Direct Tax Laws and International Taxation · Grievance Redressal

Dispute Resolution Panel (DRP) under Income Tax: Draft Order to Final Assessment

Updated 11 October 2026 · Fact-checked

The Dispute Resolution Panel is a three-member collegium of Principal Commissioners or Commissioners. For an eligible assessee, the Assessing Officer first sends a draft order. The assessee accepts it or files objections within 30 days. The DRP issues binding directions, and the AO then completes the assessment in conformity with them.

Understand Dispute Resolution Panel (DRP)

Normally an Assessing Officer passes the assessment order and you appeal to the Commissioner (Appeals). Section 275 gives a faster, alternative route for certain assessees. The AO must first send a draft order before passing the final order. The assessee can then go to a panel of senior officers instead of waiting for a final order.

The route applies only if the AO proposes a variation that is prejudicial to the interest of the assessee, and only for an eligible assessee. That means: (i) a person whose variation arises from the Transfer Pricing Officer's order under section 166(6), or (ii) any non-resident (not being a company), or any foreign company. Persons referred to in section 292(1) or section 295 are excluded.

The Dispute Resolution Panel is a collegium of three Principal Commissioners or Commissioners of Income-tax constituted by the Board. If the members differ, the majority view decides. Its directions are binding on the AO.

The DRP has wide powers. It may confirm, reduce or enhance the proposed variations. It cannot set aside a variation, and it cannot direct further enquiry and passing of the assessment order. It can itself make or cause further enquiry. While enhancing, it can consider any matter arising out of the assessment proceedings relating to the draft order, even if the assessee did not raise it. So filing objections carries a risk of enhancement.

The route does not apply to an assessment or reassessment order passed with prior approval under section 274(12), or to proceedings under Chapter XVI-B. The final order can be appealed to the Appellate Tribunal, not to the Commissioner (Appeals), where it follows DRP directions.

Key rules to remember

Draft order trigger: AO proposes variation prejudicial to eligible assessee → draft order must be forwarded first; Section 275(1). Applies only to an eligible assessee.
Eligible assessee: (i) variation arises from TPO order under section 166(6); or (ii) non-resident (not a company) or foreign company; Section 275(17)(b). Persons in section 292(1) or 295 are excluded under section 275(18).
Assessee's response time: Within 30 days of receipt of draft order: accept, or object to DRP and AO; Section 275(2). Objections go to both the DRP and the AO.
Order on acceptance or no objection: Final order within one month from the end of the month of acceptance or of expiry of the 30-day period; Section 275(4)(a), as substituted w.e.f. 1-4-2026.
Time limit for DRP directions: Not after nine months from the end of the month in which the draft order is forwarded; Section 275(13).
Order after DRP directions: Final order within one month from the end of the month in which the directions are received, without further hearing of the assessee; Section 275(14)(a).
DRP powers: Confirm, reduce or enhance; no set aside; no direction for further enquiry and passing of order; Section 275(8).
Appeal route: Order passed per DRP directions → Appellate Tribunal (section 362(1)(d)); excluded from CIT(A) under section 357(d) and (e); Tribunal appeal within two months from the end of the month of communication (section 362(3)).

How to solve Dispute Resolution Panel (DRP) questions

Use this sequence for any DRP question, whether it is a case study or a timeline problem.

1Check whether the assessee is an eligible assessee: TPO-linked variation, a non-resident non-company, or a foreign company. Check the exclusions in sections 292(1) and 295.
2Check that the AO proposes a variation prejudicial to the assessee. If so, a draft order must be forwarded first.
3Note the date the assessee received the draft order and add 30 days for acceptance or objections.
4If the assessee accepts or does not object, compute the final order deadline: one month from the end of the month of acceptance or of expiry of the 30 days.
5If objections are filed, confirm they went to both the DRP and the AO. Then note that the DRP must issue written directions, after hearing, within nine months from the end of the month in which the draft order was forwarded.
6Compute the AO's deadline: one month from the end of the month in which the directions are received. The AO follows the directions and gives no further hearing.
7State the remedy: appeal to the Appellate Tribunal within two months from the end of the month of communication.
8Close with a clear conclusion on the dates and the assessee's options.

Quickest way: Month-end timeline method

When to use it: For numerical timeline questions asking the last date for objections, directions or the final order.

Objections: receipt date plus 30 days.
Final order without objections: last day of the month in which acceptance is received or the 30 days expire, plus one month, so it is the end of the next month.
DRP directions: last day of the month of forwarding the draft order, plus nine months.
Final order after directions: last day of the month of receipt of directions, plus one month.
Write the section number next to each date.

