Faceless assessment under section 144B: show cause notice and hearing

This is Part 1 of a three-Part series on faceless assessment and faceless appeal. This Part covers the assessment itself under section 144B of the Income-tax Act, 1961 and section 273 of the Income-tax Act, 2025: the show cause notice, the hearing, the relief and limitation. Part 2 covers jurisdiction and form after the Finance Act, 2026 (the Document Identification Number, the signature, the officer who issues the section 148 notice and approvals); Part 3 covers the appeal before the Commissioner (Appeals).

A show cause notice is placed on the portal on a Saturday evening and asks for a reply by Tuesday morning. Or the assessment order arrives with an addition the notice never mentioned, or without the video hearing that was asked for. A challenge to a faceless assessment usually begins with facts of this kind, and is decided on what the portal record shows about them.

Section 144B of the Income-tax Act, 1961 gives the assessee one document that tells him what is proposed against him, the show cause notice, and one right that arises on it, a personal hearing by video if he asks. Courts have set aside orders passed in breach of either, and have refused relief where the assessee did not ask, did not reply, or sought repeated adjournments. The order set aside is almost always remitted, not annulled.

Key points

• A faceless assessment order passed without the show cause notice required by section 144B(1)(xii)(b) is set aside. The Supreme Court, on 21 March 2023 and on the earlier text of the section, described the step as “mandatorily required” but remanded for fresh orders; the Calcutta High Court held to the same effect on the current text on 16 November 2022.
• Whether an assessee who is not an “eligible assessee” under section 144C (one whose variation arises from an order of the Transfer Pricing Officer, a non-resident not being a company, or a foreign company) must also be served with the draft order is open. The Kerala High Court (Division Bench, 27 March 2025) held that he need not be; the Supreme Court’s orders speak of “a show cause notice with a draft Assessment Order” without drawing the distinction.
• Once a personal hearing is requested after a show cause notice, section 144B(6)(viii) says the unit “shall allow such hearing” by video. Where no request was made, the Kerala High Court (8 June 2026) and the Telangana High Court (3 March 2026) refused to interfere.
• A written request not made through the portal button was held sufficient by the Gujarat High Court on 11 October 2021. The later decisions discussed here do not squarely decide the point on the current text, so the request should be made both ways.
• The section fixes no minimum time to reply. The seven days come from the standard operating procedure of 3 August 2022, which itself permits curtailment for limitation. Three days (Gujarat High Court, 28 July 2026) and four days after six months of inaction (Delhi High Court, 14 October 2026) have led to a set-aside.
• The relief is a set-aside and remand, not annulment. Sub-section (9), the “non est” clause (an assessment in breach treated as never made), was omitted with retrospective effect from 1 April 2021. Outright quashing has followed where the order was itself beyond limitation or where an eligible assessee was denied a draft order under section 144C. For the fresh order section 153(6)(i) gives twelve months from the end of the month in which the court’s order is received; whether the court’s own date can displace that is open.
• Section 144B(2) leaves the coverage to the Board, which, for search and survey cases, excludes by charge and not by type of case: search cases are outside faceless assessment because they are assigned to Central Charges, and survey cases because the Board directs their transfer there. Reassessments under section 147 and best judgment assessments under section 144 are inside it.
• Breach of the standard operating procedure of 3 August 2022 is not, in our view, fatal by itself. The Gujarat High Court called the procedure mandatory on 20 January 2026 and 17 April 2026, but in both cases a requested video hearing, which section 144B(6)(viii) itself requires, had been denied, and the Revenue’s counsel was not in a position to dispute the facts. Its seven-day paragraph has been used as the measure of a reasonable opportunity (Bombay High Court, 24 November 2025; Telangana High Court, 19 February 2026).
• A writ petition has been entertained where the breach is plain from the portal record, and refused where the notice was served and nothing was filed (Patna High Court, 10 February 2025) or where adjournments were sought repeatedly and no hearing was requested (Telangana High Court, 3 March 2026). Where it succeeds, the result is ordinarily a remand.
• For tax year 2026-27 onwards, section 273 of the Income-tax Act, 2025 keeps in the Act only “an opportunity of being heard”; the show cause notice and the video hearing are in Rule 176 of the Income-tax Rules, 2026.

What section 144B is now, and what it has stopped being

Since 2019 faceless assessment has been governed by three different texts, with a further change in 2026. Much of the case law was decided on a text that is no longer in force, so the first job on any file is to identify which text applied on the date of the step being attacked.

The Scheme era. Before 1 April 2021 faceless assessment ran under the Faceless Assessment Scheme, 2019 and orders of the Board. The Board’s order of 13 August 2020 under section 119 carried its own consequence clause, quoted by the Supreme Court on 21 March 2023 in National Faceless Assessment Centre v. Chander Arjandas Manwani (Civil Appeal No. 1937 of 2023, para 3): “Any assessment order which is not in conformity with Para-2 above, shall be treated as non-est and shall be deemed to have never been passed.” (“Non est”: treated in law as never having been made.) An order passed before 1 April 2021, such as the order of 2 March 2021 in that case, is not an order under section 144B at all.

The 2021 text. Section 144B was inserted by the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (Act 38 of 2020) with effect from 1 April 2021. It covered only assessments under section 143(3) and section 144, and was built around a “draft assessment order” made by the assessment unit and examined by the National Faceless Assessment Centre, which then finalised the assessment, issued a show cause notice or sent the draft for review. The personal hearing lay in the discretion of the Chief Commissioner or Director General in charge of a Regional Faceless Assessment Centre. Sub-section (9) declared that an assessment not made in accordance with the procedure “shall be non est”.

The 2022 text. The Finance Act, 2022 (Act 6 of 2022) recast the procedural sub-sections with effect from 1 April 2022 and omitted sub-section (9) with retrospective effect from 1 April 2021. This is the text in force today. It extends to reassessment under section 147, removes the Regional Centres, makes the assessment unit the author of the show cause notice and of the final order, replaces the draft assessment order as the working document with an “income or loss determination proposal”, and says that a hearing, once requested, “shall” be allowed.

The 2026 change. The Finance Act, 2026 (Act 4 of 2026) is dated 30 March 2026; by its section 1(2)(a), “Save as otherwise provided in this Act”, its sections 2 to 129 came into force on 1 April 2026. Section 7 substituted, in section 144B(6)(i)(b), the words “by way of an electronic communication” for “by affixing digital signature”, and deemed the substitution to have been made from 1 April 2022. Sections 9, 32 and 33 inserted sections 147A, 292BA and 292BC, each with its own deemed date. Those three sections, and the substituted authentication clause, are taken up in Part 2.

Provisions of the 2021 text are still cited, though they are not law for any step taken on or after 1 April 2022, in particular the old sub-section (7)(vii) to (ix), the “may approve” hearing provision on which the leading Delhi decisions were given. The Patna High Court reproduced sub-sections (1) to (8) of the superseded text in Awadh Kishor Singh v. National Faceless Assessment Centre (10 February 2025, para 28) because the notice there had been issued on 31 March 2021. Before relying on a judgment, check which text it construed.

The 2025 Act. For tax year 2026-27 onwards the counterpart is section 273 of the Income-tax Act, 2025, which keeps the Centre and the units in the Act and sends the procedure to Rule 176 of the Income-tax Rules, 2026. The 1961 Act continues to govern every tax year beginning before 1 April 2026, including proceedings for those years begun later (section 536(2)(c) of the 2025 Act).

Which cases are faceless: the Board’s orders

Section 144B(2) leaves the coverage to the Board: faceless assessment is made “in respect of such territorial area, or persons or class of persons, or incomes or class of incomes, or cases or class of cases, as may be specified by the Board”. The Board has specified by exception. Its orders, all under F. No. 187/3/2020-ITA-I, direct that every assessment be made under section 144B except those in a short list. The order of 6 September 2021 recites two exceptions and adds a third; the order of 16 December 2021 adds the survey exception. The standing exceptions, in the Board’s words:

• “Assessment orders in cases assigned to Central Charges.”
• “Assessment orders in cases assigned to International Tax Charges.”
• “Assessment Orders in cases where pendency could not be created on ITBA because of technical reasons or cases not having a PAN, as the case may be.” By the order of 22 September 2021 these are completed by the jurisdictional Assessing Officer.
• “Assessment proceedings which are pending / initiated pursuant to action u/s 133A of the Act or where action u/s 133A of the Act is conducted in ongoing assessment proceedings.” The order of 16 December 2021 directs that all such cases, “excluding International Taxation”, be transferred to the Central Charges under section 127, “regardless of presence/absence of impounded material”, and be completed there.

The exclusion is by charge, not by type of case: search cases fall outside section 144B because they are assigned to Central Charges, and survey cases because the Board directs their transfer there.

Four categories are inside the faceless stream although the orders are sometimes read as excluding them:

• Reassessments under section 147, which the 2022 text brought into section 144B(1) in terms.
• Best judgment assessments under section 144 (clauses (viii) to (xi)).
• A domestic company with a transfer pricing adjustment that is assessed in an ordinary charge. The second exception turns on the case being assigned to an International Tax Charge, not on the presence of an international transaction.
• A case connected with a search that has not been centralised. Nothing in the orders excludes it in terms.

