functioning of the Dispute Resolution Panel and expeditious disposal of the objections filed under sub-section (2) by the eligible assessee.
(14A) The provisions of this section shall not apply to any assessment or reassessment order passed by the Assessing Officer with the prior approval of the Principal Commissioner or Commissioner as provided in sub-section (12) of section 144BA.
(14B) The Central Government may make a scheme, by notification in the Official Gazette, for the purposes of issuance of directions by the dispute resolution panel, so as to impart greater efficiency, transparency and accountability by—
(a) eliminating the interface between the dispute resolution panel and the eligible assessee or any other person to the extent technologically feasible;
(b) optimising utilisation of the resources through economies of scale and functional specialisation;
(c) introducing a mechanism with dynamic jurisdiction for issuance of directions by dispute resolution panel.
(14C) The Central Government may, for the purpose of giving effect to the scheme made under sub-section
(14B), by notification in the Official Gazette, direct that any of the provisions of this Act shall not apply or shall apply with such exceptions, modifications and adaptations as may be specified in the notification. ***
(14D) Every notification issued under sub-section (14B) and sub-section (14C) shall, as soon as may be after the notification is issued, be laid before each House of Parliament.
(15) For the purposes of this section,—
(a) "Dispute Resolution Panel" means a collegium comprising of three Principal Commissioners or Commissioners of Income-tax constituted by the Board for this purpose;
(b) "eligible assessee" means,—
(i) any person in whose case the variation referred to in sub-section (1) arises as a consequence of the order of the Transfer Pricing Officer passed under sub-section (3) of section 92CA; and
(ii) any non-resident not being a company, or any foreign company:
Provided that such eligible assessee shall not include person referred to in sub-section (1) of section 158BA or other person referred to in section 158BD.
(16) The provisions of this section shall not apply to any proceedings under Chapter XIV-B. "Provided that no direction shall be issued after the 31st day of March, 2025."
C. AUTHORITIES
The authorities settle that the draft order is mandatory and jurisdictional, and chart the unresolved 144C/153 limitation question.
1. The draft order is mandatory and jurisdictional
Zuari Cement Ltd. v. ACIT (Andhra Pradesh High Court) — SLP dismissed by the Supreme Court (2013)
Court: Andhra Pradesh High Court; the Revenue's Special Leave Petition was dismissed by the Supreme Court (Petition for Special Leave to Appeal (Civil) — dismissed 27 September 2013).
Held: Where, in the case of an eligible assessee, the Assessing Officer passes a final assessment order without first passing a draft assessment order as required by section 144C(1), the final order is without jurisdiction and is liable to be quashed; the omission is not a curable defect.
Significance: One of the earliest and most-cited authorities establishing the mandatory, jurisdictional character of the draft order; the dismissal of the SLP gave it national currency. Followed across High Courts.
Failure to pass / improper draft order — settled High Court position
Position: Consistent High Court authority (Delhi, Bombay, Madras, Andhra Pradesh and others) holds: (i) a final order passed without a draft order for an eligible assessee is a nullity for want of jurisdiction; (ii) the requirement is not cured by section 292B; and (iii) a draft order is required even on remand if a fresh variation is proposed. Conversely, the Bombay High Court has held that where the TPO/AO proposes no variation, a draft order under 144C(1) is not warranted.
Candour note: This is a settled line of High Court authority; representative decisions are summarised rather than exhaustively cited. The core proposition (mandatory draft order) is not in doubt.
ACIT v. Shelf Drilling Ron Tappmeyer Ltd. (2025) — Supreme Court split verdict
Court: Supreme Court of India (Bench of B.V. Nagarathna and S.C. Sharma JJ.); the Bench delivered a split verdict in 2025.
Issue: Whether the outer time-limit for completion of assessment under section 153 applies to, and binds, the final assessment order to be passed under section 144C(13) after DRP directions — i.e. whether the 144C timelines operate within or independently of section 153.
