Vikas Bansal vs National Faceless Assessment Centre
- Court
- Punjab and Haryana High Court
IN THE HIGH COURT OF PUNJAB AND HARYANA
AT CHANDIGARH
CWP No. 11395 of 2026 (O&M)
Vikas Bansal
… Petitioner
Versus
National Faceless Assessment Centre
… Respondent
1. The date when the judgment is reserved 17.09.2026
2. The date when the judgment is pronounced 12.11.2026
3. The date when the judgment is uploaded on
the website
13.11.2026
4. Whether only operative part of the judgment
is pronounced or whether the full judgment
is pronounced
Operative
5. The delay, if any, of the pronouncement of
full judgment, and reasons thereof
Not applicable
CORAM : HON'BLE MR. JUSTICE DEEPAK SIBAL
HON'BLE MR. JUSTICE SUNISH BINDLISH
Argued by: Mr. Nikhil Goyal, Advocate, for the petitioner.
Ms. Gauri Neo Rampal Opal, Senior Standing Counsel, Income
Tax Department, for the respondent.
SUNISH BINDLISH, J.
1. This petition under Article 226 of the Constitution of India has
been filed by the petitioner, assailing the assessment order dated 16.03.2026
(Annexure P-14) passed under Section 143(3) read with Section 144B of the
Income Tax Act, 1961 (‘the Act’) by the National Faceless Assessment Centre
(‘NFAC’) for the Assessment Year 2024-25 and the consequential notice of
demand dated 16.03.2026 (Annexure P-15) issued under Section 156 of the
Act.
The principal grievance of the petitioner is that the impugned order
has been passed in violation of the principles of natural justice, inasmuch as the
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request of the petitioner for personal hearing through video-conferencing and
the reply filed by the petitioner in response to the show cause notice were not
considered before the assessment was finalised and therefore the assessment
order suffers from the vice of having been passed without affording adequate
opportunity as contemplated under Section 144B of the Act.
2. The relevant facts, as borne out from the record may be noticed in
brief:
(i) The case of the petitioner for the Assessment Year 2024-25 was
selected for scrutiny through CASS and assigned to the Assessing
Officer on 27.06.2025. An intimation letter dated 28.06.2025 was
issued to the petitioner informing him that the assessment would
be conducted in accordance with the procedure prescribed under
Section 144B of the Act, followed by a notice dated 28.06.2025
under Section 143(2) of the Act, requiring him to submit any
evidence in support of the return of income on or before
13.07.2025.
(ii) In the course of the assessment proceedings, notices under Section
142(1) of the Act were issued from time to time, fixing successive
dates of compliance (25.09.2025, 30.10.2025), the last of such
notices fixing 14.11.2025 as the date of hearing. The petitioner-
assessee filed various replies to the aforesaid notices issued under
Section 142(1) on 4.12.2025, 9.12.2025, 2.2.2025 and 23.2.2026.
(iii) With a view to independently verify the transactions of the
petitioner, the Assessing Officer issued notices dated 20.02.2026
under Section 133(6) of the Act to three persons, namely, Monika
Sharma, Ajay and Dinesh Kumar (Annexure R-1) , calling for
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information regarding their dealings with the petitioner. The
issuance of these notices stand duly recorded in the order-sheet
(Annexure R-2).
(iv) A show-cause notice dated 24.02.2026 (Annexure P-9) was
thereafter issued in the course of the scrutiny assessment under
Section 143(3) of the Act, the faceless procedure being governed
by Section 144B. The notice set out the proposed variations
prejudicial to the petitioner and fixed 01.03.2026 at 17:40 hours as
the last date and time for compliance. Clause 3(c) thereof informed
the petitioner that, in addition to filing a written reply, he could
seek personal hearing through video-conferencing by using the
designated ‘Seek Video Conferencing’ facility, but expressly
stated that such request could be made only before expiry of the
compliance date and time.
(v) It is borne out from the petitioner’s own pleadings that no response
to the show-cause notice, no application for extension of time and
no request for personal hearing was made on or before 01.03.2026,
i.e. the date and time fixed in the notice.
(vi) The order-sheet details (Annexure R-2) annexed with the Reply,
assume significance at this stage. It records that the show-cause
notice was generated on 24.02.2026 with the hearing/compliance
date fixed on or before 01.03.2026 at 17:40 hours. Thereafter, on
13.03.2026, the Income or Loss Determination Proposal (‘ILDP’)
was submitted for approval, approved, generated and its details
were shared with NFAC. Thus, by 13.03.2026, the departmental
record itself reflects that the show-cause/hearing stage had been
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treated as complete on account of non-response within the
stipulated period.
(vii) On 16.03.2026, NFAC recorded the direction, ‘Please prepare
Draft Assessment Order in accordance with Income or Loss
Determination Proposal’ . The draft assessment order was
thereafter prepared and submitted to the Range Assessment Unit
for approval. The order-sheet further records that, on the same date
i.e. 16.03.2026, the petitioner made a request for video-
conferencing (‘VC’), stating that the matter required explanation
on account of the complexity of facts and that written submissions
would be furnished on that very day. This entry finds place in the
order-sheet before the entries recording approval of the draft order
by the Range and its submission to NFAC and before the direction
to ‘Pass Final Assessment Order in accordance with Draft Order’,
which are recorded thereafter on the same date. The assessment
order under Section 143(3) read with Section 144B was generated
on the portal on 17.03.2026, followed by the demand notice and
computation sheet.