A case can also leave the faceless stream individually. Under section 144B(8) the Principal Chief Commissioner or Principal Director General in charge of the Centre may, “at any stage of the assessment, if considered necessary”, transfer the case to the jurisdictional Assessing Officer “with the prior approval of the Board”. A special audit reference under section 142(2A) is the other statutory exit (clause (xxxii) and sub-section (7)). In Fusion Granito Private Limited v. Assistant Commissioner of Income Tax (Gujarat High Court, 14 June 2024) the assessee contended that, no transfer under section 144B(8) having been notified to it, the jurisdictional officer had no jurisdiction. The Bench held (para 12) that the contention was “not tenable in view of the notings made in the order sheet”, the assessment being one pursuant to an order under section 263 which “is required to be conducted by jurisdictional Assessing Officer”; it then quashed the order for denial of a hearing. That remark has no counterpart in the Board’s exceptions, and in the Gujarat decision on section 144C discussed later such proceedings were, on the Revenue’s own submission, before the Faceless Assessing Officer. (Darshit Ashokbhai Zinzuwadia, Gujarat High Court, 11 March 2025, on a case centralised after a search, is discussed with the personal hearing.)

Is an assessment made in the wrong stream (an excluded case assessed by a faceless unit, or an included case assessed by the jurisdictional officer without a transfer under sub-section (8)) void or merely irregular? While sub-section (9) stood the statute answered that; it no longer does, and the decisions above do not settle it. For the assessee, the Andhra Pradesh High Court’s judgment of 12 October 2026 in Bala Sreenivas Rao Somisetty v. The Income Tax Officer says (para 79) that a case can pass from the jurisdictional to the faceless officer only by the procedure of section 127, with a hearing and recorded reasons. That passage is part of the reasoning by which the Bench struck down section 147A (para 107), and the question which officer issues the section 148 notice is before the Supreme Court, which has listed the appeal against the Punjab and Haryana judgment striking down the same section for final hearing on 3 December 2026 (see Part 2, under reassessment). For the Revenue, the Punjab and Haryana High Court’s decision of 20 December 2024 in M/s Patran Foods Pvt. Ltd. v. Union of India concerned notices of 2021 issued by the jurisdictional officer and revived by the Supreme Court under Article 142. No transfer under section 144B(7) and (8) had been made, but the Bench reasoned (para 23) that the Supreme Court’s order had itself given the jurisdictional officer jurisdiction over those notices, held that he “would continue to proceed and have jurisdiction to decide the notices which were originally issued by him”, and added (para 25) that “no prejudice would be caused if such a course is adopted”. The holding is about those notices; it is not a general rule for an assessment made in the wrong stream. Our view is that a wrong-stream assessment will now be set aside only where the stream cost the assessee a statutory step (the show cause notice, the hearing, the draft order), and that the objection should be taken before the order is passed.

Under the 2025 Act the scoping power is in section 273(2), in the same words. Section 536(2)(j) of that Act deems an order issued under a provision of the 1961 Act to have been issued under the corresponding provision of the 2025 Act “so far as it is not inconsistent” with it. The contrary view is that the orders were issued under section 144B(2) for assessments under that section, and that a specification under section 273(2) is needed before a case is treated as excepted. The point is open. Our view is that the Board’s exceptions carry over to tax year 2026-27 onwards until the Board orders otherwise.

The procedure, step by step

The assessee deals with one counterparty, the National Faceless Assessment Centre. The table sets the clauses of the current section 144B(1) against what reaches him.

Clause of section 144B(1)	What happens	What the assessee sees
(i), (ii)	The Centre assigns the case to an assessment unit through an automated allocation system and intimates that the assessment will be completed under section 144B	The intimation. The unit is not identified by place or officer
(iii)	Notice under section 143(2) or section 142(1) served through the Centre; response filed to the Centre, which forwards it	The notice; the acknowledgement of his response
(iv) to (vii)	The assessment unit asks, through the Centre, for further information or evidence, or seeks a reference to a verification unit or a technical unit (arm’s length price, valuation, any technical matter)	A notice with a date, extendable “on the basis of an application”. Nothing of the reports, unless put to him in the show cause notice
(viii) to (xi)	On non-compliance, a notice under section 144 to show cause why the assessment should not be completed to the best of judgment	The section 144 notice
(xii)(a)	Where no prejudicial variation is proposed, an income or loss determination proposal goes to the Centre	Nothing until the final order
(xii)(b)	In any other case, a show cause notice “stating the variations prejudicial to the interest of assessee” is prepared by the assessment unit and served through the Centre	The show cause notice, on which the hearing right arises
(xiii) to (xv)	Reply by the date and time specified, or extended time on application; the unit then prepares an income or loss determination proposal and sends it to the Centre	The acknowledgement of the reply
(xvi) to (xix)	The Centre either tells the unit to prepare a draft order or assigns the proposal to a review unit; the review report goes back to the same unit, which accepts or rejects the modifications, with reasons for rejection, and prepares a draft order	Nothing. The review report is not served
(xx), (xxi)	The draft order goes to the Centre. In the case of an eligible assessee with a prejudicial variation, the Centre serves it	The draft order, only if he is an eligible assessee under section 144C
(xxii), (xxiii)	“in any case other than that referred to in clause (xxi)”, the unit passes the final assessment order and initiates penalty; the Centre serves it with the demand notice	The final order, the demand notice and any penalty notice
(xxiv) to (xxx)	Eligible assessee: acceptance, or objections to the Dispute Resolution Panel; directions; final order within the time in section 144C	The final order
(xxxi)	After completion the Centre transfers all electronic records to the jurisdictional Assessing Officer “for such action as may be required”	Nothing; later action is with the jurisdictional officer

Three features shape most of the litigation. The ordinary assessee receives one document that tells him what is proposed against him, the show cause notice under clause (xii)(b). Everything after his reply (the proposal, the review, the draft order) is internal. And the personal hearing is tied to the show cause notice and to nothing earlier.

Sub-section (6) supplies the mechanics. A notice or order is delivered by placing an authenticated copy in the assessee’s registered account, or sending it to the registered e-mail address of the assessee or his authorised representative, or uploading it on the Mobile App, in each case “followed by a real time alert” (clause (ii)). The assessee responds through his registered account, and the response is deemed authenticated once the Centre’s acknowledgement containing the hash result is sent (clause (iv)).

Where service is disputed, the portal record decides it. In Gandhi Realty (India) Private Limited v. Assistant/Joint/Deputy/Assitant Commissioner of Income Tax (Gujarat High Court, 5 October 2021) the Revenue asserted on affidavit that the draft order had been served; the Bench refused to accept that “in absence of placing before this Court any proof of virtual exchange or authenticated copy of service to the assessee” (para 15). For the Revenue there is Awadh Kishor Singh: the notice “was duly served on the registered e-mail of the petitioner but he did not submit any response” (para 24), and the assessee was left to his appeal (para 32). Between the two is Hero Products India Pvt Ltd v. National Faceless Assessment Centre (Bombay High Court, 13 July 2026): notices had gone to the e-mail address of an auditor who resigned during the proceedings and none, it was not disputed, to the two addresses registered on the portal. The Bench set the order aside on those facts without deciding whether such service is valid under section 282 and Rule 127 of the Income-tax Rules, 1962 (paras 10, 12).

The show cause notice: the one step the Supreme Court has called mandatory

The orders of 21 March 2023

On breach of the section 144B procedure this Part relies on a set of short orders of the Supreme Court made on 21 March 2023 by M.R. Shah and C.T. Ravikumar JJ, disposing of eight petitions by the Revenue. They are orders, not a reasoned judgment, and they concern the 2021 text or, in Chander Arjandas Manwani, the Scheme before it.

In three of the appeals the orders are in materially identical terms: National Faceless Assessment Centre v. Automotive Manufacturers Private Limited (Civil Appeal No. 1829 of 2023), Deputy Commissioner of Income Tax v. Abacus Real Estate Private Ltd. (Civil Appeal No. 1830 of 2023) and the appeal against Multiplier Brand Solutions Pvt. Ltd. (Civil Appeal No. 1831 of 2023). In each the High Court had set the assessment aside as non est because, in the Supreme Court’s description, “the show cause notice with a draft Assessment Order was not issued and served upon the assessee”. The Revenue argued that the writ petition ought not to have been entertained and that, at the least, the matter should have been remanded. Paragraph 4 of the order in Automotive Manufacturers:

considering the fact that the Assessment Order was passed without issuing a show cause notice with a draft Assessment Order, as was mandatorily required, under Section 144B of the Act, as such, it cannot be said that the High Court has committed any error. However, at the same time, considering the fact that the Faceless Assessment Scheme has been introduced recently and therefore, the Revenue ought to have been given some leverage to correct themselves and take corrective measures and therefore the High Court ought to have remanded the matter to the Assessment Officer to pass a fresh order in accordance with law

Three things follow. The step is “mandatorily required”. The Revenue’s objection that the writ petition ought not to have been entertained was not accepted: the Court said that “it cannot be said that the High Court has committed any error”. And the proper relief was a remand: the High Court’s judgment was modified to that extent (para 5), with the assessee’s contentions on merits kept open. The orders say nothing about the time for the fresh order.

No show cause notice at all

On the current text the leading decision is Magadh Sugar & Energy Limited v. Assessment Unit, Income Tax Department, National Faceless Assessment Centre (Calcutta High Court, Division Bench, 16 November 2022), an appeal from a single judge who had declined to interfere because an appeal lay, on an assessment order of 8 September 2022. The Bench observed (para 9) that “after the amendment, the provision mandates that a show cause notice stating variations prejudicial to the interest of the assessee, has to be served”, and held (para 10):

In the absence of such a show cause notice, the assessment order has to be held in violation of principles of natural justice and in violation of the statutory provision and therefore, non-est.

