The Finance Bill, 2026 seeks to conclusively clarify the time limits for completion of assessments under section 144C of the Income-tax Act, addressing prolonged litigation and conflicting judicial interpretations. Section 144C prescribes a special assessment framework for eligible assessees, such as non-residents and cases involving transfer pricing adjustments, with distinct timelines for draft orders, objections before the Dispute Resolution Panel (DRP), and final assessment orders. Despite explicit “notwithstanding” clauses in section 144C, courts had differed on whether the overall limitation under sections 153 or 153B also governed DRP cases, even leading to split verdicts at the apex level. The amendments clarify that sections 153 and 153B apply only up to the stage of issuing the draft assessment order, while the timelines under section 144C exclusively govern finalisation after acceptance of the draft or receipt of DRP directions. This clarification overrides all judicial rulings, applies retrospectively from 1 April 2009 (and 1 October 2009 for search cases), and aims to restore certainty and reduce procedural disputes.
Clarifying time-limit for completion of assessment under section 144C.
Section 144C of the Income-tax Act provides for a special procedure where assessment is made in cases where the eligible assessee is a person in whose case variations arise on account of order of a transfer pricing officer or where the person is a non-resident. As per this section, the Assessing Officer is required to forward a draft of the proposed order of assessment (draft order) to the eligible assessee.
2. The eligible assessee has two choices. He can accept the variation proposed in the draft order or file objections before the Dispute Resolution Panel (DRP). Where variations in the draft order are accepted, the Assessing Officer is required to complete the assessment on basis of the draft order. The period for completing the assessment in this case is provided in section 144C(4) which is one month from the end of the month in which the acceptance from the eligible assessee is received or the period of 30 days of filing objections before DRP expire. Section 144C(4) clearly provides that the time limit of one month from the end of the month shall be available notwithstanding anything contained in section 153 or section 153B.
3. Where the eligible assessee files objection to the DRP, the DRP is required to pass directions as per section 144C(12) and time limit for passing these directions is nine months from the end of the month in which draft order is forwarded to the eligible assessee. The period for completing the assessment in this case is provided by section 144C(13) which is one month from the end of month in which such directions are received. Section 144C(13) clearly provides that the time limit of one month from the end of the month shall be available notwithstanding anything contained in section 153 or section 153B.
4. Section 153 provides for time limit for completion of assessment, reassessment and recomputation. Section 153B provide time limit for completion of assessment in search cases.
5. On plain reading of section 144C and 153 or 153B, as the case maybe, leaves no doubt that section 153 or section 153B provides for time limit for assessment but where assessment is made under section 144C(3) or 144C(13), the time available as per section 144C(4) or 144C(13) shall apply, notwithstanding the provisions of section 153 or section 153B.
6. In various judgements of courts, differing interpretations have been made regarding the intent of the legislature. A view has been taken that the entire process of section 144C has to satisfy the overall time limit of section 153 or 153B, even though, clear carve out has been provided by the section 144C itself. Even the apex court has rendered split verdict on this issue, thus, necessitating in bringing certainty and clarity to the legislative intent.
7. Further, the Income-tax Act, 2025 is coming into force from the 1st of April, 2026. The objective of the new law has been to provide simplicity in language and provisions so as to avoid interpretational issues and prevent litigation. Therefore, there is an urgent need to clarify the position of law in the new Income-tax Act, 2025. The intention of the legislature also needs to be clearly laid out in the Income-tax Act, 1961.
8. Accordingly, notwithstanding anything contained in any judgment, order or decree of court, it is proposed to clarify in section 153 and section 153B that time lines in these sections govern the draft order stage and the timelines provided in section 144C operate for finalization of assessments, notwithstanding the time limit provided in section 153 and section 153B.
9. Suitable amendments are also proposed to be carried out in the Income-tax Act, 2025 so that correct interpretation is taken, litigation is minimized and certainty is achieved.
10. The clarification in Income-tax Act, 1961 shall come into force with retrospective effect from 1.4. 2009 in respect of section 153 and from 1.10.2009 in respect of section 153B. The amendment in Income-tax Act, 2025 shall come into force with effect from 1st day of April, 2026.
