Section 275 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Section 275 gives a defined class of assessees a way to object to a proposed adverse assessment before the order is made, by going to a Dispute Resolution Panel. The Assessing Officer first sends a draft order; the assessee can accept it or object; and if objections are filed, the Panel issues directions that bind the Assessing Officer. This article reads the section as per the Income-tax Act, 2025 (30 of 2025) as amended by the Finance Act, 2026.
Where the Assessing Officer proposes a variation that is prejudicial to an eligible assessee, he must first forward a draft order. The assessee has thirty days from receipt to accept it or to file objections with the Dispute Resolution Panel and the Assessing Officer. The Panel can confirm, reduce or enhance the variation, and its directions bind the Assessing Officer. No direction can be issued after nine months from the end of the month in which the draft order was forwarded.
Who is an "eligible assessee"
The route is not open to everyone. Sub-section (17)(b) says an eligible assessee means:
- any person in whose case the variation arises as a consequence of the order of the Transfer Pricing Officer passed under section 166(6); or
- any non-resident (not being a company), or any foreign company.
Sub-section (18) then removes from the eligible class the person referred to in section 292(1) and the other person referred to in section 295. Those are the search-case provisions; read them in our note on undisclosed income in search cases and on block assessment procedure. Sub-section (19) adds that the section does not apply to any proceedings under Chapter XVI-B, which is the search-case Part of the Chapter. Sub-section (16) also excludes any assessment or reassessment order passed by the Assessing Officer with the prior approval of the Principal Commissioner or Commissioner as provided in section 274(12); our article on section 274 covers that provision.
The "Dispute Resolution Panel" itself is defined in sub-section (17)(a) as a collegium of three Principal Commissioners or Commissioners of Income-tax constituted by the Board for this purpose.
If you are an overseas company or a non-resident individual with income taxable in India, or a person whose transfer pricing variation flows from the Transfer Pricing Officer's order, this is the section that decides whether you get a pre-assessment hearing before a three-member panel. If a draft order has reached you, our legal dispute resolution team can look at it with you. Our note on section 161 and transfer pricing sits alongside it.
Sub-section (1): the draft order
The Assessing Officer shall, irrespective of anything to the contrary in the Act, in the first instance forward a draft of the proposed order of assessment to the eligible assessee, if he proposes to make any variation which is prejudicial to the interest of that assessee. Two points follow from the words used:
- The duty is triggered only by a prejudicial variation. If the Assessing Officer proposes no variation that hurts the assessee, the section does not require a draft.
- The draft goes to the assessee "in the first instance", that is before the final assessment order.
Sub-sections (2) and (3): thirty days to accept or object
On receipt of the draft order the eligible assessee shall, within thirty days of its receipt by him, either:
- file his acceptance of the variations with the Assessing Officer; or
- file his objections, if any, to the variation with both the Dispute Resolution Panel and the Assessing Officer.
Under sub-section (3) the Assessing Officer completes the assessment on the basis of the draft order if the assessee intimates acceptance, or if no objection is received within the thirty days.
Sub-section (4): time to pass the order when there is no objection
Sub-section (4)(a) is printed in square brackets as substituted by the Finance Act, 2026, with effect from 1 April 2026. As it now stands, irrespective of anything contained in section 286, the Assessing Officer shall pass the assessment order under sub-section (3) within one month from the end of the month in which the acceptance is received, or the period of filing objections expires.
Clause (b) says that, irrespective of section 286, where the draft was forwarded within the time period allowed under section 286, the further time available to the Assessing Officer to complete the assessment under sub-section (3) is governed by this sub-section. For the general limits, see our articles on time limits for completing assessment and on periods excluded.
