Comparative Legal Analysis of the DRP Mechanism : Clause 275 of the Income Tax Bill, 2025 Vs. Section 144C of the Income-tax Act, 1961

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....cially those involving transfer pricing and non-resident assessees. Over the years, this section has undergone multiple amendments to address practical challenges, incorporate technological advancements, and align with global best practices. Clause 275 of the 2025 Bill, in this context, represents a legislative attempt to consolidate, clarify, and modernize the DRP process. This commentary undertakes a comprehensive analysis of Clause 275, examining its objectives, provisions, practical implications, and potential ambiguities. It further juxtaposes each aspect of Clause 275 with the corresponding provisions of Section 144C, highlighting similarities, differences, and the broader implications for taxpayers and the tax administration. Objective and Purpose The primary legislative intent behind both Clause 275 and Section 144C is to provide a fair, transparent, and efficient mechanism for resolving disputes arising from proposed variations in the assessment orders, particularly those that are prejudicial to the interests of certain categories of taxpayers. The DRP serves as an alternative to the traditional appellate process, aiming to reduce litigation, ensure consistency in tax a....

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....ect within thirty days, Clause 275(3) obliges the AO to complete the assessment based on the draft order. This provision is a direct counterpart to Section 144C(3), emphasizing the finality of the draft order in the absence of objections and reinforcing the time-bound nature of the process. Sub-section (4): Time Limit for Passing Assessment Order Clause 275(4) requires the AO to pass the assessment order within one month from the end of the month in which acceptance is received or the objection period expires. Notably, this is to be done "irrespective of anything contained in section 286," which pertains to country-by-country reporting and transfer pricing documentation. Section 144C(4), in contrast, references sections 153 and 153B (relating to assessment time limits), reflecting a shift in cross-referencing to harmonize with new legislative structures. Sub-sections (5) to (7): DRP's Role and Powers Upon receiving objections, the DRP is empowered under Clause 275(5) to issue directions for the AO's guidance. Clause 275(6) requires that directions be in writing, state the points of determination, the decisions thereon, and the reasons. This is a refinement over Section ....

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....mity with the directions, within one month, and without further opportunity of being heard. This is in line with Section 144C(13), ensuring finality and procedural efficiency. Sub-section (15): Rule-making Power Clause 275(15) authorizes the Board to make rules for efficient DRP functioning and expeditious disposal of objections. Section 144C(14) is similar, but the 1961 Act further provides for schemes to impart efficiency, transparency, and accountability (Sections 144C(14B)-(14D)), including faceless DRP proceedings-an aspect not expressly replicated in Clause 275. Sub-section (16): Exclusions from DRP Mechanism Clause 275(16) excludes cases where the AO's order is passed with prior approval of the Principal Commissioner or Commissioner u/s 274(12). Section 144C(14A) contains a parallel exclusion for orders passed u/s 144BA(12), relating to General Anti-Avoidance Rules (GAAR). The reference to section 274(12) in the 2025 Bill may reflect a reorganization or renumbering of the relevant provisions. Sub-section (17): Definitions Clause 275(17) defines "Dispute Resolution Panel" as a collegium of three Principal Commissioners or Commissioners, and "eligible assessee" as an....

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.... transformation of tax administration. Compliance and Procedural Impact The strict timelines for each stage of the process (thirty days for objections, one month for AO's order, nine months for DRP directions) promote procedural discipline and reduce uncertainty for all stakeholders. The requirement for written, reasoned directions and the opportunity of hearing are essential checks against arbitrary or unreasoned decision-making. Comparative Analysis: Clause 275 vs. Section 144C Structural and Substantive Similarities * Both provisions establish a draft order mechanism, requiring the AO to forward proposed prejudicial variations to eligible assessees. * The options for the assessee (acceptance or objection), the role and powers of the DRP, the binding nature of DRP directions, and the exclusion of certain categories of cases are substantively identical. * Time limits for each stage (thirty days for objections, one month for AO's order, nine months for DRP directions) are preserved. * The definition of "Dispute Resolution Panel" and "eligible assessee" is functionally equivalent, with updated cross-referencing reflecting legislative reorganization. * Both prov....