A draft assessment order under Section 144C is a proposed, not final, tax assessment that the Assessing Officer (AO) must send to an eligible assessee before finalising a prejudicial variation. The recipient is the eligible assessee—not the Dispute Resolution Panel (DRP).
After receiving the draft, the assessee has 30 days to accept the proposed variations or file objections with both the DRP and the AO. The procedure applies only when the taxpayer falls within the statutory definition of an eligible assessee and the AO proposes a variation prejudicial to that taxpayer’s interests.
As an Amazon Associate I earn from qualifying purchases.
What a draft assessment order does
Section 144C of the Income-tax Act, 1961 creates a draft-first process for specified taxpayers. It prevents the AO from moving straight from a proposed prejudicial adjustment to a final assessment in an eligible case. Instead, the AO must first forward a draft of the proposed assessment order to the eligible assessee.
“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.”
#1 Best Overall
This statutory wording establishes three conditions: there must be a proposed variation, it must be prejudicial to the assessee, and the assessee must be eligible under Section 144C. The draft is a procedural opportunity to respond. It is not itself the enforceable final assessment order.
The recipient is the taxpayer whose assessment is being varied. The DRP becomes involved only if that taxpayer files objections. It does not receive the draft as the original addressee and does not issue the initial draft order.
Who is an eligible assessee?
Section 144C does not apply to every income-tax assessment. The eligible-assessee definition covers specified transfer-pricing cases and specified non-resident cases, subject to statutory exclusions. In practical terms, the main categories are the following.
Do these 3 things before closing this tab:
1Fix the driver behind crashes, sound loss and screen glitches2Clear out junk files and repair common Windows errors3Scan for outdated or missing drivers - takes under a minuteTaxpayers affected by a Transfer Pricing Officer order
A person is an eligible assessee when the proposed prejudicial variation arises as a consequence of an order made by the Transfer Pricing Officer (TPO) under Section 92CA(3). This commonly includes an adjustment to the arm’s-length price of an international transaction or specified domestic transaction that flows into the taxpayer’s assessment.
The key test is causation: the proposed assessment variation must arise from the TPO’s order. A taxpayer with ordinary additions unrelated to a Section 92CA(3) order does not become eligible merely because the adjustment is large or disputed.
Rank #2
- Ideal for Gifting
- Ideal for a bookworm
- Compact for travelling
Specified non-resident and foreign-company cases
The statutory category also covers specified non-resident taxpayers, including foreign-company cases identified by the provision. The precise wording and exclusions must be checked in the version of the Act governing the relevant tax year. A non-resident individual, a non-resident entity that is not a company, and a foreign company should not assume that residence alone decides eligibility; the statutory definition and the nature of the proceeding control.
Because the law contains exclusions for certain block-assessment proceedings, an otherwise non-resident or foreign-company taxpayer should verify that the particular proceeding is not carved out. The fact that a taxpayer is overseas, or that an assessment concerns cross-border income, is not by itself a complete eligibility test.
Free tools Windows power users keep installed
One-click scans. No signup required.
Who is not automatically covered
- A resident taxpayer with no qualifying transfer-pricing variation is not automatically entitled to a draft under Section 144C.
- An assessment variation that is not prejudicial to the assessee does not trigger the draft-first requirement.
- A taxpayer cannot treat every notice, show-cause communication, or proposed addition as a draft assessment order.
- Block-assessment and other proceedings covered by statutory exclusions require separate analysis.
Who must receive the draft?
The AO must forward the draft to the eligible assessee whose assessment contains the proposed prejudicial variation. Service records matter because the statutory response period is tied to receipt of the draft. The date printed on the order and the date on which the assessee actually receives it can be different, so preserve the electronic-delivery record, portal timestamp, email, or other proof of service.
The assessee, rather than the DRP, is the first recipient. If the assessee decides to challenge the proposed variations, it then files objections with both recipients required by the statute: the DRP and the AO. Sending objections only to one of them is a procedural risk.
What happens after the draft is received?