Common mistakes in Dispute Resolution Panel (DRP)

Treating every assessee as eligible for the DRP route.
Students remember the panel but not the definition.
Fix: Quote section 275(17)(b): TPO-linked variation, non-resident non-company, or foreign company. Check the exclusions.
Counting the nine-month limit from the date of the draft order.
The wording 'from the end of the month' is skipped.
Fix: Take the last day of the month in which the draft order is forwarded, then add nine months.
Filing objections only with the DRP.
Students assume the panel is the only recipient.
Fix: Objections go to both the DRP and the Assessing Officer within 30 days.
Saying the DRP can set aside a variation or remand the matter.
Confusion with appellate authorities.
Fix: The DRP can only confirm, reduce or enhance. It cannot set aside or direct further enquiry and passing of the order. It may make its own enquiry before directions.
Advising the assessee to appeal to the Commissioner (Appeals) against the final order.
Students apply the normal appeal route.
Fix: An order passed under DRP directions is excluded from section 357(d) and (e). The appeal lies to the Appellate Tribunal under section 362(1)(d).
Ignoring the risk of enhancement.
Objections are seen as one-way relief.
Fix: Mention section 275(8) and (9): the DRP may enhance and may consider matters the assessee did not raise.

Worked examples

Example 1

A foreign company receives a draft assessment order proposing a prejudicial variation. The AO forwarded it on 10 July in a tax year. The company receives it on 12 July. (a) By what date must it file objections? (b) If it files none, what is the last date for the AO to pass the final order, assuming the 30-day period expires in August? (Use a 31-day July and 31-day August.)

Show the solution

The foreign company is an eligible assessee under section 275(17)(b)(ii), so the draft order route applies.
Objections must be filed within thirty days of receipt. 12 July plus 30 days is 11 August.
If no objection is received, the AO completes the assessment on the draft order under section 275(3)(b).
The 30-day period expires in August. Under section 275(4)(a), the AO must pass the order within one month from the end of that month, that is, by 30 September.

Answer: (a) Objections by 11 August, filed with both the DRP and the AO. (b) The AO must pass the final order by 30 September.

Example 2

A non-resident individual's draft order was forwarded to him on 20 January. He filed objections on 15 February. The DRP issued directions, received by the AO on 10 August of the same year. (a) What is the outer limit for the DRP's directions? (b) By when must the AO pass the final order? (c) Where can the assessee appeal?

Show the solution

A non-resident who is not a company is an eligible assessee under section 275(17)(b)(ii). Objections within 30 days of receipt: 15 February is within the window.
The outer limit under section 275(13) is nine months from the end of the month in which the draft order is forwarded. The month is January, which ends on 31 January. Nine months from that is 31 October.
The DRP's directions were received on 10 August, which is before 31 October, so they are within time.
Under section 275(14)(a), the AO must pass the order within one month from the end of the month in which the directions are received. The month is August, which ends on 31 August. One month later is 30 September.
The AO follows the directions and gives no further hearing to the assessee.
An order passed in pursuance of DRP directions is appealable to the Appellate Tribunal under section 362(1)(d), within two months from the end of the month of communication.

Answer: (a) 31 October. (b) 30 September. (c) Appellate Tribunal, within two months from the end of the month in which the order is communicated.

Exam tips

Learn the four time limits as a set: 30 days, one month, nine months, one month. Examiners test which period starts where.
In case studies, first decide eligibility. A resident Indian company with no TPO variation has no DRP route, so say so.
Always write the section number (275 for the process, 362 for the Tribunal appeal) next to each conclusion.
For MCQs, watch for traps: DRP can enhance, cannot set aside, has three members, and its directions bind the AO.
Remember the 2026 substitution of sub-sections (4) and (14), which tie the time limits to the draft order being forwarded within the time allowed under section 286.

Practice questions from Grievance Redressal

Dispute Resolution Panel (DRP) in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

CA FinalDispute Resolution Mechanisms and Settlement

Dispute Resolution Panel (DRP): frequently asked questions

Who is an eligible assessee for the DRP?

A person whose variation arises from the TPO's order under section 166(6), or any non-resident who is not a company, or any foreign company. Persons referred to in section 292(1) or section 295 are excluded.

How do I file objections against a draft assessment order?

File them within thirty days of receiving the draft order. They must go to both the Dispute Resolution Panel and the Assessing Officer. You may instead accept the variations by filing acceptance with the AO.

What is the time limit for DRP directions and the final order?

The DRP cannot issue directions after nine months from the end of the month in which the draft order is forwarded. The AO must then pass the final order within one month from the end of the month in which the directions are received.

Can the DRP increase my income?

Yes. It may confirm, reduce or enhance the proposed variations. For enhancement it can consider any matter arising from the assessment proceedings relating to the draft order, even if you did not raise it, and it must first give you an opportunity of being heard.