Dispute Resolution Panel (DRP) for Eligible Assessees: Draft Order, 30-Day Objection and Directions (Income Tax Act 2025)

The Dispute Resolution Panel (DRP) is a three-member collegium of senior tax officers that hears an eligible assessee's objections before the Assessing Officer passes a final assessment order. Under section 275 of the Income-tax Act, 2025, the Assessing Officer first sends a draft order, and the assessee has 30 days from receipt to accept it or object to it before the DRP. The DRP's directions bind the Assessing Officer.

This guide covers who is an "eligible assessee", what to file and where, what the DRP can and cannot do, and the time limits for each step. Every point comes from section 275 as amended by the Finance Act, 2026 (effective 1 April 2026) and rule 176 of the Income-tax Rules, 2026. The section and rule numbers sit next to each point so you can check them. Last reviewed against that text on 10 November 2026.

What is the Dispute Resolution Panel under the Income Tax Act 2025?

Section 275(17)(a) defines the Dispute Resolution Panel as a collegium of three Principal Commissioners or Commissioners of Income-tax, constituted by the Board for this purpose. It sits between the draft order and the final order. If the assessee objects, the Assessing Officer cannot finalise the assessment until the panel has issued its directions.

The idea is simple. For the cases the section covers, the assessee gets one review by senior officers before an adverse assessment order exists, instead of having to appeal against it afterwards.

Who is an "eligible assessee" for the DRP?

Only an eligible assessee can use the route. Section 275(17)(b) names two groups:

• any person whose proposed variation arises as a consequence of the Transfer Pricing Officer's order under section 166(6) (the order that fixes the arm's length price); and
• any non-resident that is not a company, and any foreign company.

Section 275(18) carves out two further categories. A person covered by section 292(1) (a person on whom a search was initiated or a requisition made, for the special search assessment) and an "other person" covered by section 295 (a person to whom undisclosed income found in someone else's search relates) are not eligible assessees.

Taxpayer	Eligible for DRP?	Basis
Indian company with a transfer pricing adjustment by the Transfer Pricing Officer	Yes, for the variation arising from that order	Section 275(17)(b)(i)
Foreign company with income taxable in India	Yes	Section 275(17)(b)(ii)
Non-resident individual, firm or other non-company	Yes	Section 275(17)(b)(ii)
Resident individual or domestic company with no transfer pricing order	No	Not in section 275(17)(b)
Person assessed under the search procedure (section 292(1))	No	Section 275(18)
"Other person" under section 295	No	Section 275(18)

When does the Assessing Officer send a draft order?

Under section 275(1), the Assessing Officer must, "in the first instance", forward a draft of the proposed assessment order to the eligible assessee if he proposes any variation that is prejudicial to the assessee's interest. If no adverse variation is proposed, there is nothing to send. In a faceless assessment, the National Faceless Assessment Centre serves the draft order on the assessee (rule 176(2)(u)).

Section 275(16) switches the whole section off for an assessment or reassessment order passed with the prior approval of the Principal Commissioner or Commissioner under section 274(12). Section 275(19) also says the section does not apply to any proceedings under Chapter XVI-B.

What can the assessee do within 30 days of the draft order?

Section 275(2) gives two choices, and the clock is 30 days from receipt of the draft order:

1. Accept the variations by filing acceptance with the Assessing Officer; or
2. File objections to the variations with both the Dispute Resolution Panel and the Assessing Officer.

In a faceless case the objections go to the DRP and to the National Faceless Assessment Centre (rule 176(2)(y)). Filing with only one of the two does not match the wording of the section, so file with both.

If the assessee accepts, or does not object within the 30 days, the Assessing Officer completes the assessment on the basis of the draft order (section 275(3)).

What are the time limits at each step?

Step	Who	Time limit	Provision
Accept or object	Assessee	30 days from receipt of the draft order	275(2)
Final order if accepted or no objection	Assessing Officer	Within one month from the end of the month in which acceptance is received or the 30-day period expires	275(4)(a)
DRP directions	DRP	Not after nine months from the end of the month in which the draft order was forwarded	275(13)
Final order after directions	Assessing Officer	Within one month from the end of the month in which the direction is received	275(14)(a)

Sub-sections (4) and (14) were substituted by the Finance Act, 2026 with effect from 1 April 2026. Each now has a clause (b). Where the draft order was forwarded within the time allowed under section 286, the further time available to the Assessing Officer is governed by that sub-section (and, for sub-section (14), by sub-section (13) as well) and not by the general limitation period in section 286.

What can the Dispute Resolution Panel do with the draft order?

The panel's role is set by section 275(5) to (12):

• It issues directions to guide the Assessing Officer (275(5)), in writing, with the points of determination, the decision and the reasons (275(6)).
• Before directing, it may make further enquiry itself or have any income-tax authority make it and report back (275(7)).
• It may confirm, reduce or enhance the variations in the draft order (275(8)).
• Its power to enhance includes considering any matter arising out of the assessment proceedings relating to the draft order, even if the assessee did not raise it (275(9)).
• Where members differ, the majority view prevails (275(10)). Every direction binds the Assessing Officer (275(11)).
• No direction can be issued without giving the assessee, and the Assessing Officer, an opportunity of being heard on directions that are prejudicial to them respectively (275(12)).

There is one hard limit. The panel cannot set aside a proposed variation, and it cannot direct further enquiry and a fresh assessment order (275(8)). It must decide the point itself. This is why the enhancement power matters: an objection can end with a higher variation than the draft order proposed.

Where do you appeal after a DRP-based final order?

The appeal skips the first appellate level. Section 357(d) and (e) exclude an assessment order passed in pursuance of the DRP's directions from the list of orders appealable to the Commissioner (Appeals). Instead, section 362(1)(d) lets the assessee appeal directly to the Appellate Tribunal against an order passed by the Assessing Officer under section 270(10) or 279 in pursuance of the DRP's directions. The Tribunal appeal process has its own time limit and form; check section 362 and the rules before the final order arrives.