[Clause 7, 9, 10, 61, 63]
Extract of Relevant Clauses of Finance Bill, 2026
Clause 7 of the Bill seeks to amend section 144C of the Income-tax Act, 1961 relating to reference to Dispute Resolution Panel.
Section 144C of the said Act, inter alia, provides for the procedure and scheme for making a reference to the Dispute Resolution Panel in respect of certain eligible assessee. Section 153 of the said Act provides for the time limits for completion of assessment, reassessment, and recomputation proceedings and sets the time limit for concluding such proceedings.
The Dispute Resolution Panel mechanism, as provided under section 144C of the said Act provides for a specific procedure as below:––
i. filing of objections before the Dispute Resolution Panel — within thirty days from the date of receipt of the draft assessment order;
ii. issuance of directions by the Dispute Resolution Panel — within nine months from the end of the month in which the draft assessment order is forwarded to the eligible assessee; and
iii. passing of the final assessment order — notwithstanding anything contained in sections 153 or 153B of the said Act, within one month from the end of the month in which the directions of the Dispute Resolution Panel are received, as mandated under sub-section (13).
In cases where the assessee accepts the draft assessment order and does not file objections before the Dispute Resolution Panel, the Assessing Officer is required, notwithstanding anything contained in sections 153 or 153B of the said Act, as the case may be, to pass the final assessment order within one month from the end of the month in which the period specified for filing objections expires, in terms of sub-section (4) of section 144C of the said Act.
It is proposed to amend section 144C of the said Act so as to clarify the time-limits available to the Assessing Officer to pass the final assessment order upon receipt of direction issued by Dispute Resolution Panel. Therefore it is hereby clarified for the purposes of subsection (4) that where a draft of the proposed order of assessment under sub-section (1) is forwarded within the time period allowed under section 153/153B, further time period available to the Assessing Officer to complete the assessment under sub-section (3) shall be governed and shall always be deemed to have been governed by the provisions of sub-section (4).
Further, it is also clarified for the purposes of sub-section (13) that where a draft of the proposed order of assessment under sub-section (1) is forwarded within the time period allowed under section 153/153B, time period available for the Assessing Officer under subsection (13) to pass the assessment order upon receipt of the direction issued under subsection (5), shall be governed and shall always be deemed to have been governed by the provisions of sub-sections (12) and (13).
It is proposed to insert sub-section (4A), (4B), (13A) and (13B) in section 144C of the said Act so as to clarify the time period available to the Assessing Officer to complete the assessment under sub-section (3) and sub-section (13), as the case may be, of section 144C of the said Act.
These amendments will take effect retrospectively from 1st April, 2009 for sub-section and (13A) of section 144C of the said Act.
These amendments will take effect retrospectively from 1st October, 2009 for sub-section and (13B) of section 144C of the said Act.
Clause 9 of the Bill seeks to amend section 153 of the Income-tax Act, 1961 relating to the time limit for completion of assessment, reassessment and recomputation.
Section 153 of the said Act provides for the time limits for completion of assessment, reassessment, and recomputation proceedings and sets the time limit for concluding such proceedings.
It is proposed to amend section 153 of the said Act by inserting sub-section (10) so as to clarify that in terms of provisions of sub-sections (1) to (4) of the said section, the draft of the proposed order of assessment referred to in sub-section (1) of section 144C shall be made, and shall always be deemed to have been made, at any time up to the time limit of assessment, reassessment or recomputation referred in the said sub-sections.
This amendment will take effect retrospectively from 1st April, 2009.
Clause 10 of the Bill seeks to amend section 153B of the Income-tax Act, 1961 relating to the time limit for completion of assessment, under section 153A .
Section 153B of the said Act provides for the time limits for completion of assessment and reassessment proceedings related to search initiated under section 132 and requisition made under section 132A and sets the time limit for concluding such proceedings.
It is proposed to amend section 153B of the said Act by inserting sub-section (1A) so as to clarify that in terms of provisions of this section, the draft of the proposed order of assessment referred to in sub-section (1) of section 144C shall be made, and shall always be deemed to have been made, at any time up to the time limit of assessment, reassessment or recomputation referred in this section.