- The AO proposes a prejudicial variation. The variation may follow a TPO order or arise in another case covered by the eligible-assessee definition.
- The AO forwards the draft order to the eligible assessee. This is the draft stage, not final assessment. Record the exact date and mode of receipt.
- The assessee has 30 days from receipt. Within that period, it must either communicate acceptance of the variations to the AO or file objections with both the DRP and the AO.
- The chosen route determines the next step. Acceptance or failure to object leaves the AO to complete the assessment on the draft basis. A valid objection route sends the dispute to the DRP.
- The AO passes the final assessment order. Where there are no objections, the order follows the draft. Where the DRP issues directions, the AO must complete the assessment in conformity with those directions.
The two procedural routes compared
| Issue | Acceptance or no objections | Objections to the DRP |
|---|---|---|
| What the assessee files | Communication accepting the variations to the AO, or nothing within the 30-day period | Objections filed with both the DRP and the AO within 30 days of receiving the draft |
| DRP involvement | No DRP review of the proposed variations | DRP considers the draft, objections, evidence, relevant reports and records, and any enquiries it considers necessary |
| Possible result | AO completes the assessment on the basis of the draft | DRP may confirm, reduce, or enhance the proposed variations; AO then follows the DRP’s directions |
| AO finalisation period | Generally one month from the end of the month in which acceptance is received or the objection period expires | Generally one month from the end of the month in which the DRP’s directions are received |
The one-month periods are statutory timing rules that operate alongside the general assessment limitation provisions. Amendments explained in the 2026 Finance Bill clarify aspects of that interaction, so a live case should be checked against the exact applicable text and dates.
What the DRP can and cannot do
The DRP is the review forum for objections to the draft. It examines the draft order, the assessee’s objections, evidence, reports and records, and any further enquiries it considers relevant. Its directions may confirm the proposed variation, reduce it, or enhance it. Filing objections therefore does not guarantee a reduction and can expose the assessee to an increased variation if the DRP considers enhancement justified.
Quick wins for a faster PC:
Clear out junk files and repair common Windows errorsFree Scan →Scan for outdated or missing drivers - takes under a minuteDriver Scan →The DRP’s directions bind the AO for purposes of the final assessment. The AO does not have discretion to disregard those directions and substitute an independent outcome. The AO’s role after the DRP stage is to pass the final order in conformity with the directions, subject to the statutory framework governing that assessment.
Under the Section 144C timeline stated in the 1961 Act, the DRP must issue its directions within nine months from the end of the month in which the draft order was forwarded. The forwarding date, not merely the date on which the assessee opens a document, is therefore an important record in the file.
How the 30-day period should be managed
Confirm the trigger date
Calculate the 30 days from receipt of the draft, not automatically from the date printed on it. Keep evidence of when the order became available through the tax portal, was emailed, or was otherwise served. If multiple delivery events occurred, obtain professional advice on the legally effective date rather than assuming the latest or earliest timestamp.
Check whether the document is actually a draft
Read the heading, statutory provision cited, proposed variations, and directions about acceptance or objections. A draft assessment order should be distinguished from a notice seeking information, a show-cause notice, a TPO order, and a final assessment order. Each has different consequences and response routes.
Rank #4
Choose and execute one route carefully
- If accepting, send a clear acceptance communication to the AO within the period and retain proof of submission.
- If disputing, prepare objections addressed to the DRP and AO and ensure both filings are completed within 30 days.
- Identify every proposed variation, supporting evidence, computational issue, jurisdictional objection, and legal argument rather than assuming the DRP will infer an objection from earlier correspondence.
- Check portal acknowledgements, delivery failures, digital signatures, and attachments immediately after filing.
Common mistakes and how to avoid them
Mistake: sending the draft to the DRP
The draft must first be forwarded by the AO to the eligible assessee. The DRP receives objections if the assessee chooses that route. Treating the DRP as the original recipient confuses two different procedural stages.
Mistake: filing objections with only one authority
Section 144C requires objections to be filed with both the DRP and the AO. A submission made to only one may not preserve the intended remedy. Use the prescribed electronic or procedural channels for each recipient and retain separate acknowledgements.