Held: The two Judges differed. One view held that the DRP mechanism under section 144C operates within the limitation framework of section 153, so that a final order beyond the section 153 outer limit is time-barred (affirming the Bombay High Court's approach that section 144C does not grant an open-ended extension). The other view held the 144C timelines to be a self-contained, special code operating notwithstanding section 153. In view of the split, the matter stands referred for authoritative resolution.
Significance: The leading current authority on the 144C/153 limitation question; until resolved by a larger Bench, the issue is open, and the Bombay High Court line (final order must also respect section 153) is the safer working assumption. Practitioners should track the reference.
DRP directions binding; no power to remand — principle
Position: The DRP's directions under section 144C(5)/(8) are binding on the AO (section 144C(10)); the Panel may confirm, reduce or enhance the variation but the statute (Explanation to 144C(8)) does not empower it to set aside the proposed variation and remand. The AO must pass the final order in conformity within the time in section 144C(13).
Candour note: Supported by a consistent body of Tribunal and High Court authority on the contours of the DRP's powers; cited as the working rule.
3. Draft order is mandatory — the Bombay line
Vodafone India Services (P) Ltd. v. Union of India (2014) 361 ITR 531 (Bombay)
Court: Bombay High Court.
Held: In the case of an eligible assessee, the Assessing Officer is bound first to pass a draft assessment order under section 144C(1); a final order passed without the draft order is without jurisdiction. The Court emphasised the mandatory, sequential character of the section 144C procedure.
Significance: A leading Bombay authority (alongside the Andhra Pradesh High Court in Zuari Cement) that the draft order is a jurisdictional pre-requisite; the defect is not curable under section 292B.
DRP cannot set aside / remand — Explanation to section 144C(8)
Position: The Dispute Resolution Panel may confirm, reduce or enhance the proposed variation, and its directions bind the Assessing Officer (section 144C(10)); but the Explanation to section 144C(8) does not empower the Panel to set aside the proposed variation and remit the matter for fresh consideration. The AO must pass the final order in conformity within the time in section 144C(13).
Candour note: Supported by a consistent body of Tribunal/High Court authority on the DRP's powers; cited as the working rule.
4. The draft order is mandatory — the wider High Court consensus
ESPN Star Sports Mauritius S.N.C. et Compagnie v. Union of India (2016) 388 ITR 383 (Delhi)
Court: Delhi High Court.
Held: Following Zuari Cement (AP), Vijay Television (Madras) and International Air Transport Association (Bombay), the Court held that the failure of the Assessing Officer to adhere to the mandatory requirement of section 144C(1) and first pass a draft assessment order invalidates the final assessment order and the consequent demand notices and penalty proceedings; it is a jurisdictional defect, not a curable irregularity.
Significance: Confirms the all-India High Court consensus on the mandatory, jurisdictional character of the draft order for an eligible assessee.
International Air Transport Association v. Dy. CIT (2016) 241 Taxman 249 (Bombay)
Held: A final assessment order passed in the case of an eligible assessee without first passing a draft assessment order under section 144C(1) is without jurisdiction and void; the requirement is mandatory and the omission is not saved by section 292B.
Significance: The Bombay High Court's articulation of the mandatory draft-order rule; part of the consistent line applied in ESPN Star Sports.
Vijay Television (P) Ltd. v. DRP (2014) 369 ITR 113 (Madras)
Held: Where the Assessing Officer, in the case of an eligible assessee, straightaway passed a final assessment order (with demand) without first passing a draft order under section 144C(1), the order was without jurisdiction; a subsequent corrigendum could not cure the fundamental defect.
Significance: An early and much-cited authority that the draft-order omission is jurisdictional and incurable; relied on across High Courts. (Confirm the precise reported citation.)
5. Draft order must precede, and cannot follow, a completed assessment
Olympus Medical Systems India (P) Ltd. v. ACIT (ITAT, Delhi)
Held: The section 144C scheme requires the draft assessment order to precede the final order; the Assessing Officer is not empowered to first complete the assessment under section 143(3) and then pass a 'draft' order under section 144C(1) (or to withdraw/modify/substitute the completed order). A draft order purporting to follow a concluded section 143(3) assessment is without authority.