The relief was nevertheless a remand, with a direction to issue a show cause notice “clearly setting out the proposed variations” (para 11). The label “non-est” added nothing to the relief.

In Gujarat, Gandhi Realty quashed an order on the 2021 text, where the document withheld was the combined show cause notice and draft assessment order. To the plea that the opportunities given earlier were a mitigating circumstance the Bench was “in total disagreement” (para 16); it treated the case as “a simple case of statutory non-compliance” (para 17). The order and demand were quashed (para 18), with liberty to proceed afresh under section 144B (para 19).

Additions beyond the notice

In Bharat Aluminium Company Ltd. v. Union of India (Delhi High Court, 14 January 2022) the show cause notice proposed a ‘Nil’ or ‘Null’ variation (para 12); the draft and final orders then made additions and raised a demand of Rs.1,69,77,44,240. The Bench held (para 13) that “no Show Cause Notice, as mandatorily required by Section 144B(1)(xvi) of the Act, had been served upon the petitioner with respect to the variations made”, and set the order aside with a direction to issue a show cause notice and a draft assessment order (para 26). The clause number is that of the 2021 text; the principle carries over, since clause (xii)(b) requires the notice to state the variations proposed.

Reply not considered

Bharat Aluminium also counted as a defect (para 13) that the draft assessment order “had also been issued without considering the reply which was submitted by the petitioner well in time in response to notice issued under Section 142(1) of the Act through email, given the technical glitch in the online facility”. The more balanced decision is Sunil Verma v. Assessing Officer, Assessment Unit, National Faceless Assessment Centre (Delhi High Court, 14 October 2026). The show cause notice of 4 February 2026 allowed four days. The assessee asked for an adjournment a day after the due date and filed his reply on 3 March 2026; the portal showed that the officer viewed it on 4 March; the order of 6 March ignored it. The Bench accepted that the assessee ought “to have at least asked for adjournment, before the due date of filing reply” (para 13). It still set the order aside (paras 14, 15): the officer had neither closed the right to reply nor said that it was closed, had given “only four days’ time to respond to such a long questionnaire” after having “practically gone in hibernation for six months”, and “the principle of justice, equity and good conscience required the AO to consider the reply”. On those facts a late reply that was on the portal and had been seen had to be dealt with.

The ICFAI Society v. Union of India (Telangana High Court, 19 February 2026) applies the same idea to a reply furnished through the Income Tax Grievance Cell on 29 December 2025, after the date in the notice; the order of 6 January 2026 ignored it. The order was set aside and the matter remanded (paras 10, 11).

Time to reply

The statute fixes no minimum period; clause (xiii) leaves the date and time to the notice. The figure of seven days comes from the standard operating procedure (SOP) of 3 August 2022. As reproduced by the Telangana High Court in The ICFAI Society (para 7), paragraph N.1.3 reads:

N.1.3 To ensure adherence to the principles of natural justice and reasonable opportunity to the assessee, timelines to be given for obtaining response to the SCN shall be: N.1.3.1 Response time of 7 days from the issue of SCN. N.1.3.2 Response time of 7 days may be curtailed, keeping in view the limitation date for completing the assessment.

• Not one working day. Vallabhji Malsi & Co. v. The National Faceless Assessment Centre, Delhi (Bombay High Court, 24 November 2025, 2025:BHC-OS:22259-DB). The notice was digitally signed at 20.07 hours on Saturday 23 March 2024 and required a reply by 11.15 hours on 26 March; the intervening days were a Sunday and Holi. The Bench held (para 7) that the petitioner “was not granted even one working day”. The Revenue’s plea (para 6) that the seven days “is flexible” failed: the Centre “has not given any good reason to issue the show cause notice only at the fag end”.
• Three days. SN Advance Ventures Private Limited v. Assistant Commissioner of Income Tax Assessment Unit (Gujarat High Court, 28 July 2026): “granting only three days’ time to file a reply cannot be said to be a reasonable opportunity” (para 16). In The ICFAI Society (para 10) there was “no justification to curtail the response time” to three days “when the limitation for passing the assessment order was going to expire on 31.03.2026”.
• Four days. Sunil Verma, para 14, where the four days followed six months of silence.

None of these decisions lays down a fixed minimum. The test applied is whether the period was reasonable for the notice issued and whether any curtailment was explained by a limitation date not of the Department’s own making. The words “ordinarily not less than seven days” in SN Advance Ventures (para 7) are the petitioner’s case, not the Bench’s holding.

Adjournment requests

Clauses (v), (x) and (xiii) each contemplate an extension on application. A request made and ignored has led to a set-aside. In SN Advance Ventures the assessee’s case was that the proceedings were closed before it could seek an adjournment (para 7); it sent its reply with a grievance on 16 March 2026 and the order followed the next day. The Bench held that the officer “ought to have considered and decided the petitioner’s grievance dated 16.03.2026” (para 16). In Late Junedbhai Abdulgani Memon v. The National E-Assessment Centre (Gujarat High Court, 8 May 2025) an adjournment request of 20 April 2021 that had not come to the assessment unit’s knowledge led to a remand (paras 8 to 11). The Department’s reply reproduced in that judgment states that the officer “has option to block/unblock filing of responses”; the filing window can close before the assessee expects it.

The Revenue has authority of its own. In Raja Reddy Sannareddy v. Assessment Unit, Income Tax Department, National Faceless Assessment Centre (Telangana High Court, 3 March 2026) the show cause notice of 17 December 2025 allowed until 28 December; the assessee sought adjournments on medical grounds although he had been discharged from hospital on 24 October 2025. The Bench held (para 10):

The Assessment Unit has a deadline to complete assessments. In such cases, therefore, request for repeated adjournments cannot be allowed in a routine manner.

The writ petition was dismissed and the assessee left to his appeal (paras 11, 12). Sunil Verma (para 13) faults a request made after the due date. In V Durairaj v. National Faceless Assessment Center (Madras High Court, Madurai Bench, 17 July 2026), where the assessee had answered nothing at any stage, the single judge made no finding of breach; the order was quashed and remitted only as a “partial rescue”, on deposit of Rs.2,50,000 within thirty days (para 8), the quashed order to “be treated as addendum to the show cause notice” (para 9).

The draft order: is the ordinary assessee entitled to see it

Open question 1: must the draft order be served on an assessee who is not an eligible assessee?

The Supreme Court’s orders of 21 March 2023 speak of “a show cause notice with a draft Assessment Order”. Is an assessee who is not an “eligible assessee” under section 144C entitled to be served with the draft order, or only with a show cause notice?

For the assessee. The Bombay High Court’s decisions of 2021 treated non-service of the draft assessment order as fatal. In Chander Arjandas Manwani v. The National Faceless Assessment Centre (Bombay High Court, 21 September 2021), a Scheme-era case, the order was set aside first for denial of a personal hearing (para 7) and, as a further reason, because the notice said to carry a draft assessment order only asked for documents, so that “no draft assessment order has been issued at all” (paras 9, 10). That judgment has since been set aside in its entirety by the Supreme Court and remitted for fresh consideration on merits, the occasion being the omission of sub-section (9); it is cited for its reasoning only. In SLP (C) No. 21158 of 2022, another of the matters of 21 March 2023, the High Court had set the order aside, as the Supreme Court recorded, “on the ground that the procedure as required under Section 144B, namely, to furnish the draft Assessment Order upon the assessee has not been complied with”. And in the three civil appeals the Supreme Court used “mandatorily required” of “a show cause notice with a draft Assessment Order” without confining the words to any class of assessee.

Gujarat and Delhi used the same language: Gandhi Realty reserved liberty to proceed “after issuance of the prior notice-cum-draft assessment order” (para 19), and Bharat Aluminium directed the issue of “a Show Cause Notice and a draft assessment order” (para 26).

There is also a textual point. Sub-section (6)(vii), which confers the right to ask for a hearing, describes the occasion as one where “a variation is proposed in the income or loss determination proposal or the draft order” and the assessee is called upon to show cause “why the assessment should not be completed as per such income or loss determination proposal”. Those words assume that the assessee is answering a proposal he has seen.

For the Revenue. Among the decisions discussed here only the Kerala High Court reasons the question out, and its Division Bench has decided it for the Revenue. In Joint Commissioner of Income Tax v. Sujatha Revikumar (27 March 2025, 2025:KER:26913) the challenge was primarily that the draft assessment order had not been served with the show cause notice (para 3). A single judge had accepted it. The Division Bench reversed (para 6):

the procedure prescribed in relation to an ordinary assessee as contemplated in Clause xvi of Section 144B(1) does not require the furnishing of a draft assessment order along with the show cause notice that is issued to such assessee. In the case of an ordinary assessee, the draft assessment order has to be seen as merely an internal document

The writ petition was dismissed outright. The clause numbers are those of the 2021 text: the Revenue relied on clause (xxiii) “as it then stood” (para 5). The year in question was assessment year 2021-22 (para 2) and the writ petition was filed in 2023 (W.P.(C) No. 6742 of 2023). As to the Supreme Court and the earlier decisions, the Bench said (para 7) that they “do not provide any clarity as regards whether or not the assessee in those cases was an ‘eligible assessee’”, and that it was “inclined to presume that the assessees in those cases were eligible assessees, since the statutory provisions clearly bring out a distinction between the two”.

