Introduction
On 1st February, the Finance Minister introduced the new Finance Bill 2026, which carries various amendments to both the old and new tax regimes. One of the most significant amendments relates to Sections 144C , and 153 , which provide a substantial solution to many pending cases before various courts and tribunals concerning the validity of final assessment orders.
This legislative clarification restores the position that Section 144C constitutes a self‑contained procedural code, neutralises adverse interpretations that artificially compressed DRP timelines, and ensures that the statutory architecture functions as originally designed. By applying the clarification to past, pending, and future proceedings, the amendment promotes constitutional values of certainty, equality, and orderly fiscal administration, while preserving taxpayer safeguards and enabling effective faceless assessments, thereby striking a balanced alignment between legislative intent and practical tax governance.
Prior to this, a two‑judge Bench led by Justice Nagarathna and Justice Satish Chandra, in the case of ACIT v. Shelf Drilling Ron Tappmeyer Ltd. , delivered a split judgment on the Dispute Resolution Panel (hereinafter DRP ’) timeline, highlighting a conflict between Section 144C and Section 153(3) of the Income‑tax Act, 1961 . Justice Nagaratna opined that the rule of harmonious construction would apply to the non‑obstante clause in Section 144C, and that the DRP timeline would be subsumed within the overall timeline for passing the final assessment order under Section 153(3) of the Income‑tax Act, 1961.
On the other hand, Justice Chandra opined that Section 144C, later enacted through the Finance Act, 2009 and containing a non‑obstante clause, has an overriding effect over the general limitation period prescribed under Section 153(3) of the Act. He further said that the timeline application of section 153(3) is only upto the draft assessment order, the later stage including DRP and Final assessment order will govern through the time limits of the section 144C(5) .
State The Issues
The all assessments, reassessment and recomputation procedure and its time limit govern according to the provisions prescribed under the section 153 of the Income Tax Act, 1961. Due to the increased number of disputes pending before the tribunal and various High Courts, the legislature introduced the dispute resolution body for the disposal of all claims and remand by the higher authorities under the finance act, 2009. Justice Satish Chandra opined that the application of time limit only till the passing of initial draft assessment orders, after that timeline will govern according to the procedure prescribed under section 144C. Section 144C carries non-obstante which have an overriding effect over the other general provisions of the Act. Justice Navaratna opined that the process from draft to final assessment order must be finished according to time prescribed under the section 153(3), the legislature never intended to create a different time limit for the disposal of the claims by the DRP. She further harmonised the non-obstante clause with the final timeline under section 153 of the act and said the all process from draft assessment order, reassessment, DRP and final assessment order will govern through the timeline prescribed under section 153 of the Income Tax Act, 1961.
What the news provisions says
The Finance bill, 2026 came up with four new amendments by addition of the sub section 4A, 4B, 13A and 13B under clause 7 of 144C of the income tax Act to govern the timeline for the DRP proceedings and final assessment order. And Clause 9 of the bill inserts section 153(10).
Clause 7 of the Finance Bill, 2026 introduces a significant clarification to the assessment framework by inserting sub‑sections (4A), (4B), (13A), and (13B) into Section 144C, while correspondingly amending Sections 153(9) and 153B(1). Previously, ambiguity existed regarding whether the one‑month period provided under Sections 144C(4) and 144C(13) was restricted by the overall limitation prescribed under Sections 153 and 153B, leading to judicial conflict and compressed DRP timelines. The new provisions decisively clarify that once the draft assessment order is issued within the time permitted under Sections 153 or 153B, the additional period available for completing the assessment operates independently and cannot be curtailed by the general limitation framework. By inserting a non‑obstante clarification “notwithstanding any judgment, order or decree,” the legislature has reaffirmed that the DRP mechanism is self‑contained and must govern the finalisation stage without interference from general timelines. This amendment restores legislative intent, removes interpretational uncertainty, and strengthens procedural certainty in assessments by clearly separating the draft stage from the DRP‑driven finalisation process.
The Retrospective effect of the bill
The retrospective operation of the Bill is curative and clarificatory in nature, intended to restore certainty, coherence, and uniformity in the statutory assessment framework under the Income‑tax Act, 1961, and not to impose any new burden or liability on assessees. Section 144C(4A) and 144C(13A) have retrospective effect from the 1st of April, 2009 and section 144C(4B) and 144C(13B) have retrospective effect from the 1st October, 2009. Lastly, the combined effect of the section 153 and 153B will be applicable to the draft assessment order stage and later for DRP, final assessment order section 144C have an overriding effect on the timeline.
Persistent divergence in judicial interpretation regarding the interaction between general limitation provisions and the specialised DRP mechanism had led to procedural confusion and inconsistent outcomes across tribunals and courts, resulting in avoidable revenue loss solely due to ambiguity in timelines rather than taxpayer default. Recognising this systemic disruption, the legislature intervened retrospectively to reaffirm its original intent that general limitation provisions govern the draft assessment stage, while special DRP timelines exclusively and independently govern the finalisation stage, operating notwithstanding the general limitation sections.
Conclusion
The legislature ended the disputes by introducing a separate timeline for the draft assessment order, DRP, and final assessment order through amendments to Sections 144C, 153, and 153B. Through a clarificatory amendment, the legislature restated the intent behind the enactment of Section 144C as a self-contained code, which carries a non-obstante clause to override the earlier general provisions. By prioritising certainty over creativity, the legislature provided for faceless assessment to maximise revenue collection. However, extraordinary delay by the revenue can raise questions regarding the validity of the assessment order, including its impact on the status of the foreign investment hub.
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Article is authored by Satyam Kumar, a law student at Asian Law College, Noida, and co-authored by Vikas Kumar (3rd Year, JMI).
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