Section 144C

Issue of Directions to AO on Receipt of Objections from the Eligible Assessee

Extract of Income Tax Act of India for Section 144C

Section 144C of the Income Tax Act, 1961 provides a mechanism for eligible assessees to dispute variations proposed by the Assessing Officer (AO) through a Dispute Resolution Panel (DRP). This section outlines the process for the DRP to issue directions to the AO based on objections filed by the assessee.

Section 144C(1): The Assessing Officer (AO) shall, in the first instance, forward a draft of the proposed order of assessment (if it is prejudicial to the interest of the eligible assessee) to the eligible assessee, in respect of whom any variation is proposed in the income or loss returned, on or after the 1st day of October 2009.

Section 144C(2): On receipt of the draft order, the eligible assessee shall, within thirty days of the receipt by him of the draft order, file his acceptance of the variations to the Assessing Officer or file his objections, if any, to such variations with:

  • (a) the Dispute Resolution Panel; and
  • (b) the Assessing Officer.

Section 144C(3): The Assessing Officer shall complete the assessment based on the draft order if:

  • (a) the assessee intimates to the Assessing Officer the acceptance of the variations; or
  • (b) no objections are received within the period specified in sub-section (2).

Section 144C(4): 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.

Section 144C(5): The Dispute Resolution Panel may confirm, reduce, or enhance the variations proposed in the draft order but shall not set aside any proposed variation or issue any direction for further inquiry and passing of the assessment order.

Section 144C(6): The Dispute Resolution Panel shall issue the directions referred to in subsection (5), after considering the following:

  • (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 inquiry made by, or caused to be made by, it.

Section 144C(7): If the members of the Dispute Resolution Panel differ in opinion on any point, the point shall be decided according to the opinion of most members.

Section 144C(8): Every direction issued by the Dispute Resolution Panel shall be binding on the Assessing Officer.

Section 144C(9): 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.

Section 144C(10): Upon receipt of the directions issued under sub-section (5), the Assessing Officer shall, in conformity with the directions, complete 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.

Section 144C(11): For this section, the “Dispute Resolution Panel” is a collegium comprising three Commissioners of Income-tax constituted by the Board.

Section 144C(12): For this section, “eligible assessee” means:

  • (a) 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
  • (b) any foreign company.

Purpose and Objective of the Act

The primary objective of Section 144C is to provide a structured and efficient mechanism for resolving disputes related to transfer pricing adjustments and international taxation issues. The DRP aims to expedite the resolution process, reduce litigation, and ensure fairness in the assessment proceedings. This section allows taxpayers to present their objections and seek redressal without going through the traditional appellate process.

Proper Reasoning

The reasoning behind the introduction of Section 144C includes:

  1. Speedy Resolution: Providing a faster mechanism for resolving transfer pricing and international taxation disputes, thereby reducing the time and cost associated with prolonged litigation.
  2. Expert Guidance: Utilizing the expertise of senior tax officials to provide well-informed directions and ensure fair assessments.
  3. Reduction of Litigation: Resolving disputes early can minimise the cases that proceed to the appellate authorities and courts.
  4. Transparency and Fairness: Ensuring taxpayers have a clear and structured process to raise objections and seek resolution, thereby promoting transparency and fairness in tax assessments.

Legal Recourse and Legal Proceedings

The legal recourse and proceedings under Section 144C are as follows:

  1. Draft Order: If the returned income or loss contains any proposed variations, the AO issues a draft order of assessment to the eligible assessee.
  2. Objections by Assessee: The assessee can file objections to the draft order with both the DRP and the AO within thirty days of receiving it.
  3. DRP Directions: The DRP, after considering the draft order, objections, evidence, and reports, issues directions to the AO within nine months from the end of the month in which the draft order is forwarded to the assessee.
  4. Final Assessment Order: The AO completes the assessment by the directions of the DRP within one month of receiving the DRP’s directions.

Do’s and Don’ts


  • File objections to the draft order with the DRP and AO within the thirty-day period.
  • Ensure that all supporting evidence, documentation, and objections are submitted.
  • Cooperate with the DRP during the proceedings and provide any additional information or clarification required.
  • Seek professional advice to present your case before the DRP effectively.


  • Do not ignore the draft order or fail to file objections within the specified timeframe.
  • Avoid providing incomplete or inaccurate information in your objections.
  • Do not assume that the DRP will automatically rule in your favour; prepare a well-reasoned and documented case.
  • Avoid non-cooperation or delays in providing additional information requested by the DRP.


Section 144C of the Income Tax Act, 1961, introduces the Dispute Resolution Panel (DRP) as a mechanism to efficiently resolve transfer pricing and international taxation disputes. The DRP aims to expedite dispute resolution, reduce litigation, and ensure fairness in tax assessments by providing a structured process for taxpayers to raise objections and seek redressal. Understanding the provisions, objectives, and procedures associated with Section 144C is essential for taxpayers to navigate the DRP process and achieve favourable outcomes effectively. Proper documentation, timely filing of objections, and cooperation with the DRP are critical to successfully resolving disputes under this section.

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