Oral Hearing Through Video Conferencing Is Mandatory in Faceless Appeals Upon Assessee's Request to Ensure Natural Justice.

The petitioner filed an appeal before the CIT(A) on 28.01.2020 against an assessment order passed under Section 143(3) of the Income Tax Act, 1961.

During subsequent penalty proceedings, the Assessing Officer (AO) informed the petitioner that the appeal had already been rejected on 28.07.2025.

Although the CIT(A) had issued several hearing notices to which the petitioner responded with written submissions, the petitioner's specific request for a personal/virtual hearing via video conferencing was not granted.

The petitioner challenged the appellate order on the grounds of violation of the principles of natural justice.

1. Whether the failure of the National Faceless Appeal Centre (NFAC) to provide a virtual/personal hearing despite a specific request constitutes a violation of the principles of natural justice.

2. Whether the consideration of written submissions by the Appellate Authority can serve as a substitute for an oral or personal hearing.

The court primarily applied the principles of natural justice (Audi Alteram Partem) as inherent in the appellate procedure under Section 250 of the Income Tax Act, 1961.

The court emphasized that the Faceless Appeal Scheme must ensure that the right to a hearing—either physical or virtual—is preserved when requested by the assessee to explain complex transactions.

The court also highlighted that "hearing" an appeal presupposes a face-to-face interaction (even if masked or digital) and cannot be entirely substituted by written memos.

The court reasoned that the appellate process is not a mere formality and requires the effective participation of the assessee.

While the Department argued that the faceless regime aims for non-physical interaction and that written submissions were considered, the court found this insufficient.

The court observed that certain complex issues—such as the disallowance of advances written off and additions under Section 68—require personal explanations that written text cannot fully convey.

By failing to provide a video conference link or virtual hearing despite a request, the CIT(A) acted in a manner that led to a "miscarriage rather failure of justice".

The court noted that hearing notices become "illusionary" if the final opportunity for oral representation is denied once the case is ripe for hearing.

The appeal was restored to the CIT(A) (NFAC) with a direction to provide a fresh notice and a mandatory video conference link for the hearing.

Consequently, the penalty orders passed under Sections 271AAC(1) and 270(A) were also quashed.

The court directed the CBDT and the Principal Chief Commissioner (NFAC) to ensure that video conferencing facilities are made available for all appellate proceedings under Section 250 as a matter of right within three months.