This amendment will take effect retrospectively from 1st October, 2009.
Clause 61 of the Bill seeks to amend section 275 of the Income-tax Act, 2025 relating to reference to Dispute Resolution Panel.
The said section, inter alia, provides for the procedure and scheme for making a reference to the Dispute Resolution Panel in respect of certain eligible assessee. Further, section 286 of the said Act provides for the time limits for completion of assessment, reassessment and recomputation proceedings and sets the time limit for concluding such proceedings.
The Dispute Resolution Panel mechanism, as provided under section 275 of the said Act provides for a specific procedure as below:––
i. filing of objections before the Dispute Resolution Panel — within thirty days from the date of receipt of the draft assessment order;
ii. issuance of directions by the Dispute Resolution Panel — within nine months from the end of the month in which the draft assessment order is forwarded to the eligible assessee; and
iii. passing of the final assessment order — irrespective of anything contained in section 286 of the said Act, within one month from the end of the month in which the directions of the Dispute Resolution Panel are received, as mandated under section 275(14) of the said Act.
In cases where the assessee accepts the draft assessment order and does not file objections before the Dispute Resolution Panel, the Assessing Officer is required, notwithstanding anything contained in sections 286 of the said Act, as the case may be, to pass the final assessment order within one month from the end of the month in which the period specified for filing objections expires, in terms of section 275(4) of the said Act.
It is proposed to amend sub-sections (4) and (14) of section 275 of the said Act so as to clarify that the period available to the Assessing Officer under the section shall be in addition to the period available to him under section 286 of the said Act.
These amendments will take effect from 1st April, 2026 and will, accordingly, apply in relation to the tax year 2026-2027 and subsequent years.
Clause 63 of the Bill seeks to amend section 286 of the Income-tax Act, 2025 relating to the time limit for completion of assessment, reassessment and recomputation.
Section 286 of the said Act provides for the time limits for completion of assessment, reassessment, and recomputation proceedings and sets the outer time limit for concluding such proceedings.
It is proposed to amend sub-section (2) of the said section so as to clarify that in terms of provisions of section 286(1) [Table: Sl No. 1 to 4] and sub-section (2), the draft of the proposed order of assessment referred to in section 275 shall be made at any time up to the time limit of assessment, reassessment or recomputation referred in the said table and the said sub-section.
This amendment will take effect from 1st April, 2026 and will, accordingly, apply in relation to the tax year 2026-2027 and subsequent years.
Extract of Relevant Amendment Proposed by Finance Bill, 2026
7. Amendment of section 144C.
In section 144C of the Income-tax Act,––
(a) after sub-section (4), the following sub-section shall be inserted and shall be deemed to have been inserted with effect from the 1st day of April, 2009, namely:––
“(4A) Notwithstanding anything contained in any judgment, order or decree of any court, or section 153, for the removal of doubts, it is hereby clarified for the purposes of sub-section (4) that where a draft of the proposed order of assessment under subsection (1) is forwarded within the time period allowed under section 153, further time period available to the Assessing Officer to complete the assessment under sub-section (3) shall be governed and shall always be deemed to have been governed by the provisions of sub-section (4).”;
(b) after sub-section (4A) as so inserted, the following sub-section shall be inserted and shall be deemed to have been inserted with effect from the 1st day of October, 2009, namely: ––
“(4B) Notwithstanding anything contained in any judgment, order or decree of any court, or section 153B, for the removal of doubts, it is hereby clarified for the purposes of sub-section (4) that where a draft of the proposed order of assessment under subsection (1) is forwarded within the time period allowed under section 153B, further time period available to the Assessing Officer to complete the assessment under sub-section (3) shall be governed and shall always be deemed to have been governed by the provisions of sub-section (4).”;
(c) after sub-section (13), the following sub-section shall be inserted and shall be deemed to have been inserted with effect from the 1st day of April, 2009, namely:––
“(13A) Notwithstanding anything contained in any judgment, order or decree of any court, or section 153, for the removal of doubts, it is hereby clarified for the purposes of sub-section (13) that where a draft of the proposed order of assessment under subsection (1) is forwarded within the time period allowed under section 153, time period available for the Assessing Officer under sub-section (13) to pass the assessment order upon receipt of the direction issued under sub-section (5), shall be governed and shall always be deemed to have been governed by the provisions of subsections (12) and (13).”;
(d) after sub-section (13A) as so inserted, the following sub-section shall be inserted and shall be deemed to have been inserted with effect from the 1st day of October, 2009, namely:––
“(13B) Notwithstanding anything contained in any judgment, order or decree of any court, or section 153B, for the removal of doubts, it is hereby clarified for the purposes of sub-section (13) that where a draft of the proposed order of assessment under sub-section (1) is forwarded within the time period allowed under section 153B, time period available for the Assessing Officer under sub-section (13) to pass the assessment order upon receipt of the direction issued under sub-section (5), shall be governed and shall always be deemed to have been governed by the provisions of sub-sections (12) and (13).”.