(viii) On 17.03.2026, the petitioner uploaded his detailed written reply
together with supporting documents (Annexures P-12 and P-13),
at about 04:52 PM. This was, no doubt, after the compliance date
of 01.03.2026 had expired and after the ILDP had been generated,
but it was before the impugned order stood authenticated at about
05.54 PM, since it is the respondents’ own stand in their reply that
the date of digital signature i.e. 17.03.2026 reflects the final
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authentication of the order. The order-sheet also records receipt of
this response on 17.03.2026.
It is the grievance of the petitioner that the impugned
assessment order makes no reference whatsoever either to the
request for VC or to the reply filed by the petitioner, and that the
assessment order records that no additional information,
explanation or documentary evidence has been furnished by the
assessee after the issuance of the show cause notice.
(ix) Penalty notices dated 17.03.2026 and 25.03.2026 (Annexures P-
16 and P-17) under Section 274 read with Section 271AAC(1) of
the Act were also issued consequent to the additions made in the
assessment order.
3. Learned counsel for the petitioner has raised the following
contentions:
(a) That the e-mail containing the show-cause notice escaped the
petitioner’s attention due to inadvertence; that the petitioner
became aware of it on 15.03.2026, on which date he immediately
prepared a reply; and that on 16.03.2026 he sought an opportunity
for personal hearing through VC at about 01:10 PM. The petitioner
also submitted a detailed reply on 17.03.2026 at 04:52 PM along
with complete supporting documents. It is submitted that the
respondent failed to consider the same and proceeded to pass the
impugned order without affording any effective opportunity of
being heard, thereby clearly demonstrating non-application of
mind and violation of principles of natural justice. It is pointed out
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that the impugned order does not even notice the request for VC
or the reply dated 17.03.2026.. It is accordingly contended that the
impugned assessment order has been passed in gross violation of
the principles of natural justice, as the reply and request of the
petitioner for personal hearing through video-conferencing ought
to have been considered before the assessment was finalised,
particularly when the matter involved complex facts and additions
running into substantial amounts.
(b) That there is a discrepancy between the date of the assessment
order (16.03.2026) and the date of digital signing thereof
(17.03.2026), which renders the order legally unsustainable and
non est in the eyes of law.
(c) That the mandatory procedure prescribed under Section 144B of
the Act, which is intended to ensure a fair and transparent faceless
assessment, has not been complied with in letter and spirit,
inasmuch as no effective opportunity was granted to the petitioner
before passing the impugned order.
(d) Reliance has been placed on the judgments of this Court in
Arihant Roller Flour Mills v. NFAC (CWP No. 7239 of 2023)
and Suvidhi Udyog Pvt. Ltd. v. National Faceless Assessment
Centre (CWP No. 8976 of 2022) and of Gujarat High Court in
Champion Exim Company v. Union of India, 2025:175
taxmann.com 1006 (Gujarat) , wherein failure to grant personal
hearing despite a specific request amounting to violation of
principles of natural justice, has been alleged and dealt with.
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(e) That the penalty notices issued under Section 274 read with
Section 271AAC(1) of the Act have been issued mechanically,
without independent application of mind, and without granting the
petitioner a fair opportunity to respond. The same are therefore
unsustainable.
4. Per contra, learned Senior Standing Counsel for the respondent,
while relying upon the reply filed by way of affidavit of Sh. Vijay Kumar Saini,
Income Tax Officer, Ward-1, Kurukshetra, has controverted the aforesaid
submissions and contended as under:
(a) That adequate, sufficient and reasonable opportunity was granted
to the petitioner by way of the show-cause notice dated
24.02.2026, which clearly and unambiguously specified the
compliance date as 01.03.2026 and further stipulated that any
request for personal hearing had to be made only before the expiry
of the said date and time. The petitioner neither filed any response
nor made a request for personal hearing through VC within the
stipulated period. The plea that the e-mail containing the notice
was not noticed due to inadvertence is wholly untenable and does
not constitute a valid ground for non-compliance with stipulated
timelines. The failure of the petitioner to respond within time is
attributable solely to his own negligence.
(b) That the request for video-conferencing made on 16.03.2026 and
the reply filed on 17.03.2026 were both substantially beyond the
compliance date of 01.03.2026 and after sufficient opportunity had
already been afforded, the respondent was under no obligation to
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consider such belated submission particularly in light of statutory
timelines governing completion of assessment. Principles of
natural justice do not mandate that the authority must wait
indefinitely for a response or consider belated submissions beyond
the stipulated timeline, particularly in timebound statutory
proceedings. The obligation of the authority is to provide an
opportunity, not to ensure that such opportunity is availed.
(c) That the discrepancy, if any, between the date of the order
(16.03.2026) and the date of its digital signing (17.03.2026) is
attributable to the system-driven process of generation and digital
authentication of orders on the Income Tax portal, and constitutes,
at best, a technical/procedural nicety causing no prejudice
whatsoever to the petitioner.
(d) That the judgments relied upon by the petitioner in Arihant Roller
Flour Mills (supra) and Suvidhi Udyog Pvt. Ltd. (supra) are
clearly distinguishable on facts, inasmuch as in both the cited cases
the assessee had duly made a timely request for personal hearing,
which request remained unattended – a situation squarely different
from the case at hand, where the petitioner himself failed to
respond within time.
(e) That the judgment of the Gujarat High Court in Champion Exim
Company (supra) is also clearly distinguishable, since in that case
the assessee was denied an effective opportunity on account of
notices having been sent to a wrong e-mail address, whereas in the
present case the show-cause notice was duly served, its contents
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stood admitted by the petitioner in the writ petition itself, and the
compliance date was unambiguously specified.