Worked example 1: what the DRP can do to the variation

Assumptions: tax year 2026-27 assessment of Alpha Components India Pvt Ltd (an example company). Its return shows income of Rs 5,00,00,000. The Assessing Officer's draft order, based on the Transfer Pricing Officer's order under section 166(6), proposes two variations. The company is an eligible assessee under section 275(17)(b)(i).

Item	Draft order (Rs)	After DRP directions (Rs)
Income per return	5,00,00,000	5,00,00,000
Transfer pricing adjustment	60,00,000	35,00,000 (reduced)
Disallowance of an expense	8,00,000	8,00,000 (confirmed)
New addition on a matter the company never raised	0	12,00,000 (enhanced, s.275(9))
Total variation	68,00,000	55,00,000
Assessed income	5,68,00,000	5,55,00,000

Arithmetic: draft variation 60,00,000 + 8,00,000 = 68,00,000, so income is 5,00,00,000 + 68,00,000 = 5,68,00,000. After directions, 35,00,000 + 8,00,000 + 12,00,000 = 55,00,000, so income is 5,00,00,000 + 55,00,000 = 5,55,00,000. The Assessing Officer must complete the assessment in conformity with these directions (275(14)). The company still comes out ahead overall here, but the Rs 12,00,000 addition shows why the choice to object needs thought.

Worked example 2: the calendar for a draft order

Assumptions: the draft order is forwarded to the assessee on 12 June 2026 and received that day. The window is not extended.

Event	Working	Date
Last day to accept or object (275(2))	12 June + 30 days (18 days left in June, 12 more in July)	12 July 2026
If no objection: Assessing Officer's last day (275(4)(a))	One month from the end of July 2026	31 August 2026
If objection: outer limit for DRP directions (275(13))	Nine months from the end of June 2026 (July to March)	31 March 2027
If directions received on 10 February 2027: Assessing Officer's last day (275(14)(a))	One month from the end of February 2027	31 March 2027

The month-end counting is the reading to apply: each limit runs from the end of the month in which the trigger happens, not from the trigger date itself.

Real-life example 1: Meena, finance head of a transfer pricing case

Meena runs finance at an Indian company that pays its overseas parent for services. The Transfer Pricing Officer fixes a higher arm's length price, and the Assessing Officer sends a draft order adding that difference to income. Because the variation arises from the Transfer Pricing Officer's order under section 166(6), the company is an eligible assessee. Meena has 30 days to decide. She files objections with both the DRP and the Assessing Officer, and the final order waits for the DRP's directions instead of being passed straight away.

Real-life example 2: Kenji, a non-resident individual

Kenji lives abroad and earns income in India that the Assessing Officer thinks is under-reported. He is a non-resident and not a company, so he is an eligible assessee under section 275(17)(b)(ii) even though no transfer pricing order exists. A draft order arrives with an adverse variation. He accepts one small item and objects to the rest. Section 275(2) lets him accept or object, and the section text does not carve out acceptance of part of the variations, so he should confirm with his advisor how to record a partial acceptance before filing.

Real-life example 3: Ravi, who is not eligible

Ravi is a resident individual running a trading business. The Assessing Officer proposes to disallow part of his expenses. There is no transfer pricing order and he is not a non-resident, so section 275 does not cover him. He gets the usual assessment procedure instead, and the DRP route is not open to him.

Common mistakes

• Filing objections with only the DRP or only the Assessing Officer. Section 275(2)(b) requires both.
• Missing the 30 days. If no objection is received in time, the Assessing Officer completes the assessment on the draft order (275(3)(b)).
• Assuming the DRP can only reduce. It may also enhance, including on matters the assessee did not raise (275(8), (9)).
• Expecting a remand. The panel cannot set aside a variation or send it back for further enquiry and a fresh order (275(8)).
• Treating every adverse assessment as DRP-eligible. Only the two groups in section 275(17)(b) qualify, and the search-case categories in section 275(18) are excluded.
• Counting limits from the wrong date. The Assessing Officer's and the DRP's time limits run from the end of a month, as the table above shows.

Quick reference

Point	Rule	Where
Draft order trigger	Variation prejudicial to an eligible assessee	275(1)
Assessee's window	30 days from receipt	275(2)
Panel	Three Principal Commissioners or Commissioners	275(17)(a)
Panel's powers	Confirm, reduce or enhance; no set-aside	275(8), (9)
Directions bind AO	Yes	275(11)
Directions deadline	9 months from end of month of draft order	275(13)
Final order after directions	1 month from end of month of receipt	275(14)(a)

Where this is in the Act

• Section 275(1) to (4): draft order, objections, final order on acceptance.
• Section 275(5) to (14): DRP directions, powers, hearing and time limits.
• Section 275(15): Board's power to make rules for the DRP's functioning.
• Section 275(16), (18), (19): where the section does not apply.
• Section 275(17): definitions of "Dispute Resolution Panel" and "eligible assessee".
• Section 166(6): the Transfer Pricing Officer's order. See also transfer pricing and arm's length price.
• Rule 176(2)(u), (y) to (ad): how the draft order and objections work in a faceless assessment. For the wider picture, see assessment procedure under the 2025 Act.

For a CA firm, the hard part is tracking dates: the day the draft order was received, the 30-day objection deadline, and the month-end limits that follow. Finexo's practice management software lets you track these deadlines across your client book and remind the team before they pass. It does not prepare objections or file anything for you.

This article is general information on the Income-tax Act, 2025 and the Income-tax Rules, 2026, not tax or legal advice. Check the current text and your facts before acting.