A single judge of the same court followed it in M/s. Noel Villas and Apartments v. The Assistant Commissioner of Income-tax (8 June 2026, 2026:KER:40561), an assessment order of 28 September 2022. The judgment holds (para 13) that the requirement of issuing a draft assessment order “is made only in respect of an ‘eligible assessee’”; that the position “was the same even before the amendment” of 2022 (para 11); and that the show cause notice there had “specifically highlighted” the proposed variations, so that the statutory requirement “has been fulfilled” (para 15).

The current text supports that reading more clearly than the 2021 text did. Under clause (xii)(b) the show cause notice is prepared before any proposal or draft order exists. The draft order is prepared only under clause (xvi)(a) or (xix) and goes to the Centre under clause (xx). Clause (xxi) requires the Centre to serve it “in case of an eligible assessee”, and clause (xxii) deals with “any case other than that referred to in clause (xxi)” by going straight to the final order. Magadh Sugar is consistent: what the Calcutta Division Bench called mandatory on the 2022 text was the show cause notice, not the draft order.

Where it is open. The weakness in the Kerala reasoning is the presumption in para 7 of Sujatha Revikumar: the Bench did not examine whether the assessees before the Supreme Court were eligible assessees, and the Supreme Court’s words carry no such qualification. Against that, the Supreme Court’s orders are unreasoned on the point, were made on the 2021 text, and did not address the distinction. The Gujarat decisions discussed here do not address the distinction on the 2022 text, and none of the decisions above construes the wording of sub-section (6)(vii).

Our view is that under the current text an ordinary assessee has no statutory right to service of the draft order, and that a challenge resting only on its non-service will fail as it did in Kerala. The right he does have is to a show cause notice that states every variation and the material for it; where the final order goes beyond the notice, or the notice is too bare to answer, the challenge should be put on clause (xii)(b) and Bharat Aluminium, not on the draft order.

The personal hearing

The 2021 text: “may approve”

Under the 2021 text the assessee “may request” a hearing and the Chief Commissioner or Director General in charge of the Regional Centre “may approve the request” if it fell within circumstances to be laid down under sub-section (7)(xii)(h). The Revenue argued that this conferred no right. The Delhi High Court rejected the argument three times.

In Ritnand Balved Education Foundation v. National Faceless Assessment Centre (order of 27 May 2021) the Bench held (para 7.5) that “since the statute itself makes the provision for grant of personal hearing, the respondents/revenue cannot veer away from the same”. In Sanjay Aggarwal v. National Faceless Assessment Centre Delhi (2 June 2021) the same Bench held (para 11.4) that the word “may” could not absolve the Revenue “from the obligation cast upon it, to consider the request made for grant of personal hearing”. In Bharat Aluminium a different Bench went further: “the word “may” in Section 144B(viii) should be read as “must” or “shall” and requirement of giving an assessee a reasonable opportunity of personal hearing is mandatory” (para 22, meaning sub-section (7)(viii) of the 2021 text), and “an assessee has a vested right to personal hearing and the same has to be given, if an assessee asks for it” (para 25).

The 2022 text: “shall allow”

Under the current sub-section (6)(viii), where a request has been received, the income-tax authority of the relevant unit “shall allow such hearing”. The Bombay High Court in Vallabhji Malsi (para 8): “It is mandatory to provide a personal hearing in terms of section 144B(6)(viii) of the Act.” The Allahabad High Court in Sapna Flour Mills Ltd. v. Union of India (9 December 2022) set aside, for breach of natural justice, a reassessment order of 30 March 2022 passed two days after a reply that asked for a video hearing, the request having been acknowledged and left unanswered (paras 35, 37, 38). That order predated the 2022 text, but the Bench added (para 36) that under the procedure in place from 1 April 2022 “the personal hearing through video conferencing has been made mandatory, in case of the request made by the assessee”. The Gujarat High Court in B.M. Developers v. Assessment Unit Income Tax Department (17 April 2026, para 8) described the grant of a video conference as a “mandatory requirement”.

Three limits on the right

It arises only on a request. Clause (viii) operates “where the request for personal hearing has been received”. Where no request was made there is no breach: Noel Villas (para 16), “Here there was no such request and hence on that ground also no interference is warranted”; Raja Reddy Sannareddy (para 10), “Petitioner himself has failed to avail the opportunity of personal hearing”.

It arises only after a show cause notice. Sub-section (6)(vii) is confined to a case where a variation is proposed and “an opportunity is provided to the assessee by serving a notice calling upon him to show cause”. The Department’s own position, as set out in its reply reproduced by the Gujarat High Court in Late Junedbhai Abdulgani Memon, is that the hearing “is available to the assessee only at the state of SCN u/s. 144B(6)(vii)” (the reply uses the numbering of the 2022 text, though the order in that case was made in April 2021). A request made earlier, in a reply to a section 142(1) notice, should be repeated when the show cause notice comes.

It is by video only, “to the extent technologically feasible”. Those are the words of clause (viii). In none of these decisions did the Revenue rely on them to refuse a hearing. Bharat Aluminium (para 21) met the anonymity concern directly: the officer’s identity “can be hidden/protected while granting personal hearing by either creating a blank screen or by decreasing the pixel/density/resolution”. In Vallabhji Malsi the failure of the Department’s own link was treated as a denial of the hearing, not as an excuse for it. Our view, as for the appeal (Part 3, open question 8), is that the words can excuse a failed link on a given day, which calls for another date; they do not excuse an order passed without the hearing.

Open question 2: is a written request for a hearing enough, or must the portal button be used?

The show cause notice ordinarily tells the assessee that a hearing is to be sought by clicking a “Seek Video Conferencing” button against the notice on the portal. Is a request made in the body of the written reply, or by letter, a request “received” under clause (viii)?

For the assessee. The Gujarat High Court decided the point in Agrawal JMC Joint Venture v. Assistant / Joint / Deputy / Assistant Commissioner of Income Tax (11 October 2021). The assessee asked for a video conference in a written communication of 7 April 2021. The Revenue’s affidavit said that “furnishing the written reply to show cause notice on 07.04.2021 without clicking on the hyperlink is insufficient”. The Bench held that where the Revenue “recognises the fact that it had received the request of 07.04.2021, there was no earthly reason for it to have ignored it” (para 22), and that the internal guidelines relied on “cannot be taken into consideration” because their author and date were not shown and they were not in the public domain (para 23). The Revenue’s “no prejudice” argument, resting on a Supreme Court decision in a central excise case, was rejected on the facts (para 26). Later decisions show the same preference for substance where the communication demonstrably reached the Department: the e-mailed reply to the section 142(1) notice in Bharat Aluminium, the reply through the Grievance Cell in The ICFAI Society, and the grievance in SN Advance Ventures. Clause (vii) itself says only that the assessee “may request”; it prescribes no form.

For the Revenue. Agrawal JMC was decided, in the Bench’s own words (para 22), at “a time when this regime of faceless assessment had merely begun and there were many hiccups”, and it turned on the Revenue’s failure to show that the link had been created and on unpublished guidelines. The 2026 decisions treat the button as the step the assessee is expected to take. In Raja Reddy Sannareddy the Bench recorded against the assessee (para 9) that he “did not click the Seek Video Conferencing button on 28.12.2025 for having an opportunity of hearing”. In Noel Villas the Court noted (para 16) that the show cause notice had said that the request “will have to be made” by clicking that button, and that the assessee did not ask. The text gives the Revenue two footholds: clause (iv) of sub-section (6) requires a response to be filed “through his registered account”, and clause (viii) says the hearing is to be allowed “in accordance with the procedure laid down by the Board”.

Where it is open. In neither Raja Reddy nor Noel Villas had the assessee made a written request; both are cases of no request at all. Neither refuses relief to an assessee who asked in writing but did not use the button, and none of the later decisions discussed here squarely holds the written request sufficient on a portal where the button was shown to be working.

Our view is that a request shown to have reached the assessment unit is a request “received” under clause (viii), whatever its form, and that on Agrawal JMC this is the law in Gujarat. The point should never have to be argued: make the request by the button and repeat it in the first paragraph of the reply.

Link failure and short notice of the hearing

In Vallabhji Malsi the Centre’s e-mail of 27 March 2024 was sent at 11.30 AM and said that the hearing was scheduled for 11.15 AM the same day; the assessee’s screenshots showed that “the meeting was not started by the host”. The Bench held (para 8) that “the notice of personal hearing was issued after the time for the personal hearing had lapsed”. On remand it directed (para 10) that notice of the hearing “shall be given atleast five working days in advance” and that the assessee have not less than seven working days’ notice of any decisions relied upon. That is a direction in one case, not a rule, but it is a measure of what reasonable notice of a hearing looks like.

The Revenue’s counter-example is Late Junedbhai Abdulgani Memon, where the assessee did not attend the video conference fixed for 22 April 2021. Relief was given only because his adjournment request had not been seen, which the Court attributed to the scheme being “in a very nascent stage” in 2021 (para 8).