(f) That initiation of penalty proceedings under Section 274 read with
Section 271AAC(1) of the Act is a statutory consequence flowing
from the additions made and the satisfaction recorded in the
assessment order, the penalty proceedings are independent of and
separate from the assessment proceedings and the notice under
Section 274 itself affords a fresh opportunity to the petitioner to
explain his case and contest the levy of penalty. Any challenge to
the penalty notices would, therefore, be premature at this stage.
5. We have heard learned counsel for the parties, perused the paper-
book and given our thoughtful consideration to the rival submissions.
6. Section 143(3) is the substantive provision under which, upon
scrutiny, the Assessing Officer makes an assessment “ after hearing such
evidence as the assessee may produce and such other evidence as the Assessing
Officer may require on specified points, and after taking into account all
relevant material which he has gathered ”.
7. Where such assessment is required to be made in the faceless
regime, Section 144B regulates the manner in which that exercise is to be
undertaken. During the assessment under Section 143(3), a show-cause notice
is issued in a case involving a proposed prejudicial variation in accordance with
Section 144B(1)(xii)(b) calling upon the assessee to submit as to why the
proposed variation should not be made and an opportunity to make a request
for oral hearing , so as to make it’s oral submissions is provided under Section
144B(6)(vii). Clause (viii) of sub-section (6) provides that where the request
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for personal hearing has been received, the income-tax authority of the relevant
unit shall allow the hearing through NFAC by video-conferencing or video-
telephony in accordance with the procedure laid down by the Board.
8. For ready reference, the provisions of Section 144B which bear
directly on the controversy, as substituted by the Finance Act, 2022 with effect
from 01.04.2022, are reproduced below:
“Section 144B(1)
(1) Notwithstanding anything to the contrary contained in any
other provision of this Act, the assessment, reassessment or
recomputation under sub-section (3) of section 143 or under
section 144 or under section 147, as the case may be, with respect
to the cases referred to in sub-section (2), shall be made in a
faceless manner as per the following procedure, namely:—
XXX XXX XXX
(xii) the assessment unit shall, after taking into account all
the relevant material available on the record, prepare, in
writing,—
(a) an income or loss determination proposal, where
no variation prejudicial to assessee is proposed and
send a copy of such income or loss determination
proposal to the National Faceless Assessment Centre;
or
(b) in any other case, a show cause notice stating the
variations prejudicial to the interest of assessee
proposed to be made to the income of the assessee and
calling upon him to submit as to why the proposed
variation should not be made and serve such show
cause notice, on the assessee, through the National
Faceless Assessment Centre;
(xiii) the assessee shall file his reply to the show cause notice
served under sub-clause (b) of clause (xii) on a date and time
as specified therein or such time as may be extended on the
basis of an application made in this regard, to the National
Faceless Assessment Centre, which shall forward the reply
to the assessment unit;
(xiv) where the assessee fails to file response to the notice
served under sub-clause (b) of clause (xii) within the time
specified therein or within the extended time, if any, the
National Faceless Assessment Centre shall intimate such
failure to the assessment unit;
(xv) the assessment unit shall, after considering the response
received under clause (xiii) or after receipt of intimation
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under clause (xiv), as the case may be, and taking into
account all relevant material available on record, prepare
an income or loss determination proposal and send the same
to the National Faceless Assessment Centre;
XXX XXX XXX
Section 144B(6)
(6) For the purposes of faceless assessment—
XXX XXX XXX
(vii) in a case where a variation is proposed in the
income or loss determination proposal or the draft
order, and an opportunity is provided to the assessee
by serving a notice calling upon him to show cause as
to why the assessment should not be completed as per
such income or loss determination proposal, the
assessee or his authorised representative, as the case
may be, may request for personal hearing so as to
make his oral submissions or present his case before
the income-tax authority of the relevant unit;
(viii) where the request for personal hearing has been
received, the income-tax authority of relevant unit
shall allow such hearing, through National Faceless
Assessment Centre, which shall be conducted
exclusively through video conferencing or video
telephony, including use of any telecommunication
application software which supports video
conferencing or video telephony, to the extent
technologically feasible, in accordance with the
procedure laid down by the Board;
XXX XXX XXX
9. The obligation to issue a show-cause notice where a variation
prejudicial to the assessee is contemplated, is traceable to Section
144B(1)(xii)(b) of the Act. Clause (xii) requires the assessment unit, after
taking into account all the relevant material on record, to prepare in writing one
of two things. Where no prejudicial variation is proposed, it prepares an income
or loss determination proposal (‘ILDP’) under sub-clause (a). “In any other
case”, that is to say, wherever a variation prejudicial to the assessee is proposed,
sub-clause (b) requires it to prepare a show-cause notice stating the proposed
variations, calling upon the assessee to submit why they should not be made,
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and to have the notice served through NFAC. The requirement of a notice is
thus not a creation of any SOP or of departmental practice but it is a statutory
pre-condition to the preparation of an ILDP in a case of prejudicial variation.
10. Clause (xiii) of Section 144B(1) requires the assessee to file his
reply “ on a date and time as specified ” in the show-cause notice issued under
Section 144B(1)(xii)(b), or within such time as may be extended on an
application made by him. The date and time are thus to be specified by the
assessing authority in the notice, and the statute itself contemplates extension
on application. Clause (xiv) deals with the case in which the assessee fails to
respond “ within the time specified ” or within the extended time.