Significance: Illustrates the sequential, mandatory nature of the section 144C procedure from the Tribunal's perspective; the draft order is a genuine pre-decisional step, not a post-hoc formality. (Confirm the exact ITA No./date before reliance.)
Compiled for the bharattax.co Treatise on the Income-tax Act, 1961 (as amended by the Finance Act, 2026). Statutory text reproduced from the local Act (base text amended up to the Finance Act, 2025), with the publisher footnote apparatus and amendment-marker brackets removed; Finance Act, 2026 changes are flagged in the commentary. Citations are stated as reported; Tribunal / AAR / High Court orders are flagged. Where a section has not been judicially construed, that is stated candidly and the nearest governing authority is given. This material is for professional reference and is not legal advice.
CHAPTER XIV — PROCEDURE FOR ASSESSMENT
Section 144C — Reference to Dispute Resolution Panel (DRP)
Case Laws & Commentary · Income-tax Act, 1961 (as amended by the Finance Act, 2026) · bharattax.co Treatise
Status: Live, central for transfer-pricing and foreign-company assessments. Inserted by the Finance (No. 2) Act, 2009. Requires the Assessing Officer, in the case of an 'eligible assessee' (any person in whose case a transfer-pricing variation is proposed, and any foreign company/non-resident), to first pass a draft assessment order; the assessee may accept it or file objections before the Dispute Resolution Panel, whose directions (issued within nine months) are binding on the AO, who must then pass the final order.
FA 2026: The Finance Act, 2026 (with the FA 2026 reassessment-timeline refinement) does not alter the DRP architecture; the FA-2025 base text reflects the cut-off date for DRP directions inserted by earlier Finance Acts.
Limitation interplay: Whether the outer time-limit in section 153 governs the final order in a 144C case is the subject of a recent Supreme Court split verdict (Shelf Drilling Ron Tappmeyer, 2025), pending authoritative resolution.
A. SECTION COMMENTARY
Section 144C interposes an additional, pre-assessment dispute-resolution layer for eligible assessees. The scheme is mandatory and sequential: (i) the AO must pass a draft assessment order proposing the variation; (ii) within 30 days the eligible assessee either accepts it (whereupon the AO passes the final order) or files objections with the DRP and the AO; (iii) the DRP, a collegium of three Principal Commissioners/Commissioners, issues binding directions after such inquiry as it thinks fit, within nine months of the end of the month in which the draft order is forwarded; (iv) the AO passes the final order in conformity within one month from the end of the month in which the directions are received. The DRP may confirm, reduce or enhance the variation, but cannot set aside or remand.
The dominant litigation theme is the mandatory and jurisdictional character of the draft order: an AO who, in the case of an eligible assessee, passes a final order without first passing a draft order under section 144C(1) acts without jurisdiction, and the defect is not a curable irregularity under section 292B. The second, currently unsettled, theme is the interaction of the section 144C timelines with the outer limitation in section 153 — whether a final order that complies with the 144C(13) one-month limit but breaches the section 153 outer limit is time-barred. A two-Judge Bench of the Supreme Court delivered a split verdict on the point in 2025, and the question awaits authoritative resolution by a larger Bench.
B. STATUTORY POSITION (verbatim text)
Reproduced from the local Act (base text to the Finance Act, 2025), including the definition of 'eligible assessee', the DRP's powers and the time-limits.
144C. (1) The Assessing Officer shall, notwithstanding anything to the contrary contained in this Act, in the first instance, forward a draft of the proposed order of assessment (hereafter in this section referred to as the draft order) to the eligible assessee if he proposes to make, on or after the 1st day of October, 2009, any variation which is prejudicial to the interest of such assessee.