A case transferred to a Central Circle

In Darshit Ashokbhai Zinzuwadia the reassessment was pending before the Centre, which had issued a show cause notice on 29 December 2021, when, after a search, the case was centralised by an order under section 127(2) dated 1 March 2022. The Central Circle officer issued a fresh notice on 10 March and passed the order on 17 March 2022. The assessee’s case was that he had asked for a video conference in his reply to that notice and on the portal (paras 3.8, 4.1). The Revenue said that, the case having been transferred, the request “could not be entertained” (para 5.4). The Gujarat High Court held (para 6) that this was “contrary to the basic requirement of providing opportunity of hearing”, and quashed and remanded for a fresh order within twelve weeks (para 8). An assessee does not lose the hearing because the file has left the faceless stream. In Fusion Granito, on an assessment by the jurisdictional officer, the Bench likewise remanded for a hearing “either through video conference or through personal hearing in the designated area of the income tax office” (para 13).

The standard operating procedure: binding or guidance

The short answer is that the SOP is the Department’s own statement of what a reasonable opportunity is, and a court will hold the Department to it unless the departure is explained; it cannot take away what the section gives. Its statutory footing is clause (xi) of sub-section (6): the Principal Chief Commissioner or Principal Director General in charge of the Centre “shall, with the prior approval of the Board, lay down the standards, procedures and processes for effective functioning” of the Centre and the units. Two such documents appear in the decisions.

The first is the SOP for personal hearing through video conference of 23 November 2020, issued under the Scheme and reproduced in Ritnand Balved and Bharat Aluminium. It allowed a hearing where the assessee “in his/her written response disputes the facts underlying the proposed modification and makes a request for a personal hearing”. The second is the SOP of 3 August 2022 for the assessment, verification, technical and review units. As reproduced in The ICFAI Society (para 7), paragraph N.1.2 requires the show cause notice to contain, among other things, a “Complete description of the issues involved”, a “Summary of all submissions of the assessee, to demonstrably reflect application of mind and consideration of all submissions” and the “Specific Information /material proposed to be used against the assessee”; paragraph N.1.3 gives the seven days quoted above; and paragraph E, as the Department’s reply in Late Junedbhai Abdulgani Memon has it, allows “Adjournment up to 7 days where assessee seeks adjournment using the online option”.

Breach treated as fatal

Two Gujarat decisions of 2026 treat departure from the SOP as fatal in terms. In Parmeshwar Trading Co. Shingala Pravinbhai Hardasbhai v. National Faceless Assessment Centre (20 January 2026) the Bench held (para 9) that “the authorities have failed to follow the mandatory requirement of the Standard Operating Procedure”, and remanded “to comply with the SOP” within twelve weeks. B.M. Developers (para 8) uses the same words and says that the order “would not stand at all”. In Vallabhji Malsi (para 7) and The ICFAI Society (para 10) paragraph N.1.3 was used as the measure of a reasonable opportunity.

They should be cited with care. In both Gujarat cases the breach found was denial of a video hearing that had been requested, and the Revenue’s counsel was not in a position to dispute the facts (Parmeshwar Trading, para 7; B.M. Developers, para 6). The clause of the SOP actually reproduced in Parmeshwar Trading (para 8) is clause G.3, on sending a physical letter by speed post and an SMS to an assessee who does not respond to a section 142(1) notice; it has nothing to do with the hearing. Neither judgment examines whether an SOP laid down under clause (xi) has the force of law. The result in each is supported by sub-section (6)(viii) without the SOP, and in a case of pure SOP breach the Revenue will say so.

The SOP against the assessee

The Revenue uses the SOP too. Paragraph N.1.3.2 permits the seven days to be curtailed for limitation, though reliance on it failed in Vallabhji Malsi and The ICFAI Society because the limitation pressure was self-inflicted or absent. The portal procedure is likewise enforced against the assessee: the unclicked button in Raja Reddy Sannareddy and Noel Villas, and the Revenue’s stand in SN Advance Ventures (para 12) that the e-filing portal is the only mode of reply.

An SOP cannot cut down the statute

On this the decisions discussed here are one way. In Bharat Aluminium the Revenue relied on the SOP of 23 November 2020 to say that a hearing was available only where the assessee disputed facts. The Bench held (para 23) that the classification “is not legally sustainable as the classification between fact and law is not founded on intelligible differentia”. Ritnand Balved (para 7.5) is to the same effect, and Agrawal JMC (para 23) refused to look at guidelines that were neither published nor attributed to any authority. Under the current text the point is stronger, because clause (viii) says “shall allow” and leaves to the Board only the procedure.

Our view is that breach of a paragraph of the SOP is not by itself fatal. The Gujarat decisions that call the SOP mandatory were given where the section itself had been breached and the facts were not disputed; where the paragraph relied on has no counterpart in the section, the assessee should show what the departure cost him.

The relief: set aside and remit, not annul

What the Supreme Court did

In the three civil appeals the Supreme Court remanded “to the Assessment Officer to pass a fresh Assessment Order, after following due procedure” (para 5), because the scheme “has been introduced recently”. In SLP (C) No. 21158 of 2022, where the High Court had itself reserved liberty for de novo proceedings, it clarified that even without a remand “it will always be open for the Department to initiate fresh assessment proceedings in accordance with law and setting aside the Assessment Orders shall not come in the way of the Revenue”. The reason given in 2023, that the scheme was new, no longer holds; the High Courts remand all the same.

What the High Courts do

Every decision discussed above that sets aside an order for want of a show cause notice, a hearing or a reasonable opportunity leaves the Revenue free to assess again, whether by express liberty (Ritnand Balved; Gandhi Realty; Chander Arjandas Manwani, para 14, since set aside; Rajdhani Textiles Pvt. Ltd. v. The National Faceless Assessment Centre, Gujarat High Court, 8 August 2023, para 9, a reassessment order of 28 September 2021 quashed with liberty to proceed from the response to the show cause notice and to give the video hearing prayed for) or by remand (Agrawal JMC, Sapna Flour Mills, Magadh Sugar, Bharat Aluminium, Fusion Granito, Zinzuwadia, Late Junedbhai Abdulgani Memon, Vallabhji Malsi, Parmeshwar Trading, The ICFAI Society, B.M. Developers, SN Advance Ventures, Sunil Verma). Sanjay Aggarwal reserves no liberty but does not refuse it: the Bench said only (para 13) that “if the law permits the respondent/revenue to take further steps in the matter, the Court, at this stage, need not make any observations in that regard”. The penalty initiated in the order goes with it: the notice of penalty was set aside with the assessment in Chander Arjandas Manwani (para 13), and in Vallabhji Malsi (para 9) a penalty order of 16 July 2024, passed while the petition was pending, was quashed as well.

In the decisions discussed here a High Court has refused a remand in two kinds of case. The first is where the first order was itself beyond limitation: Filmtec Solar Private Limited v. National Faceless Assessment Centre, Delhi (Gujarat High Court, 28 September 2026) and Milind Dashrath Pawar v. National Faceless Assessment Centre, Delhi (Bombay High Court, 6 July 2026). The second is where a final order was passed on an eligible assessee without a draft order under section 144C (see the section on the Dispute Resolution Panel). In the other decisions discussed here on breach of the section 144B procedure, a “quashed” faceless order has left the assessment to be made again. Defects of jurisdiction and form (the number, the signature, the officer, the approval) are dealt with in Part 2 and stand differently.

Mantra Industries

Four orders travel under the name Mantra Industries Ltd. v. National Faceless Assessment Centre: two of the Bombay High Court and two of the Supreme Court.

The order of 3 July 2021 (Bombay High Court, Writ Petition (L) No. 14286 of 2021) is a two-paragraph ad interim order. It records counsel’s submission that a personal hearing was sought and not given, issues notice and grants interim protection. It decides nothing.

The final order was made on 11 October 2021 in Writ Petition No. 1625 of 2021. What it decided is recorded by the Supreme Court: the High Court “has set aside the Assessment Order relying upon” sub-section (9) of section 144B (Civil Appeal No. 1936 of 2023, para 3).

The Supreme Court did two things to it. By an interim order of 11 April 2022 it stayed the observations in paragraph 9 of the High Court’s order. By the final order of 21 March 2023 (para 5) it held that “the observations made in para 9 are unwarranted and not required” and ordered them “to be expunged”. The setting aside of the assessment was not reversed, the petition having been filed only against paragraph 9; but because sub-section (9) had since been omitted, which “was not before the High Court”, the Revenue was permitted to seek a review in the High Court within six weeks.

Mantra Industries is thus not a Supreme Court decision that a faceless order passed without a hearing is a nullity; it is a High Court decision under a clause since omitted, with a review permitted on that ground.

The “non est” clause and what was left undecided

Sub-section (9) of the 2021 text read:

Notwithstanding anything contained in any other provision of this Act, assessment made under sub-section (3) of section 143 or under section 144 in the cases referred to in sub-section (2) [other than the cases transferred under sub-section (8)], on or after the 1st day of April, 2021, shall be non est if such assessment is not made in accordance with the procedure laid down under this section.

While it stood, the Gujarat High Court read it as showing “a clear legislative intent that every step and stage of procedural requirement of this provision is needed to be regarded with matching seriousness” (Gandhi Realty, para 7.12; see also Agrawal JMC, para 18). The Finance Act, 2022 omitted it with retrospective effect from 1 April 2021, in the words of the Allahabad High Court in Sapna Flour Mills “taking note of the fact that large number of disputes have been raised under the said sub-section involving technical issues arising due to use of information technology leading to unnecessary litigation”.

The Allahabad High Court upheld the retrospective omission in Sapna Flour Mills. The Bench held that section 144B is procedural and that “no right much less substantive right can be said to have been conferred by sub-section (9) of Section 144B upon the taxpayer”. The same judgment then set the reassessment order aside for denial of the hearing: the omission removed a statutory label and did not rescue an order passed in breach of natural justice.