11. Section 144B(6)(vii) takes the matter a step further. Where a
variation is proposed and a show-cause notice has been served, the assessee or
his authorised representative “ may request for personal hearing so as to make
his oral submissions or present his case ”. The legislature has thus treated the
opportunity to seek an oral hearing as an incident of the show-cause notice itself
i.e. the assessee may file a reply to the show cause notice as per clause (xiii)
and also seek to explain his case orally by making a request for personal hearing
as per the provisions of Section 144B(6)(vii). Section 144B(6)(viii) then
prescribes what follows upon such a request viz. where the request for personal
hearing “ has been received ”, the income-tax authority of the relevant unit
“ shall allow such hearing ”, to be conducted exclusively by video-conferencing
or video-telephony, to the extent technologically feasible and in accordance
with the procedure laid down by the Board. Clause (vii) confers the liberty to
ask while clause (viii) imposes the corresponding duty to grant, once the
request has been made as contemplated by clause (vii).
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12. It may be apposite to note that no statutorily prescribed fixed time
period has been provided either in clauses (xii) to (xv) of sub-section (1) or in
clauses (vii) and (viii) of sub-section (6) of section 144B, within which the
assessee is bound to respond to the show-cause notice or make a request for
personal hearing. The Legislature has, where it so intended, fixed a period of
its own; for instance, sub-section (2) of Section 144C prescribes thirty days for
an eligible assessee to file objections to a draft order, and clause (ii) of Section
144B(1) as originally inserted in 2021 itself fixed fifteen days for responding
to a notice under Section 143(2). In clauses (xii) to (xv) of Section 144B(1)
and Sections 144B(6)(vii) and (viii)there is no such prescription.
The period is left to be fixed by the authority in each case, and the
SOP of 03.08.2022, which is the Board-approved instrument laying down the
procedure, treats seven days as the ordinary period and permits its curtailment.
The timelines for seeking compliance may therefore be fixed by the authority,
but in doing so the authority has to keep in view the statutory prescription for
framing of the assessment, namely the period of limitation under Section 153,
and the period fixed has to be a reasonable one that is realistically capable of
being complied with. The date so fixed is a stipulation made under the authority
of clause (xiii) of Section 144B(1) in aid of orderly and timely completion of
assessment. Though it is not a statutory period of limitation, once the period so
fixed is reasonable, the assessee is bound to adhere to it. The statute itself
provides the course open to an assessee who is unable to comply within the
time so fixed, namely, to apply for extension of time under clause (xiii). An
assessee who neither complies within the time specified nor seeks extension
within that time cannot thereafter insist that the authority must keep the show-
cause stage open for him.
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13. Equally, the statute does not say what is to happen to a response or
a request that reaches the authority after the date so specified but before the
assessment is completed. Clause (xiv),however, prescribes the consequence of
non-response within time, but that consequence is only that NFAC intimates
the failure to the assessment unit, which then proceeds under clause (xv) to
prepare the ILDP “ taking into account all relevant material available on
record ”.
The consequence of non-compliance is thus spelt out by the statute
itself. Upon the failure of the assessee to respond within the time specified or
within the extended time, NFAC intimates the failure and the assessment unit
proceeds to prepare the ILDP. Nothing in clauses (xii) to (xv) of Section
144B(1) or clauses (vii) and (viii) of Section 144B(6) casts an obligation upon
the authority, having so proceeded, to revert to the show-cause stage on the
strength of a reply or a request for hearing received thereafter, or to pass a
reasoned order on such belated reply or request. The cut-off date is therefore a
rule of procedure which entitles the authority to proceed on the material
available, if no response is received by that date. An assessee who has allowed
the time to lapse without seeking extension cannot claim, as a matter of right,
that such belated response must be considered and decided by a reasoned order.
14. The statutory scheme of faceless assessment is further
supplemented by the afore referred Standard Operating Procedure dated
03.08.2022 issued by NFAC, with prior approval of the CBDT, under Section
144B(6)(xi). Paragraph N.1 requires a show-cause notice wherever a
prejudicial variation is proposed and requires the notice to reflect the issues,
earlier opportunities, compliance/non-compliance, submissions of the assessee,
material proposed to be used and the proposed variations. Under paragraph
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N.1.3.1, the ordinary response time to the show-cause notice is seven days from
its issue; paragraph N.1.3.2 permits that period to be curtailed keeping in view
the limitation for completion of the assessment. Paragraph N.2.1 provides that
where personal hearing is sought through the designated button on the e-filing
portal, the Assessment Unit shall accord hearing through VC and paragraph
N.2.2 contemplates that the VC should be given within two to three days of the
request. Of particular significance is paragraph N.3.2, which provides that, in
cases involving a variation prejudicial to the assessee, the ILDP shall be
prepared after completion of the process of the show-cause notice and VC, if
any.
Read together, the afore statutory provisions and the SOP disclose
the sequence: show-cause notice and response; personal hearing, if sought in
that process; completion of that stage; preparation of ILDP; preparation/review
of the draft order and, thereafter, the final assessment order. Each stage is
premised upon the completion of the preceding one. Once the show-cause stage
stands closed on account of non-response within the stipulated time and the
ILDP has been prepared, the process moves forward, and the scheme does not
contemplate its reversal at the instance of an assessee who has defaulted.