(2) On receipt of the draft order, the eligible assessee shall, within thirty days of the receipt by him of the draft order,—
(a) file his acceptance of the variations to the Assessing Officer; or
(b) file his objections, if any, to such variation with,—
(i) the Dispute Resolution Panel; and
(ii) the Assessing Officer.
(3) The Assessing Officer shall complete the assessment on the basis of the draft order, if—
(a) the assessee intimates to the Assessing Officer the acceptance of the variation; or
(b) no objections are received within the period specified in sub-section (2).
(4) The Assessing Officer shall, notwithstanding anything contained in section 153 or section 153B, pass the assessment order under sub-section (3) within one month from the end of the month in which,—
(a) the acceptance is received; or
(b) the period of filing of objections under sub-section (2) expires.
(5) The Dispute Resolution Panel shall, in a case where any objection is received under sub-section (2), issue such directions, as it thinks fit, for the guidance of the Assessing Officer to enable him to complete the assessment.
(6) The Dispute Resolution Panel shall issue the directions referred to in sub-section (5), after considering the following, namely:—
(a) draft order;
(b) objections filed by the assessee;
(c) evidence furnished by the assessee;
(d) report, if any, of the Assessing Officer, Valuation Officer or Transfer Pricing Officer or any other authority;
(e) records relating to the draft order;
(f) evidence collected by, or caused to be collected by, it; and
(g) result of any enquiry made by, or caused to be made by, it.
(7) The Dispute Resolution Panel may, before issuing any directions referred to in sub-section (5),—
(a) make such further enquiry, as it thinks fit; or
(b) cause any further enquiry to be made by any income-tax authority and report the result of the same to it.
(8) The Dispute Resolution Panel may confirm, reduce or enhance the variations proposed in the draft order so, however, that it shall not set aside any proposed variation or issue any direction under sub-section (5) for further enquiry and passing of the assessment order.
Explanation.—For the removal of doubts, it is hereby declared that the power of the Dispute Resolution Panel to enhance the variation shall include and shall be deemed always to have included the power to consider any matter arising out of the assessment proceedings relating to the draft order, notwithstanding that such matter was raised or not by the eligible assessee.
(9) If the members of the Dispute Resolution Panel differ in opinion on any point, the point shall be decided according to the opinion of the majority of the members.
(10) Every direction issued by the Dispute Resolution Panel shall be binding on the Assessing Officer.
(11) No direction under sub-section (5) shall be issued unless an opportunity of being heard is given to the assessee and the Assessing Officer on such directions which are prejudicial to the interest of the assessee or the interest of the revenue, respectively.
(12) No direction under sub-section (5) shall be issued after nine months from the end of the month in which the draft order is forwarded to the eligible assessee.
(13) Upon receipt of the directions issued under sub-section (5), the Assessing Officer shall, in conformity with the directions, complete, notwithstanding anything to the contrary contained in section 153 or section 153B, the assessment without providing any further opportunity of being heard to the assessee, within one month from the end of the month in which such direction is received.
(14) The Board may make rules for the purposes of the efficient functioning of the Dispute Resolution Panel and expeditious disposal of the objections filed under sub-section (2) by the eligible assessee.
(14A) The provisions of this section shall not apply to any assessment or reassessment order passed by the Assessing Officer with the prior approval of the Principal Commissioner or Commissioner as provided in sub-section (12) of section 144BA.
(14B) The Central Government may make a scheme, by notification in the Official Gazette, for the purposes of issuance of directions by the dispute resolution panel, so as to impart greater efficiency, transparency and accountability by—
(a) eliminating the interface between the dispute resolution panel and the eligible assessee or any other person to the extent technologically feasible;
(b) optimising utilisation of the resources through economies of scale and functional specialisation;
(c) introducing a mechanism with dynamic jurisdiction for issuance of directions by dispute resolution panel.
(14C) The Central Government may, for the purpose of giving effect to the scheme made under sub-section
(14B), by notification in the Official Gazette, direct that any of the provisions of this Act shall not apply or shall apply with such exceptions, modifications and adaptations as may be specified in the notification. ***
(14D) Every notification issued under sub-section (14B) and sub-section (14C) shall, as soon as may be after the notification is issued, be laid before each House of Parliament.