What the omission does to decisions already given under the clause was left undecided. The Supreme Court on 21 March 2023 dealt with it three times and each time declined to rule. In Mantra Industries it permitted a review. In Chander Arjandas Manwani it set the High Court’s judgment aside and remitted the matter for the High Court to consider the effect of the omission on para 3 of the Board’s order of 13 August 2020, which “prima facie seems to be pari materia to Section 144B(9)”, expressly “without further expressing anything on merits in favour of either parties” (para 7); the assessee’s answer (para 5) was that both the assessment order and the Board’s order predate 1 April 2021. In SLP (C) No. 20642 of 2022, where the assessee was unserved, the Court observed that “There might be some substance” in the Additional Solicitor General’s submission, permitted a review, and recorded that it “has not expressed anything on merits in favour of either parties”; that is not a holding. Our view is that the omission does not reopen a quashing that has become final between the parties, and that in a pending matter the order still falls if a show cause notice or a requested hearing was denied, as it did in Sapna Flour Mills. What the assessee has lost is the argument that every procedural lapse makes the assessment a nullity.

Limitation for the fresh order after a set-aside

Open question 3: how long does the Department have to pass the fresh order?

After a set-aside the Department assesses again. The question is how long it has, and whether the second order can be attacked as out of time.

The statute. Section 153(6)(i) covers the case in terms. Sub-sections (1), (1A) and (2) do not apply to an assessment “made on the assessee or any person in consequence of or to give effect to any finding or direction contained in an order under section 250, section 254, section 260, section 262, section 263, or section 264 or in an order of any court in a proceeding otherwise than by way of appeal or reference under this Act”, which may be completed “on or before the expiry of twelve months from the end of the month in which such order is received or passed by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner, as the case may be”. Sub-section (6) is “subject to the provisions of sub-sections (3), (5) and (5A)”; sub-section (3), on a fresh assessment after a set-aside, speaks only of orders under sections 250, 254, 263 and 264, not of an order of a court. Explanation 1(ii) excludes the period of a court’s stay of the assessment proceeding. In the 2025 Act the rule is in section 286(1), Table, Sl. No. 8(ii): one year from the end of the month in which the order “of any Court in a proceeding otherwise than by way of appeal or reference under this Act” is received by the jurisdictional Principal Commissioner or Commissioner.

For the Revenue: the practice of fixing a period. The High Courts commonly fix their own period without reference to section 153. In Gujarat it is usually twelve weeks from receipt of the order (Fusion Granito, Zinzuwadia, Late Junedbhai Abdulgani Memon, Parmeshwar Trading, SN Advance Ventures). The Bombay High Court gave four months from the uploading of its order in Hero Products (para 13) and a fixed date, 31 March 2026, in Vallabhji Malsi (para 10), two years after the order it quashed. Other orders fix nothing: B.M. Developers, Sunil Verma, Magadh Sugar, and the Supreme Court’s orders of 21 March 2023. In The ICFAI Society (para 13) the Telangana High Court directed the fresh order to be passed “taking into account, the limitation for passing such order i.e., up to 31.03.2026”, the period already running. This practice, and the Supreme Court’s words in SLP (C) No. 21158 of 2022 (setting aside “shall not come in the way of the Revenue”), support the proposition that a writ remand carries with it the time needed to comply, and that the court’s own date governs.

For the assessee: a court cannot enlarge the period. Limitation is statutory. The clearest statement is that of the Delhi High Court in Pr. Commissioner of Income Tax -7 v. Sumitomo Corporation India (P) Ltd. (2 September 2024, paras 54, 55 and 60), reproduced by the Gujarat High Court in Sun Pharmaceutical Industries Limited v. Deputy Commissioner of Income Tax (6 January 2026, para 13). The Revenue there asked for a remand and relied on section 153(6). The Delhi Bench held that sub-section (6) overrides only the limitation in sub-sections (1), (1A) and (2), is itself subject to sub-sections (3), (5) and (5A), and “neither lifts the period of limitation prescribed by sub-sections (3) and (4) nor does it extend the period which would otherwise be available”. It concluded:

Once it is conceded that the period for completion of the assessment exercise in terms of sub-sections (3) and (4) of Section 153 has expired, it would be wholly impermissible for us to expand or enlarge the period prescribed for completion of assessment.

The Gujarat High Court applied this in Sun Pharmaceutical, refusing a remand because “the remand proceedings would be barred by the limitation as prescribed under Section 153(6)” (para 16). Where the first order was itself out of time the result is outright quashing. In Filmtec Solar the order of 24 March 2025 “was required to be passed on or before 31.03.2024” and was “time barred” (para 10), the Revenue not disputing the dates (para 9). In Milind Dashrath Pawar a reassessment order dated 13 April 2022 was digitally signed and e-mailed on 26 May 2022, after limitation (computed with the exclusion for a valuation reference, on which see the article on section 142A) had expired; the Bench held (para 7) that the typed date “is of no consequence, when it was actually signed on 26th May 2022”, and quashed it.

Where it is open. The decisions discussed in this Part that remand a faceless assessment for breach of natural justice do not discuss section 153. Three questions are left unanswered by them. Is a bare set-aside for a fresh order a “finding or direction” within section 153(6)(i)? (The Delhi High Court held, at para 56 of Sumitomo, that the direction the Revenue sought there would not be one.) Where the High Court fixes a period shorter than the twelve months, is an order passed after the court’s date but within the statute bad? And where the court fixes a longer date, or none, and the twelve months have run, does the court’s order save the assessment? Sumitomo and Sun Pharmaceutical answer the last question against the Revenue, but in the setting of section 144C and of remands by the Tribunal and under section 263, not of a writ court setting aside an order under section 144B.

Our view is that section 153 is the outer limit and the writ court’s timetable operates inside it: a High Court can require the Department to act sooner than the statute allows, and cannot give it longer. On a writ remand the assessee should note the month in which the High Court’s order is received by the Principal Commissioner or Commissioner, count twelve months from the end of that month under section 153(6)(i), and take the objection if that date or the court’s own earlier date is missed. The limitation rules for draft orders under section 144C, including the retrospective amendments made by the Finance Act, 2026, are dealt with in the transfer pricing article.

Section 144C and the Dispute Resolution Panel inside the faceless stream

Section 144B does not exclude the eligible assessee; it gives him a separate track. Where a prejudicial variation is proposed the Centre serves the draft order on him (clause (xxi)). He may accept the variations or file objections with the Dispute Resolution Panel and the Centre within the period in section 144C(2) (clause (xxiv)). On acceptance or silence the assessment unit passes the order on the basis of the draft within the time in section 144C(4) (clauses (xxv), (xxvi)); on objections it completes the assessment “in conformity with the directions” within the time in section 144C(13) (clauses (xxvii) to (xxix)). “Eligible assessee” has the meaning in section 144C(15)(b): a person in whose case the variation arises from an order of the Transfer Pricing Officer, a non-resident not being a company, or a foreign company.

Non-residents and foreign companies are ordinarily assessed in International Tax Charges and so are with the jurisdictional officer; a domestic company with a transfer pricing adjustment, assessed in an ordinary charge, stays faceless. Sidel India Private Ltd v. Deputy Commissioner of Income Tax (Bombay High Court, 19 October 2026, 2026:BHC-AS:43046-DB) is an instance: a reference to the Transfer Pricing Officer, a draft order under section 144C(1), and a final order “passed under Section 143(3) read with Sections 144C(3) and 144B”.

Where a faceless unit passes a final order on an eligible assessee without a draft order, the Bombay and Gujarat High Courts have quashed and refused to remand. In Hansgrohe India Private Limited v. The Assessment Unit, Income Tax Department (Bombay High Court, 25 March 2026, 2026:BHC-AS:15187-DB) the Revenue conceded that a draft order was necessary and asked that the final order be treated as a draft, or for a remand. The Bench held (para 6) that the order was “in clear violation not only of the provisions of Section 144C but also of Section 144B(1)(xxi) to (xxix)”, quashed it (paras 8, 9) and refused both requests; whether the officer could in law begin again was a matter on which “We have not opined … one way or the other”. In Sun Pharmaceutical the Gujarat High Court quashed fresh orders passed without a draft after a section 263 set-aside, in proceedings which on the Revenue’s own submission were before the Faceless Assessing Officer: the revisional order “cannot be construed to such an extent of allowing a detour to the provisions of Section 144 (C) (1)” (para 15). A different case is Royal Cyber Private Limited v. Assessment Unit / Verification Unit (Karnataka High Court, single judge, 27 November 2025), where a draft order had been made and the unit passed the final order while objections were pending before the Panel; the order was quashed and the Assessing Officer directed to consider the Panel’s directions of 5 September 2024 and pass appropriate orders.

For the ordinary assessee the missing step is cured by a remand; for the eligible assessee the draft order is the gateway to the Panel, and the Bombay and Gujarat High Courts have declined to order a remand for its absence. In Sidel the draft order itself was held to be “beyond the period of limitation and, hence, without jurisdiction” (para 17), and the Bench read the Finance Act, 2026 insertions in sections 144C and 153 as supporting the assessee (para 18). Whether a fresh draft order can issue after such a quashing was left open in Hansgrohe. Our view is that it can only while the period under section 153 for the assessment itself is still running.