Mistake: counting from the order date
The statutory period runs from receipt. A taxpayer who waits because the order date appears later or earlier than the service timestamp can lose valuable days. Establish the service record at once.
Mistake: assuming the DRP can only reduce the adjustment
The DRP may confirm, reduce, or enhance the proposed variations. Objections should therefore be technically complete and supported by evidence, not filed on the assumption that review is necessarily taxpayer-favourable.
PC Slower Than It Used to Be?
A free scan shows the junk files, broken settings and background clutter dragging Windows down - then fixes them in one click.Free scan · Windows 10 & 11Outdated Drivers Are Slowing You Down
One free scan finds every outdated or missing driver and matches the right update for your exact hardware.Free scan · exact hardware matchMistake: treating the draft as the final demand
The draft is not the final assessment order. Finalisation follows acceptance or expiry of the objection period, or follows DRP directions when objections are filed. Consequential demand, recovery, and appeal questions should be analysed from the final order and the applicable statutory remedies.
Best Value
- It can be a gift option
- Comes with secure packaging
- Helpful in various ways
Which law governs after 1 April 2026?
The Income-tax Act, 2025 took effect on 1 April 2026. The Income Tax Department’s transition guidance states that the Income-tax Act, 1961 continues to govern proceedings for tax years beginning before 1 April 2026, including proceedings initiated after that date. Consequently, a proceeding handled in 2026 is not automatically governed by the 2025 Act; the relevant tax year and saving provisions must be identified first.
For the 2025 Act, Section 275 is identified as the corresponding provision to Section 144C. For an earlier tax year or a saved proceeding, references to Section 144C of the 1961 Act may remain correct. For a tax year beginning on or after 1 April 2026, the corresponding Section 275 framework may apply instead. The department’s Appeals and Revisions guidance also maps the two provisions, but the operative wording, transitional rules, and effective dates should be checked for the particular matter.
The 2026 Finance Bill’s explanatory material describes the same core deadlines for the Section 144C framework: 30 days for objections after receipt, nine months for DRP directions measured from the end of the month in which the draft is forwarded, and generally one month for the AO’s final order after the relevant acceptance, expiry, or DRP event. It also explains amendments affecting interaction with general assessment limits, including provisions taking effect from 1 April 2026. Do not apply a generic calendar calculation without checking the governing Act and version.
What’s actually slowing this PC down?
Pick the symptom - the matching free tool is one click away.
Worked examples
Transfer-pricing adjustment
A company’s assessment includes a proposed adjustment that directly follows a TPO order under Section 92CA(3). The AO proposes a prejudicial variation and sends a draft order to the company. The company is the recipient and has 30 days from receipt to accept or object. If it objects, the same objections go to both the DRP and AO; the DRP then issues binding directions within the statutory period, after which the AO passes the final order.
Non-resident case without a qualifying variation
A non-resident receives an information notice concerning an assessment but no draft order proposing a prejudicial variation. That notice is not, by itself, a Section 144C draft assessment order. Eligibility and the draft-first obligation arise only when the statutory conditions are met, including the nature of the taxpayer and the proposed variation.
Quick Recap
Practical checklist for a live draft
- Identify the tax year and determine whether the 1961 Act’s Section 144C or the 2025 Act’s corresponding Section 275 governs.
- Confirm that the taxpayer falls within the eligible-assessee definition and that the proposed variation is prejudicial.
- Preserve the exact service and receipt evidence.
- Diary the 30-day deadline from receipt.
- Reconcile every figure in the draft with the TPO order, return, submissions, and supporting records.
- If objecting, file with both the DRP and AO and retain acknowledgements.
- Monitor the DRP timetable and later final order; do not treat the draft as the final assessment.
- Obtain advice from a qualified Indian chartered accountant or tax litigation lawyer when the adjustment is material, the service date is disputed, or the transition between Acts is unclear.
Product prices and availability are accurate as of the date/time indicated and are subject to change. Any price and availability information displayed on Amazon at the time of purchase will apply.