15. It may also be noteworthy to mention that the Finance Act, 2022
brought about a material change in the statutory scheme governing personal
hearing under faceless assessment. The provisions as they stood in Section
144B(7) prior to the substitution read as under:
Pre amendment:
“144B (7)- For the purpose of faceless assessment-
XXX XXX XXX
(vii) In a case where a variation is proposed in the draft
assessment order or final draft assessment order or revised
assessment order, and an opportunity is provided to the
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assessee by serving the notice calling upon him to show-
cause as to why the assessment should not be completed as
per the such draft or final draft or revised draft assessment
order, the assessee or his authorised representative, as the
case may be, may request for personal hearing so as to make
his oral submissions or present his case before the income-
tax authority in any unit;
(viii) The Chief Commissioner or Director General, in
charge of the Regional Faceless Assessment Centre, under
which the concern unit is set up, may approve the request
for personal hearing referred to in Clause (vii) if he is of the
opinion that the request is covered by the circumstances
referred to in sub-clause (h) of clause (xii);”
The post-amendment provisions, namely Section 144B(6)(vii) and
(viii), stand reproduced in paragraph 8 above. As would be evident from a
comparison of the two, the pre-amended provision provided that the competent
authority ‘may approve’ a request for personal hearing, whereas upon
substitution of Section 144B with effect from 01.04.2022, Section
144B(6)(viii) mandates that, where a request for personal hearing contemplated
by clause (vii) has been received, the concerned income-tax authority ‘ shall
allow such hearing’ through video-conferencing. The said amendment
removed the discretion earlier available to the authority in dealing with a
request for hearing. The word ‘shall’ is imperative and the provision is a
statutory embodiment of the principle of audi alteram partem in the faceless
regime.
16. Having said that we are equally mindful of the practical
considerations urged on behalf of the respondents. Assessments under the Act
are required to be completed within the period prescribed under Section 153,
which, for the Assessment Year 2024-25, expired on 31.03.2026. Once the date
fixed in the show-cause notice has passed, the assessment unit proceeds to
prepare the ILDP, and the draft order then passes through a multi-tier process
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of review and approval before the final order is generated, authenticated and
served. A request for hearing or a reply received late in that process may well
present the authority with genuine difficulty in examining it and in framing a
reasoned assessment order within the time permitted by law.
We also do not accept the proposition that an assessee can,
regardless of the specific cut-off date fixed in the show-cause notice, seek
personal hearing or file his response at any time he chooses, even on the eve of
the last date on which the assessment itself would become barred by limitation.
Assessments under the Act are required to be completed within the period
prescribed under Section 153, which, for the Assessment Year 2024-25,
expired on 31.03.2026. Were assessees to be permitted, as a matter of right, to
request video-conferencing or to file replies up to that very last date, the
Assessing Officer would be rendered incapable of examining the response,
undertaking the multi-tier approval process and framing a reasoned assessment
order within the time permitted by law. Such a construction would place it in
the power of an assessee to defeat the timely completion of assessment by
delaying his response until the eleventh hour. Even in the realm of assessment
proceedings, the requirement is one of a reasonable opportunity of hearing and
not an unlimited or open-ended one.
The word “shall” in Section 144B(6)(viii) of the Income-tax Act,
1961 must be construed harmoniously with the scheme of faceless assessment
as a whole. That scheme is designed to operate within fixed time-frames and is
bound by the limitation period prescribed for completing the assessment. The
provision cannot be read in isolation from that statutory framework. To
interpret it otherwise would render the time-bound mechanism of faceless
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assessment unworkable and otiose, a result the Legislature cannot be presumed
to have intended.
On a proper construction, the amendment to Section 144B(6)(viii)
does no more than remove the discretion previously vested in the authorities to
decline a request for personal hearing at their pleasure. Where, however, the
assessee has been granted a hearing and fails to avail of it within the time
allowed, it would not be open to the assessee to insist on a hearing, irrespective
of the attendant facts, merely because the amended provision uses the words
“shall allow such hearing.”
17. The fixation of a definite date for compliance is, therefore, not only
permissible but necessary, and it serves a vital function in the faceless
assessment scheme. It enables the Assessing Officer to proceed on the material
available, if no response is received by that date, and to marshal the material,
apply his mind and frame the assessment within the time permitted by law. The
authority would, therefore, be justified in proceeding with the assessment and
in not entertaining a request for hearing or a reply received after that date,
where no extension has been sought within the time granted and no sufficient
cause has been shown for the failure to act within time.
The obligation of the authority to deal with, and to pass a reasoned
order on, a request for personal hearing, a reply or an application for extension
of time arises where such request, reply or application is made within the time
stipulated in the show-cause notice or within the time extended on an
application in that regard. Had the assessee sought personal hearing or filed a
reply within time, or sought extension within time, the authority would have
been bound to deal with the same and to pass a reasoned order thereon, and a
failure to do so may well have vitiated the assessment. The position is
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materially different where the assessee allows the stipulated time to lapse, seeks
no extension and approaches the authority only after the show-cause stage has
been closed and the assessment has moved on to the subsequent stages. In such
a situation, the authority is justified in proceeding with the assessment keeping
in view the timelines for its completion, and cannot be faulted for not passing
a reasoned order on the belated request or reply.
18. Turning to the facts of the present case, the show-cause notice
dated 24.02.2026 required the petitioner to submit his response by 17:40 hours
on 01.03.2026. It gave three alternatives: acceptance of the variation, filing of
a written objection or, in addition to the written reply, seeking a personal
hearing through the designated VC facility.It further stated that the request for
VC could be made only before expiry of the compliance date and time and that,
in the absence of a response, the assessment would be finalised by taking the
proposed variations into account.