The Income-tax Act, 2025: section 273 and Rule 176

For tax year 2026-27 onwards faceless assessment rests on section 273 of the 2025 Act, which sends the procedure to the rules: assessment under section 270(10), 271 or 279 in the specified cases “shall be made in a faceless manner as per such procedure, as may be prescribed in this behalf” (sub-section (1)).

What the section keeps. The Board’s power to specify the cases (sub-section (2)); the National Faceless Assessment Centre and the four kinds of unit (sub-section (3)); communication through the Centre and by electronic mode (sub-section (7)); the special audit reference (sub-sections (9) to (11)); and transfer to the jurisdictional Assessing Officer “with the prior approval of the Board” (sub-section (12)). One safeguard stays in the Act. Under section 273(4)(b)(i) the assessment unit makes the assessment “after taking into account all relevant material which it has gathered and after giving the assessee an opportunity of being heard”.

What goes to the rules. The rest is in Rule 176 of the Income-tax Rules, 2026 (Notification No. 22/2026, G.S.R. 198(E), 20 March 2026), the only rule in the 2026 Rules on a faceless procedure.

• Show cause notice. Where a prejudicial variation is proposed, the assessment unit prepares a show cause notice stating the variations and serves it through the Centre (Rule 176(2)(l)(ii), corresponding to section 144B(1)(xii)(b)). The rule fixes no minimum time for the reply.
• Draft order. A draft order is prepared in every case (Rule 176(2)(p) to (t)). It is served on the assessee only “in case of an eligible assessee, as mentioned in section 275(1), where any variation prejudicial to his interest is proposed” (Rule 176(2)(u)); in every other case the Centre conveys to the assessment unit to pass the final order (Rule 176(2)(v)). Section 275 is the counterpart of section 144C.
• Hearing. No personal appearance is required (Rule 176(3)(f)). Where a variation is proposed and a show cause notice served, the assessee may request a personal hearing (Rule 176(3)(g)), and the income-tax authority of the relevant unit “shall allow such hearing”, exclusively through video conferencing, “to the extent technologically feasible” (Rule 176(3)(h)), repeating section 144B(6)(vii) and (viii). Rule 176(3)(k) repeats the power to lay down standards and procedures.
• Authentication. The units authenticate an electronic record “by way of an electronic communication” (Rule 176(3)(a)(ii), where those words were substituted for “by affixing digital signature” with retrospective effect from 1 April 2026), matching the substituted section 144B(6)(i)(b).

The practical consequence. Under the 2025 Act the show cause notice and the personal hearing are in a rule, which can be altered by notification, as the authentication clause already has been; the statutory floor is the “opportunity of being heard” in section 273(4)(b)(i). A challenge for want of a show cause notice or a video hearing will therefore be put in two steps: breach of Rule 176, and through it denial of the opportunity the section itself requires. Section 273(1) also says that the assessment “shall be made in a faceless manner as per such procedure, as may be prescribed in this behalf”, so a breach of the rule can be put as a breach of the section as well.

No consequence clause. Neither section 273 nor Rule 176 has an equivalent of the former section 144B(9); the consequence of a breach is what the courts attach to it on general principles.

Schemes. In place of the separate scheme-making powers of the 1961 Act, section 532 is a single power: the Central Government “may, by notification, make a scheme for any of the purposes of this Act” to eliminate the interface with the assessee, and may direct that provisions of the Act apply with modifications. Under section 532(3) a scheme notified under the 1961 Act may be amended or modified under the same power, and section 536(2)(u) deems such a scheme to have been made under the corresponding provision of the 2025 Act or, where there is none, under section 532. Faceless jurisdiction has its own provision in section 245.

After the assessment order: appeal or writ

The appeal to the Commissioner (Appeals), itself faceless, is the subject of Part 3. On the writ the position is this. On 21 March 2023 the Supreme Court did not accept the Revenue’s objection to a writ petition against an order passed without the mandatory show cause notice. The Calcutta Division Bench interfered in Magadh Sugar where the single judge had declined because an appeal lay, and in Gujarat the plea of alternate remedy failed in Gandhi Realty, Agrawal JMC, Fusion Granito (para 10) and Zinzuwadia; in each the breach was plain on the record. The writ has been refused where the notice was served and nothing was filed (Awadh Kishor Singh), where adjournments were sought repeatedly and no hearing was requested (Raja Reddy Sannareddy), and where the only complaint was non-service of the draft order on an ordinary assessee (Sujatha Revikumar; Noel Villas). Where it succeeds, the result is ordinarily a remand.

Who acts after the order. Section 144B assigns nothing after completion to the faceless units: under clause (xxxi) the Centre transfers the electronic records to the jurisdictional Assessing Officer “for such action as may be required”. What follows is governed by the general provisions. Rectification under section 154(1) is by the authority that passed the order (“may … amend any order passed by it”). Effect to an appellate order is given by the Assessing Officer within the time in section 153(5), and he serves the notice of demand under section 156. Under section 220(6), where an appeal has been presented, the Assessing Officer “may, in his discretion and subject to such conditions as he may think fit to impose in the circumstances of the case, treat the assessee as not being in default in respect of the amount in dispute in the appeal”. Our view is that once the records have gone back under clause (xxxi) these applications go to the jurisdictional Assessing Officer, and that the application under section 220(6) should be made as soon as the appeal is filed.

Which High Court’s decisions bind the unit. Parts 1 and 2 record conflicts between High Courts on the draft order, the number, the signature and the reassessment officer, and section 144B does not say whose view a unit not identified by place must apply. In Pr. Commissioner of Income Tax-I, Chandigarh v. M/s. ABC Papers Limited (Supreme Court, 18 August 2022), on which High Court hears the appeal from the Tribunal, the Court said (para 29) that “the Assessing Officer, Commissioner of Appeals and the ITAT operate under the concerned High Court as one unit”, and held (para 33) that the appeal lies to the High Court “within whose jurisdiction the Assessing Officer who passed the assessment order is situated”. That was not a faceless assessment, but the Delhi High Court has applied it to one. In Ramesh Kumar Bagri v. Income Tax Officer, Ward 2(1), Faridabad (2 April 2026) the assessee argued that “the assessment order was passed by the National Faceless Assessment Centre, which is situated in Delhi” (para 2). The Division Bench held, “in light of the judgment of the Supreme Court” in ABC Papers, that the forum follows the seat of the jurisdictional Assessing Officer (para 4), and disposed of the appeals “as not maintainable before the Delhi High Court” (para 8); the forum is taken up in Part 3. That order decides which High Court hears the appeal; it does not say in terms whose decisions the unit must apply. Our view is that the two go together: for a faceless assessment the concerned High Court is that of the jurisdictional Assessing Officer, to whom the records return, and its decisions are the ones the unit must apply.

Gujarat: what the record shows

The Gujarat High Court’s decisions discussed in this Part, by subject and in date order within each:

Procedure under section 144B

1. Gandhi Realty, 5 October 2021: no notice-cum-draft order, service not proved; quashed with liberty.
2. Agrawal JMC Joint Venture, 11 October 2021: written request for a hearing ignored; order, demand and penalty quashed and remanded.
3. Rajdhani Textiles, 8 August 2023: reassessment order quashed with liberty to proceed from the reply to the show cause notice.
4. Fusion Granito, 14 June 2024: objection for want of a transfer under section 144B(8) rejected; order quashed for denial of hearing.
5. Darshit Ashokbhai Zinzuwadia, 11 March 2025: hearing not lost on centralisation under section 127(2).
6. Late Junedbhai Abdulgani Memon, 8 May 2025: adjournment request not seen; order of 27 April 2021 quashed and remanded.
7. Parmeshwar Trading Co., 20 January 2026, and B.M. Developers, 17 April 2026: requested video hearing not given; the SOP described as mandatory.
8. SN Advance Ventures, 28 July 2026: three days to reply not a reasonable opportunity; remanded, with a hearing “if otherwise permissible in law” (para 18).

Limitation

9. Sun Pharmaceutical, 6 January 2026: fresh orders without a draft order under section 144C quashed; remand refused as time-barred.
10. Filmtec Solar, 28 September 2026: order passed after limitation, the dates undisputed; quashed without remand (para 13).

On procedure, the plea of alternate remedy has not prevailed where the breach is plain on the record; where the breach is one of opportunity the assessment goes back, by remand (usually with twelve weeks) or with liberty to proceed afresh; outright quashing has been confined to limitation and section 144C; and in the 2026 hearing cases the facts were not disputed. The Gujarat decisions on the Document Identification Number, the section 148 notice and the section 151 sanction are listed in Part 2.

The Gujarat decisions above do not decide: the ordinary assessee’s entitlement to the draft order on the 2022 text (Gandhi Realty was decided on the 2021 text, without reference to the distinction the Kerala High Court has since drawn); the effect of the omission of sub-section (9); the portal button after Agrawal JMC; the legal status of the SOP in a contested case; or section 153 and the fresh order after a writ remand.

Open questions, argued both ways

Three questions in this Part are open. Each is argued, with our view, in the section named; Part 2 carries questions 4 to 7 and Part 3 questions 8 to 10.

1. Must the draft order be served on an assessee who is not an eligible assessee? (The draft order.)
2. Is a written request for a hearing enough, or must the portal button be used? (The personal hearing.)
3. How long does the Department have to pass the fresh order? (Limitation for the fresh order after a set-aside.)