9. Amendment of section 153.
In section 153 of the Income-tax Act, after sub-section (9), the following sub-section shall be inserted and shall be deemed to have been inserted with effect from the 1st day of April, 2009, namely:––
“(10) Notwithstanding anything contained in any judgment, order or decree of any court, for the removal of doubts, it is hereby clarified that in terms of provisions of sub-sections (1) to (4), the draft of the proposed order of assessment referred to in sub-section (1) of section 144C shall be made, and shall always be deemed to have been made, at any time up to the time limit of assessment, reassessment or recomputation referred to in the said sub-sections.”.
10. Amendment of section 153B.
In section 153B of the Income-tax Act, after sub-section (1), the following sub-section shall be inserted and shall be deemed to have been inserted with effect from the 1st day of October, 2009, namely:––
“(1A) Notwithstanding anything contained in any judgment, order or decree of any court, for the removal of doubts, it is hereby clarified that in terms of provisions of this section, the draft of the proposed order of assessment referred to in sub-section (1) of section 144C shall be made, and shall always be deemed to have been made, at any time up to the time limit of assessment, reassessment or recomputation referred to in this section.”.
61. Amendment of section 275.
In section 275 of the Income-tax Act,––
(a) for sub-section (4), the following sub-section shall be substituted, namely:––
“(4)(a) The Assessing Officer shall, irrespective of anything contained in section 286, pass the assessment order under sub-section (3) within one month from the end of the month in which,—
(i) the acceptance is received; or
(iii) the period of filing of objections under sub-section (2) expires.
(b) Irrespective of anything contained in section 286, where a draft of the proposed order of assessment under sub-section (1) is forwarded within the time period allowed under the said section, further time period available to the Assessing Officer to complete the assessment under sub-section (3) shall be governed by the provisions of this sub-section.”;
(b) for sub-section (14), the following sub-section shall be substituted, namely:––
“(14)(a) Upon receipt of the directions issued under sub-section (5), the Assessing Officer shall, in conformity with the directions, complete, irrespective of anything to the contrary contained in section 286, 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;
(b) Irrespective of anything contained in section 286, where a draft of the proposed order of assessment under sub-section (1) is forwarded within the time period allowed under section 286, time period available for the Assessing Officer under this sub-section to pass the assessment order upon receipt of the direction issued under sub-section (5), shall be governed by the provisions of sub-section (13) and this sub-section.”.
63. Amendment of section 286.
In section 286 of the Income-tax Act, for sub-section (2), the following sub-section shall be substituted, namely:––
“(2)(a) Time limit for completion of any assessment or reassessment as provided in sub-section (1) [Table: Sl No. 1 to 4], in a case where reference is made to the Transfer Pricing Officer for determining the arm’s length price under section 166(1), shall be extended by an additional period of twelve months.
(b) In terms of provisions of sub-section (1) [Table: Sl No. 1 to 4] and this sub-section, the draft of the proposed order of assessment referred to in section 275 shall be made at any time up to the time limit of assessment, reassessment or recomputation referred to in the said Table and this sub-section.”.