Although the SOP ordinarily contemplates seven days for a
response, it recognises curtailment of that period having regard to the limitation
for completion of the assessment, and the period allowed by the notice was one
which the authority was competent to fix in terms of clause (xiii) of Section
144B(1).
Admittedly, the petitioner did not respond or file a reply, did not
seek extension and did not seek VC by 01.03.2026. The explanation offered by
him is that the e-mail containing the notice escaped his attention, that he
became aware of it on 15.03.2026 and that he sought VC on the very next day.
Even upon becoming aware of the notice, the petitioner did not apply for
extension of time setting out any cause for his default; he merely sought VC on
16.03.2026 and uploaded a reply on 17.03.2026.
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19. In the above facts, the question that would fall for consideration
before us, therefore, is whether the respondents were bound to grant the hearing
sought by the petitioner, or to consider his belated reply and pass a reasoned
order thereon, when both were made long after the expiry of the time stipulated
in the show-cause notice, without any application for extension of time having
been made within the time granted, and after the show-cause stage stood closed
and the ILDP had been generated. The order-sheet (Annexure R-2) , on which
the respondents themselves rely, supplies the chronology, which is not in
dispute:
(a) The show-cause notice was generated on 24.02.2026, with
compliance fixed on or before 01.03.2026 at 05:40 PM, which date
lapsed without response.
(b) The ILDP was submitted for approval, approved, generated and
shared with NFAC on 13.03.2026.
(c) On 16.03.2026, NFAC directed preparation of the draft assessment
order, which was submitted by the Assessing Officer to the Range
Assessment Unit for approval. At that stage, the petitioner’s
request for VC, citing complexity of facts and stating that written
submissions would be furnished the same day, was received on the
same date. It stood on the order-sheet before the draft order was
approved by the Range and before NFAC directed that the final
order be passed.
(d) The final assessment order was generated and uploaded on
17.03.2026 and, as per the respondents’ own case, was digitally
signed and authenticated on that date.
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(e) The petitioner’s detailed reply with supporting documents was
filed at 04:52 PM on 17.03.2026, i.e. on the very day the final order
was generated and only about an hour before the impugned order
was authenticated.
(f) The period of limitation for completion of the assessment expired
on 31.03.2026, i.e. about two weeks after the date on which the
order was uploaded.
Thus, the request for VC came about fifteen days after the expiry
of the compliance date, after the ILDP had been approved, generated and
shared with NFAC, and when the draft assessment order had already been
prepared and submitted to the Range for approval. The reply came on the very
day on which the final order was generated. Neither the request nor the reply
was preceded by any application for extension of time made within the time
granted. The fact that about two weeks remained before the period of limitation
expired on 31.03.2026 does not alter the position. The timelines fixed in the
show-cause notice are intended precisely to enable the authority to complete
the multi-tier process of preparation of the ILDP, preparation and review of the
draft order and passing of the final order within the period of limitation; an
assessee cannot, by his own default, compel the authority to rewind that process
and compress it into whatever time happens to remain.
20. As regards the fact that the ILDP had already been generated on
13.03.2026, in our view, this is a circumstance of significance. Under clause
(xv) of Section 144B(1), read with paragraph N.3.2 of the SOP, the ILDP is to
be prepared after the process of the show-cause notice and VC, if any, is
complete, or after intimation of the failure of the assessee to respond within
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time. Its generation thus marks the closure of the show-cause stage in
accordance with the statutory scheme. The movement of the file thereafter
between the Assessment Unit, the Range and NFAC is the onward progression
of the assessment towards its completion within the time permitted by law. The
final assessment order under clause (xxii) of Section 144B(1) is passed by the
assessment unit in accordance with the draft order, and the relevant material
which the authority is required to take into account is the material which has
come on record in the manner and within the time contemplated by the scheme.
The scheme nowhere obliges the authority to revert to an earlier
stage of the internal sequence merely because a defaulting assessee chooses to
file a reply or seek a hearing after that stage has closed. The authority is not
bound to do so, much less to record reasons for not doing so, at the instance of
an assessee who has allowed the stipulated time to lapse without seeking
extension. Paragraph N.3.2 prescribes the sequence in which the internal stages
are to be undertaken, and to require the authority to re-open a completed stage
at the asking of a defaulting assessee would run counter to that sequence.
In the present case, the ILDP had already been generated, the draft
order had been prepared and placed for approval, and the multi-tier process
would have had to be re-opened, all within the limited time remaining for
completion of the assessment. In these circumstances, the authority was
justified in proceeding to finalise the assessment on the basis of the ILDP and
the draft order. The absence of a specific reference in the assessment order to
the belated request and reply does not, in such circumstances, vitiate the order.
The stand of the respondents in the reply-affidavit, that the request
and the reply were belated and that the authority was justified in proceeding on
the material available, does not amount to supplying fresh reasons for the
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impugned order; it is a statement of the procedural position which the statute
itself prescribes under clauses (xiv) and (xv) of Section 144B(1). The principle
in Mohinder Singh Gill v. Chief Election Commissioner, (1978) 1 SCC 405
is, therefore, not attracted.