On a live file

1. Fix the Act, the text and the stream. Tax years beginning before 1 April 2026 stay under the 1961 Act, procedure included (section 536(2)(c) of the 2025 Act); later years are under section 273 and Rule 176. See which Act governs your appeal. Apply the 2021 or the 2022 text of section 144B by the date of the step complained of, and confirm that the case is properly faceless: not in a Central or International Tax Charge, not a survey case, no transfer under section 144B(8).
2. Check delivery. Confirm the registered e-mail addresses and mobile number on the portal, remove former consultants and auditors (Hero Products), and download every notice with its portal entry.
3. Read the show cause notice against clause (xii)(b). List each variation and the material cited for it, the time of digital signing, the due date and time and the intervening holidays. This list is the measure of the final order.
4. Ask for the hearing at once, both ways. Click “Seek Video Conferencing” and repeat the request in the first paragraph of the reply, with a screenshot of each. A request made earlier in a section 142(1) reply is not enough.
5. If the time is short, object before it expires. Seek an adjournment through the online option, citing paragraph N.1.3 of the SOP, and file an interim reply within time. A request made after the due date is the assessee’s default (Sunil Verma, para 13).
6. If the portal closes. Take a dated screenshot and send the reply by e-mail and through the grievance facility the same day (The ICFAI Society; SN Advance Ventures).
7. On the hearing. Keep the intimation with its time of receipt, log in early, keep screenshots if the host does not start the meeting, and object in writing the same day (Vallabhji Malsi).
8. When the order comes. Compare it with the notice for any addition not proposed and any reply not dealt with. The checks on the signature, the Document Identification Number, the section 148 notice and the approval are in the list in Part 2.
9. Writ or appeal. A writ petition is realistic where the breach appears from the portal record: no show cause notice, a requested hearing not given, an impossible reply period, an addition outside the notice, or an order beyond limitation. Either way, file the appeal within time and disclose it: a writ petition does not stop the thirty days, and Noel Villas ended, after more than three years in the writ court, with dismissal and only an exclusion of that period. Apply to the jurisdictional Assessing Officer under section 220(6) as soon as the appeal is filed.
10. After a remand. Expect a second assessment. Diarise the month in which the High Court’s order was received by the Principal Commissioner or Commissioner, the twelve months under section 153(6)(i) from the end of that month, and the court’s own date; repeat the hearing request against the fresh show cause notice.
11. Preserve the record. Take the e-proceedings history, every acknowledgement with its hash, the screenshots, the e-mails and the grievance receipts before the order is passed; after the transfer under clause (xxxi) they are harder to obtain.

Concordance: Income-tax Act, 1961 and Income-tax Act, 2025

Subject	Income-tax Act, 1961	Income-tax Act, 2025
Faceless assessment	Section 144B	Section 273, with Rule 176 of the Income-tax Rules, 2026
Show cause notice for a prejudicial variation	Section 144B(1)(xii)(b)	Rule 176(2)(l)(ii)
Personal hearing: request and grant	Section 144B(6)(vii), (viii)	Rule 176(3)(g), (h)
Draft order and Dispute Resolution Panel	Section 144C	Section 275
Faceless schemes (reassessment, penalty, revision, appeal, Dispute Resolution Panel)	Sections 151A, 274(2A), 264A, 250(6B), 144C(14B)	Section 532
Faceless jurisdiction of income-tax authorities	Section 130	Section 245
Scrutiny notice	Section 143(2)	Section 270(8)
Scrutiny assessment	Section 143(3)	Section 270(10)
Best judgment assessment	Section 144	Section 271
Special audit	Section 142(2A)	Section 268(5)
Time limit for completing assessment	Section 153	Section 286
Assessment to give effect to a court’s order made otherwise than in appeal or reference	Section 153(6)(i)	Section 286(1), Table, Sl. No. 8(ii)

Decisions referred to in this Part

Decision	Court and date	Cited for
National Faceless Assessment Centre v. Chander Arjandas Manwani	Supreme Court, 21 March 2023	The Board’s “non-est” clause; effect of omitting sub-section (9) remitted
Awadh Kishor Singh	Patna High Court, 10 February 2025	Superseded text; service on registered e-mail; assessee left to appeal
Fusion Granito Private Limited	Gujarat High Court, 14 June 2024	Jurisdiction after a section 263 order; hearing; alternate remedy
Darshit Ashokbhai Zinzuwadia	Gujarat High Court, 11 March 2025	Hearing not lost on centralisation
Bala Sreenivas Rao Somisetty	Andhra Pradesh High Court, 12 October 2026	Case passes from the jurisdictional to the faceless officer only under section 127 (said in striking down section 147A)
M/s Patran Foods Pvt. Ltd.	Punjab and Haryana High Court, 20 December 2024	Jurisdictional officer to continue with notices revived under Article 142; no prejudice
Gandhi Realty (India) Private Limited	Gujarat High Court, 5 October 2021	Proof of service; no show cause notice
Hero Products India Pvt Ltd	Bombay High Court, 13 July 2026	Notices sent to a former auditor’s e-mail; four months for the fresh order
Automotive Manufacturers Private Limited	Supreme Court, 21 March 2023	Show cause notice mandatory; remand
Abacus Real Estate Private Ltd.	Supreme Court, 21 March 2023	Same
Multiplier Brand Solutions Pvt. Ltd.	Supreme Court, 21 March 2023	Same
Magadh Sugar & Energy Limited	Calcutta High Court, 16 November 2022	No show cause notice on the current text
Bharat Aluminium Company Ltd.	Delhi High Court, 14 January 2022	Additions beyond the notice; reply to section 142(1) notice ignored; hearing mandatory
Sunil Verma	Delhi High Court, 14 October 2026	Late reply on the portal to be considered
The ICFAI Society	Telangana High Court, 19 February 2026	Reply through Grievance Cell; SOP paragraph N.1.3
Vallabhji Malsi & Co.	Bombay High Court, 24 November 2025	No working day to reply; hearing link failure
SN Advance Ventures Private Limited	Gujarat High Court, 28 July 2026	Three days not a reasonable opportunity
Late Junedbhai Abdulgani Memon	Gujarat High Court, 8 May 2025	Adjournment request not seen
Raja Reddy Sannareddy	Telangana High Court, 3 March 2026	Repeated adjournments; no hearing request; writ dismissed
V Durairaj	Madras High Court, Madurai Bench, 17 July 2026	Remand on deposit as “partial rescue”
Chander Arjandas Manwani v. The National Faceless Assessment Centre	Bombay High Court, 21 September 2021	Hearing denied; no draft assessment order issued; since set aside
SLP (C) No. 21158 of 2022	Supreme Court, 21 March 2023	Fresh assessment open without a remand
Sujatha Revikumar	Kerala High Court, 27 March 2025	Draft order not due to an ordinary assessee
M/s. Noel Villas and Apartments	Kerala High Court, 8 June 2026	Same; no hearing request
Ritnand Balved Education Foundation	Delhi High Court, 27 May 2021	Hearing under the 2021 text
Sanjay Aggarwal	Delhi High Court, 2 June 2021	Same
Sapna Flour Mills Ltd.	Allahabad High Court, 9 December 2022	Requested hearing denied; omission of sub-section (9) upheld
B.M. Developers	Gujarat High Court, 17 April 2026	Video hearing; SOP
Agrawal JMC Joint Venture	Gujarat High Court, 11 October 2021	Written request for hearing
Parmeshwar Trading Co.	Gujarat High Court, 20 January 2026	SOP described as mandatory
Rajdhani Textiles Pvt. Ltd.	Gujarat High Court, 8 August 2023	Liberty to proceed afresh
Filmtec Solar Private Limited	Gujarat High Court, 28 September 2026	Order beyond limitation; no remand
Milind Dashrath Pawar	Bombay High Court, 6 July 2026	Order signed after limitation; no remand
Mantra Industries Ltd.	Bombay High Court, 3 July 2021 and 11 October 2021; Supreme Court, 11 April 2022 and 21 March 2023	Paragraph 9 expunged; review permitted
SLP (C) No. 20642 of 2022	Supreme Court, 21 March 2023	Omission of sub-section (9) left undecided
Sumitomo Corporation India (P) Ltd.	Delhi High Court, 2 September 2024	Court cannot enlarge section 153
Sun Pharmaceutical Industries Limited	Gujarat High Court, 6 January 2026	No draft order under section 144C; remand refused
Sidel India Private Ltd	Bombay High Court, 19 October 2026	Draft order beyond limitation
Hansgrohe India Private Limited	Bombay High Court, 25 March 2026	Final order without draft quashed
Royal Cyber Private Limited	Karnataka High Court, 27 November 2025	Final order while objections pending
M/s. ABC Papers Limited	Supreme Court, 18 August 2022	Authorities operate under the concerned High Court
Ramesh Kumar Bagri	Delhi High Court, 2 April 2026	Seat of the jurisdictional officer

The grounds of jurisdiction and form after the Finance Act, 2026 (the Document Identification Number, the signature, the officer who issues the section 148 notice and approvals), and how far its retrospective amendments answer them, are in Part 2, with open questions 4 to 7. Read it at Faceless assessment after Finance Act 2026: DIN, sections 147A and 292BC. The order made in a faceless assessment goes in appeal to the Commissioner (Appeals), and that appeal is also faceless. Part 3 takes up the hearing before the Commissioner (Appeals), the forum for the further appeal and open questions 8 to 10. Read it at Faceless appeal before the Commissioner (Appeals): hearing and remedies.

This note is general commentary on the law as at 11 November 2026 and is not advice on any matter. The position in a particular case depends on its own facts.