(15) For the purposes of this section,—
(a) "Dispute Resolution Panel" means a collegium comprising of three Principal Commissioners or Commissioners of Income-tax constituted by the Board for this purpose;
(b) "eligible assessee" means,—
(i) any person in whose case the variation referred to in sub-section (1) arises as a consequence of the order of the Transfer Pricing Officer passed under sub-section (3) of section 92CA; and
(ii) any non-resident not being a company, or any foreign company:
Provided that such eligible assessee shall not include person referred to in sub-section (1) of section 158BA or other person referred to in section 158BD.
(16) The provisions of this section shall not apply to any proceedings under Chapter XIV-B. "Provided that no direction shall be issued after the 31st day of March, 2025."
C. AUTHORITIES
The authorities settle that the draft order is mandatory and jurisdictional, and chart the unresolved 144C/153 limitation question.
1. The draft order is mandatory and jurisdictional
Zuari Cement Ltd. v. ACIT (Andhra Pradesh High Court) — SLP dismissed by the Supreme Court (2013)
Court: Andhra Pradesh High Court; the Revenue's Special Leave Petition was dismissed by the Supreme Court (Petition for Special Leave to Appeal (Civil) — dismissed 27 September 2013).
Held: Where, in the case of an eligible assessee, the Assessing Officer passes a final assessment order without first passing a draft assessment order as required by section 144C(1), the final order is without jurisdiction and is liable to be quashed; the omission is not a curable defect.
Significance: One of the earliest and most-cited authorities establishing the mandatory, jurisdictional character of the draft order; the dismissal of the SLP gave it national currency. Followed across High Courts.
Failure to pass / improper draft order — settled High Court position
Position: Consistent High Court authority (Delhi, Bombay, Madras, Andhra Pradesh and others) holds: (i) a final order passed without a draft order for an eligible assessee is a nullity for want of jurisdiction; (ii) the requirement is not cured by section 292B; and (iii) a draft order is required even on remand if a fresh variation is proposed. Conversely, the Bombay High Court has held that where the TPO/AO proposes no variation, a draft order under 144C(1) is not warranted.
Candour note: This is a settled line of High Court authority; representative decisions are summarised rather than exhaustively cited. The core proposition (mandatory draft order) is not in doubt.
2. Limitation: interplay of section 144C and section 153
ACIT v. Shelf Drilling Ron Tappmeyer Ltd. (2025) — Supreme Court split verdict
Court: Supreme Court of India (Bench of B.V. Nagarathna and S.C. Sharma JJ.); the Bench delivered a split verdict in 2025.
Issue: Whether the outer time-limit for completion of assessment under section 153 applies to, and binds, the final assessment order to be passed under section 144C(13) after DRP directions — i.e. whether the 144C timelines operate within or independently of section 153.
Held: The two Judges differed. One view held that the DRP mechanism under section 144C operates within the limitation framework of section 153, so that a final order beyond the section 153 outer limit is time-barred (affirming the Bombay High Court's approach that section 144C does not grant an open-ended extension). The other view held the 144C timelines to be a self-contained, special code operating notwithstanding section 153. In view of the split, the matter stands referred for authoritative resolution.
Significance: The leading current authority on the 144C/153 limitation question; until resolved by a larger Bench, the issue is open, and the Bombay High Court line (final order must also respect section 153) is the safer working assumption. Practitioners should track the reference.
DRP directions binding; no power to remand — principle
Position: The DRP's directions under section 144C(5)/(8) are binding on the AO (section 144C(10)); the Panel may confirm, reduce or enhance the variation but the statute (Explanation to 144C(8)) does not empower it to set aside the proposed variation and remand. The AO must pass the final order in conformity within the time in section 144C(13).
Candour note: Supported by a consistent body of Tribunal and High Court authority on the contours of the DRP's powers; cited as the working rule.