Sub-sections (5) to (12): what the Panel does
| Sub-section | What it says |
|---|---|
| (5) | Where an objection is received under sub-section (2), the Panel issues such directions as it thinks fit for the guidance of the Assessing Officer to enable him to complete the assessment. |
| (6) | Directions are in writing, stating the points of determination, the decision thereon and the reason for it. |
| (7) | Before issuing directions the Panel may make further enquiry, or cause any income-tax authority to make it and report the result. |
| (8) | The Panel may confirm, reduce or enhance the variations proposed in the draft order, but it shall not set aside any proposed variation, or issue any direction for further enquiry and passing of the assessment order. |
| (9) | The power to enhance includes power to consider any matter arising out of the assessment proceedings relating to the draft order, even if the eligible assessee did not raise it. |
| (10) | If members differ in opinion on a point, it is decided by the majority. |
| (11) | Every direction is binding on the Assessing Officer. |
| (12) | No direction is issued unless an opportunity of being heard is given to the assessee, and to the Assessing Officer on directions prejudicial to the interest of the revenue. |
Sub-section (8) matters in practice. The Panel can make a variation larger than the Assessing Officer proposed, and sub-section (9) lets it look at matters the assessee never raised. An assessee who objects should therefore weigh that the Panel's power runs both ways, within the draft order's proceedings.
Sub-section (13): the nine-month cut-off
No direction under sub-section (5) shall be issued after nine months from the end of the month in which the draft order is forwarded to the eligible assessee.
Sub-section (14): final order after directions
Sub-section (14) is also printed as substituted by the Finance Act, 2026, with effect from 1 April 2026. Clause (a): upon receipt of the Panel's directions the Assessing Officer shall, in conformity with them, complete the assessment, irrespective of anything to the contrary in section 286, without providing any further opportunity of being heard to the assessee, within one month from the end of the month in which the direction is received. Clause (b): where the draft was forwarded within the time allowed under section 286, the time available to pass the order on receipt of directions is governed by sub-section (13) and this sub-section.
Sub-section (15): rules
The Board may make rules for the efficient functioning of the Panel and expeditious disposal of objections filed under sub-section (2). The detail is left to the Income-tax Rules, 2026; see our rule-wise guides for the current text.
A worked example
The names and amounts below are assumed, to show the sequence only.
Northgate Marine Holdings Ltd, a foreign company, is told that the Assessing Officer proposes to increase its income by Rs. 40,00,000. This is a prejudicial variation, and Northgate is an eligible assessee as a foreign company, so the Assessing Officer must forward a draft order.
- The draft order is received by Northgate on 12 May. Thirty days from receipt run to 11 June.
- Northgate files objections with the Panel and with the Assessing Officer on 5 June, within the thirty days.
- The draft was forwarded in May. Nine months from the end of May (31 May) end on the last day of February of the next year (28 February, or 29 in a leap year). The Panel must issue its directions no later than that date, after hearing Northgate.
- Suppose the Panel confirms Rs. 25,00,000 of the variation and reduces Rs. 15,00,000. The Assessing Officer must complete the assessment on that basis. If the directions are received in October, the one-month rule counts from the end of October, so he completes the assessment by 30 November.
Had Northgate filed nothing within thirty days, the Assessing Officer would have completed the assessment on the basis of the draft order.
Need help with a draft assessment order?
A draft order comes with a short clock, and the choice between accepting and objecting is hard to reverse. If you have received one, or expect a transfer pricing or non-resident variation, our team can help you review it and prepare a reasoned objection. See our legal dispute resolution service.
Key takeaways
- The route applies to an eligible assessee: a person facing a variation that flows from a Transfer Pricing Officer's order under section 166(6), a non-resident who is not a company, or a foreign company.
- A draft order is mandatory only where the proposed variation is prejudicial to the assessee.
- The assessee has thirty days from receipt to accept or to object to the Panel and the Assessing Officer.
- The Panel may confirm, reduce or enhance, but cannot set aside a variation or send the matter back for fresh enquiry.
- Directions bind the Assessing Officer and must be issued within nine months from the end of the month in which the draft order was forwarded.
- Sub-sections (4) and (14) are printed as substituted by the Finance Act, 2026, with effect from 1 April 2026.
Read next
- Section 274: reference to the Principal Commissioner on impermissible avoidance arrangements
- Time limits for completing assessment and reassessment, section 286
- Section 270: assessment
- Chapter XVI: procedure for assessment
Disclaimer: Based on the Income-tax Act, 2025 (30 of 2025) as amended by the Finance Act, 2026, as consulted on 2 October 2026. It explains the words of the Act only; the Income-tax Rules, 2026, notifications, circulars, later amendments and the way the tax authorities and courts apply these provisions should be checked. This article is general information, not legal advice; check the official text before acting.