21. The principles of natural justice are not a mere formality; equally,
they are not cast in a rigid mould, and their content in a given case is shaped by
the statutory framework within which the authority acts. Here, the statute itself
structures the opportunity: a show-cause notice specifying a date and time for
reply, the liberty to seek personal hearing within that time, and the liberty to
apply for extension of time. The petitioner was afforded that opportunity and
failed to avail of it. The obligation of the authority is to afford an opportunity,
not to ensure that it is availed of. It is true that the assessment order does not
refer to the request for VC made on 16.03.2026 or to the reply filed on
17.03.2026, and that it records that no additional information, explanation or
documentary evidence had been furnished by the assessee after the issuance of
the show-cause notice. That recital, read in its context, reflects the position that
no response was received within the time stipulated in the show-cause notice.
At the highest, it is an inaccuracy in narration which has caused no prejudice
to the petitioner, since the request and the reply were belated and were not such
as the authority was bound to consider and decide by a reasoned order.
It is well settled that the right to reason is an indispensable part of
the dispensation of justice. Reasons are the live link between the material on
record and the conclusion arrived at; they assure the person affected that his
case has been considered, and they enable a superior forum to ascertain whether
the decision was reached upon due application of mind. Even in respect of
administrative orders, the giving of reasons is one of the fundamentals of good
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administration. The obligation applies with all the greater force to an
assessment order, which is quasi-judicial in character and visits the assessee
with civil consequences. However, the duty to record reasons is co-extensive
with the duty to decide. Where a request for hearing, a reply or an application
for extension is made within the time granted, the authority is bound to deal
with it and to indicate, however briefly, the reason for the course adopted. That
duty cannot be stretched to require the authority to render a reasoned decision
on every belated communication received from an assessee after the stage to
which it pertained has closed. To hold otherwise would enable an assessee to
re-open, at his own convenience, a stage which the statute requires to be closed
within the time specified.
A quasi-judicial order is expected to reflect application of mind to
the material on record. The respondents’ stand that the order was passed ‘on
the basis of the material available on record’ cannot, in the facts of the present
case, be faulted, since the material which had come on record within the time
contemplated by the statutory scheme was duly considered. What the petitioner
complains of is, in substance, the consequence of his own failure to respond, or
to seek extension, within the time granted.
22. The position that emerges is this. The petitioner was duly served
with a show-cause notice which fixed a date and time for compliance and
expressly stated that a request for VC could be made only before the expiry of
that date and time. Under clause (xiii) of Section 144B(1), it was for the
petitioner to file his reply within the time specified or within such time as may
be extended on an application made in that regard. Under clause (vii) of Section
144B(6), the request for personal hearing is an incident of the show-cause
notice and, in terms of the notice, had to be made before the expiry of the
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compliance date. The petitioner did neither, and also did not seek any extension
of time. Upon such failure, clauses (xiv) and (xv) of Section 144B(1) came into
operation, and the assessment unit prepared the ILDP, followed by the draft
order and the final order. The authority thus acted in conformity with the
statutory scheme.
The fact that the request and the reply were received after the date
specified in the show-cause notice is, in the facts of this case, decisive. Had the
petitioner sought personal hearing or filed a reply within time, or sought
extension within the time granted, the authorities would have been bound to
deal with such request and to pass a reasoned order thereon. That obligation
does not arise now, when the petitioner failed to act within time, sought no
extension and approached the authority only after the show-cause stage had
closed and the assessment had reached its final stages.
We may also observe that the petitioner is not left without remedy.
The Act provides a statutory remedy of appeal under Section 246A, in which
the petitioner can raise all his contentions on the merits of the additions,
including, subject to the conditions prescribed in Rule 46A of the Income-tax
Rules, 1962, the production of additional evidence.
23. The petitioner has placed reliance on Arihant Roller Flour Mills
v. NFAC (supra) and Suvidhi Udyog Pvt. Ltd. (supra) . The respondents seek
to distinguish them on the ground that, in those cases, the assessee had made a
timely request which remained unattended. It is true that those authorities
concern a failure of the department to act upon a request for hearing made
within the date fixed, and it is not the case of the petitioner that he sought VC
by the compliance date fixed in the show-cause notice. Those decisions are,
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therefore, clearly distinguishable on facts and do not advance the case of the
petitioner.
24. The judgment of the Gujarat High Court in Champion Exim
Company is distinguishable on facts, since in that case the assessee was denied
an effective opportunity on account of the notice under Section 148A(b) having
been sent to an e-mail address other than the registered one, whereas in the
present case the show-cause notice was sent to the petitioner and its receipt is
not in dispute.
25. Learned Senior Standing Counsel has invoked the principle that
the law does not assist a party who sleeps over his rights, and that an assessee
is required to be vigilant and diligent in submitting his complete response at the
first available opportunity. We find merit in the said submission. The only
explanation offered by the petitioner for not acting within time is that the e-
mail containing the show-cause notice escaped his attention due to
inadvertence. The explanation is bald, is unsupported by any particulars and
does not constitute sufficient cause. Under the faceless regime, notices are
communicated through the registered e-mail address and the e-filing portal, and
an assessee whose case is under scrutiny is expected to remain vigilant. It is
significant that the petitioner had been actively participating in the assessment
proceedings, having filed replies to the notices under Section 142(1), the last
of which was filed on 23.02.2026, i.e. just a day before the issuance of the
show-cause notice. In these circumstances, the petitioner cannot be heard to say
that the show-cause notice escaped his attention, and the consequences of his
default must be borne by him.