3. Draft order is mandatory — the Bombay line
Vodafone India Services (P) Ltd. v. Union of India (2014) 361 ITR 531 (Bombay)
Court: Bombay High Court.
Held: In the case of an eligible assessee, the Assessing Officer is bound first to pass a draft assessment order under section 144C(1); a final order passed without the draft order is without jurisdiction. The Court emphasised the mandatory, sequential character of the section 144C procedure.
Significance: A leading Bombay authority (alongside the Andhra Pradesh High Court in Zuari Cement) that the draft order is a jurisdictional pre-requisite; the defect is not curable under section 292B.
DRP cannot set aside / remand — Explanation to section 144C(8)
Position: The Dispute Resolution Panel may confirm, reduce or enhance the proposed variation, and its directions bind the Assessing Officer (section 144C(10)); but the Explanation to section 144C(8) does not empower the Panel to set aside the proposed variation and remit the matter for fresh consideration. The AO must pass the final order in conformity within the time in section 144C(13).
Candour note: Supported by a consistent body of Tribunal/High Court authority on the DRP's powers; cited as the working rule.
4. The draft order is mandatory — the wider High Court consensus
ESPN Star Sports Mauritius S.N.C. et Compagnie v. Union of India (2016) 388 ITR 383 (Delhi)
Court: Delhi High Court.
Held: Following Zuari Cement (AP), Vijay Television (Madras) and International Air Transport Association (Bombay), the Court held that the failure of the Assessing Officer to adhere to the mandatory requirement of section 144C(1) and first pass a draft assessment order invalidates the final assessment order and the consequent demand notices and penalty proceedings; it is a jurisdictional defect, not a curable irregularity.
Significance: Confirms the all-India High Court consensus on the mandatory, jurisdictional character of the draft order for an eligible assessee.
International Air Transport Association v. Dy. CIT (2016) 241 Taxman 249 (Bombay)
Held: A final assessment order passed in the case of an eligible assessee without first passing a draft assessment order under section 144C(1) is without jurisdiction and void; the requirement is mandatory and the omission is not saved by section 292B.
Significance: The Bombay High Court's articulation of the mandatory draft-order rule; part of the consistent line applied in ESPN Star Sports.
Vijay Television (P) Ltd. v. DRP (2014) 369 ITR 113 (Madras)
Held: Where the Assessing Officer, in the case of an eligible assessee, straightaway passed a final assessment order (with demand) without first passing a draft order under section 144C(1), the order was without jurisdiction; a subsequent corrigendum could not cure the fundamental defect.
Significance: An early and much-cited authority that the draft-order omission is jurisdictional and incurable; relied on across High Courts. (Confirm the precise reported citation.)
5. Draft order must precede, and cannot follow, a completed assessment
Olympus Medical Systems India (P) Ltd. v. ACIT (ITAT, Delhi)
Tribunal / Bench: Income-tax Appellate Tribunal, Delhi.
Held: The section 144C scheme requires the draft assessment order to precede the final order; the Assessing Officer is not empowered to first complete the assessment under section 143(3) and then pass a 'draft' order under section 144C(1) (or to withdraw/modify/substitute the completed order). A draft order purporting to follow a concluded section 143(3) assessment is without authority.
Significance: Illustrates the sequential, mandatory nature of the section 144C procedure from the Tribunal's perspective; the draft order is a genuine pre-decisional step, not a post-hoc formality. (Confirm the exact ITA No./date before reliance.)
Compiled for the bharattax.co Treatise on the Income-tax Act, 1961 (as amended by the Finance Act, 2026). Statutory text reproduced from the local Act (base text amended up to the Finance Act, 2025), with the publisher footnote apparatus and amendment-marker brackets removed; Finance Act, 2026 changes are flagged in the commentary. Citations are stated as reported; Tribunal / AAR / High Court orders are flagged. Where a section has not been judicially construed, that is stated candidly and the nearest governing authority is given. This material is for professional reference and is not legal advice.