26. In view of the above discussion, the legal position may be
summarised thus. The assessing authority is competent to fix a date and time
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for responding to a show-cause notice and further grant time to the assessee to
make a request for personal hearing. Assessees are expected to follow the
timelines so stipulated and would do well to treat them with the seriousness
they deserve. An assessee who is unable to comply within the time so stipulated
is required to apply for extension of time within that time, as contemplated by
clause (xiii) of Section 144B(1). Where a reply, a request for personal hearing
or an application for extension is made within the time granted, the authority is
bound to deal with it and to pass a reasoned order thereon. On the failure of the
assessee to do so, the assessing authority may proceed in accordance with the
mandate of clauses (xiv) and (xv) of Section 144B(1), that is, upon failure of
the assessee to respond to the notice within the prescribed time, prepare the
income or loss determination proposal taking into account all relevant material
available on record, and proceed to complete the assessment. Once the
authority has so proceeded, it is not bound to revert to the show-cause stage, or
to pass a reasoned order, on a request for VC or a reply made thereafter, where
no extension was sought within the time granted and no sufficient cause has
been shown for the failure to act within time. In the present case, the request
for VC was made on 16.03.2026 and the reply was filed on 17.03.2026, long
after the compliance date of 01.03.2026, without any application for extension,
and after the ILDP had been generated and the draft order prepared. The
authority was, therefore, justified in proceeding to complete the assessment
keeping in view the timelines for its completion.
27. As regards the contention founded upon the discrepancy between
the date recorded in the assessment order (16.03.2026) and the date of its digital
signing (17.03.2026), we find no substance therein insofar as it is urged that
the order is thereby rendered non est . The process of generation, approval and
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digital authentication of orders under the faceless assessment regime is
inherently system-driven and sequential and a minor and explainable variance
of this nature, without anything more, does not render the order invalid. Further
no prejudice has been demonstrated as flowing from this variance alone and it
is trite that a technical or venial irregularity, unaccompanied by prejudice, does
not vitiate an otherwise valid administrative or quasi-judicial action. We have,
however, proceeded on the footing which the respondents themselves admit,
namely, that the date of digital signature reflects the final authentication of the
order. The circumstance that the reply of the petitioner was uploaded a little
before the order stood authenticated on 17.03.2026 makes no difference, for
the reasons recorded above.
28. That as regards the petitioner contention regarding the issuance of
penalty notices dated 17.03.2026 and 25.03.2026 (Annexures P-16 and P-17)
issued under Section 274 read with Section 271AAC(1) of the Act and the
consequent stand taken by the respondents that penalty proceedings are
independent of and separate from the assessment proceedings and that the
notice under Section 274 itself affords an opportunity to the petitioner to
explain his case, it may suffice to notice that the petitioner has not made any
prayer for quashing of the said notices, through the instant writ petition.
Since the penalty proceedings are independent of and separate
from the assessment proceedings, and the notice under Section 274 itself
affords an opportunity to the petitioner to explain his case, it shall be open to
the petitioner to respond to the said notices taking all pleas as may be available
to him in law. The authorities may then proceed subject to and in the manner
contemplated by applicable provisions of the Act.
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29. The petitioner has a statutory remedy of appeal under Section
246A of the Act against the assessment order. In view of our finding that the
impugned assessment order does not suffer from any violation of the principles
of natural justice or from any foundational irregularity in the process by which
it was framed, the contentions of the petitioner on the merits of the additions
are matters which the appellate authority is fully equipped to examine. We,
therefore, see no reason to entertain the petition on that score either. Should the
petitioner choose to avail of the remedy of appeal, the appellate authority may,
while considering any application for condonation of delay under Section
249(3) of the Act, take into account the time spent by the petitioner in bona fide
pursuing the present writ petition, in accordance with law.
30. For the reasons recorded above, we are of the considered view that
the impugned assessment order does not suffer from any infirmity warranting
interference in exercise of the writ jurisdiction. The petitioner was afforded
adequate opportunity in accordance with the scheme of Sections 143(3) and
144B(1)(xii) to (xv) read with 144B(6)(vii) and (viii) of the Act. He failed to
respond, to seek personal hearing or to seek extension of time within the time
granted, and has not shown sufficient cause for such failure. The authorities
were justified in proceeding with the assessment keeping in view the timelines
for its completion, and no violation of the principles of natural justice is made
out.
Accordingly, the writ petition is dismissed with the following
observations:
(i) The challenge to the assessment order dated 16.03.2026
(Annexure P-14) passed under Section 143(3) read with Section
144B of the Act for the Assessment Year 2024-25 and the
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consequential notice of demand dated 16.03.2026 (Annexure P-
15) issued under Section 156 of the Act is rejected.
(ii) It shall be open to the petitioner to avail of the remedy of appeal
under Section 246A of the Act, and the appellate authority may
consider any application for condonation of delay in the manner
indicated in paragraph 29 above.
(iii) As regards the penalty proceedings initiated under the notices
dated 17.03.2026 and 25.03.2026 (Annexures P-16 and P-17), the
petitioner shall be at liberty to respond to the said notices. The
authorities may then proceed subject to and in the manner
permissible in law.
(iv) The observations made herein are confined to the challenge
founded on the alleged violation of the principles of natural justice,
and the contentions of the petitioner on the merits of the additions,
if raised in appeal, shall be decided by the appellate authority
uninfluenced by anything observed herein.
31. Pending application(s), if any, stand disposed of. There shall be no
order as to costs.
( DEEPAK SIBAL )
JUDGE
( SUNISH BINDLISH )
JUDGE
November 12, 2026
rps
Whether speaking/reasoned Yes/No
Whether reportable Yes/No
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