s.273 (2025 Act) — Faceless assessment under the Income-tax Act, 2025
The provision of the Income-tax Act, 2025 that makes assessment faceless, keeps the Centre, the units and the opportunity of being heard in the Act, and leaves the rest of the procedure to Rule 176.
Applies to assessments for tax year 2026-27 onwards. The procedure is prescribed by Rule 176 of the Income-tax Rules, 2026 (Notification No. 22/2026, G.S.R. 198(E), 20 March 2026). Every tax year beginning before 1 April 2026 remains under section 144B of the Income-tax Act, 1961, including proceedings for those years begun later (section 536(2)(c) of the 2025 Act).
Income-tax Act, 1961
s.273 (2025 Act)
Income-tax Act, 2025
s.273
In force from 1 April 2026, but s.536(2)(c) preserves the 1961 Act for tax years beginning before that date.
In short
Section 273(1) of the Income-tax Act, 2025 requires an assessment, reassessment or recomputation under section 270(10), section 271 or section 279, in the cases specified by the Board under sub-section (2), to be made in a faceless manner "as per such procedure, as may be prescribed". The section keeps the National Faceless Assessment Centre and the assessment, verification, technical and review units (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 is in the Act itself: under sub-section (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". The rest is in Rule 176 of the Income-tax Rules, 2026. Rule 176(2)(l)(ii) requires a show cause notice stating the prejudicial variations. Rule 176(3)(g) lets the assessee request a personal hearing after that notice, and under Rule 176(3)(h) the unit "shall allow such hearing", exclusively through video conferencing, "to the extent technologically feasible". A draft order is served only on an eligible assessee mentioned in section 275(1) (Rule 176(2)(u)). The counterpart in the Income-tax Act, 1961 is section 144B, where the show cause notice and the hearing are in the section itself, in sub-sections (1)(xii)(b) and (6)(vii) and (viii).
What the provision does
Makes assessment faceless for the cases the Board specifies, establishes the Centre and the units, requires the assessment to be made after an opportunity of being heard, and authorises the procedure to be prescribed by rule. It does not itself contain the show cause notice or the video hearing; both are in Rule 176, which can be altered by notification. Neither the section nor the rule fixes a minimum time for the reply to a show cause notice. Neither has an equivalent of the former section 144B(9), so the consequence of a breach is what the courts attach to it on general principles. It does not apply to any tax year beginning before 1 April 2026.
Threshold questions
- Whether the assessment is for tax year 2026-27 or a later year, so that section 273 and not section 144B applies
- Whether the case is within the cases specified by the Board under section 273(2)
- Whether a show cause notice stating every prejudicial variation was served under Rule 176(2)(l)(ii)
- Whether a personal hearing was requested under Rule 176(3)(g) after the show cause notice, and allowed under Rule 176(3)(h)
- Whether the assessee is an eligible assessee mentioned in section 275(1), on whom the draft order must be served under Rule 176(2)(u)
- Whether, apart from the rule, the assessee had the opportunity of being heard that section 273(4)(b)(i) requires
In practice
The recurring disputes.
Whether the show cause notice and the hearing are protected by the Act or only by the rule
The assessee's case is that section 273(4)(b)(i) keeps a statutory floor: the assessment is to be made "after giving the assessee an opportunity of being heard". Sub-section (1) itself requires that the assessment "shall be made in a faceless manner as per such procedure, as may be prescribed in this behalf", and sub-section (4) opens "In accordance with the procedure as may be prescribed under sub-section (1)", so that on this argument an assessment made in breach of Rule 176 is not made as the section itself requires. Rule 176 is the procedure prescribed under the section, so a failure to serve the show cause notice or to allow a requested video hearing is a breach of the rule and, through it, a denial of the opportunity the section requires. The Revenue's case is that Parliament has moved the two steps out of the Act. The section requires an opportunity of being heard and nothing more specific, a written reply to a notice can supply it, and the detail is whatever the rule provides from time to time, since a rule can be altered by notification. The provision operates from tax year 2026-27 and the point is open. The firm's view is that a challenge should be put in two steps: breach of Rule 176, and through it denial of the opportunity in section 273(4)(b)(i) and a departure from the procedure that section 273(1) requires.
What follows from a breach when neither the section nor the rule states a consequence
Neither section 273 nor Rule 176 has an equivalent of the former section 144B(9), which declared an assessment in breach of the procedure to be non est. The assessee's case is that the wording of Rule 176(2)(l)(ii) and (3)(g) and (h) corresponds to section 144B(1)(xii)(b) and (6)(vii) and (viii), and that the Supreme Court, on 21 March 2023 in National Faceless Assessment Centre v. Automotive Manufacturers Private Limited (para 4), described the show cause notice under section 144B as "mandatorily required". An order passed without it should be set aside under the new Act as under the old; and the step does not rest on the rule alone, because section 273(1) requires the assessment to be made as per the prescribed procedure. The Revenue's case is that those orders were made on words found in the statute, not in a rule; that even there the relief was a remand for a fresh order (para 5); and that sub-section (9) was omitted from the 1961 Act with retrospective effect because of the litigation it produced. On either view the likely relief is a set-aside and a second assessment, not annulment. Whether a breach of the rule alone invalidates the order has yet to be decided.
Whether the Board's orders excepting cases from faceless assessment carry over
Under the 1961 Act the Board's orders direct that every assessment be made under section 144B except those in a short list: cases assigned to Central Charges, cases assigned to International Tax Charges, cases where pendency could not be created or there is no PAN, and survey cases. Section 273(2) confers the scoping power in the same words as section 144B(2). Section 536(2)(j) of the 2025 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. On one view the exceptions therefore continue for tax year 2026-27 onwards. On the other, the orders were issued under section 144B(2) for assessments under that section, and a specification under section 273(2) is needed before a case can be treated as excepted. The firm's view is that the exceptions carry over until the Board orders otherwise. The point matters where an assessment is made in the wrong stream, and it is open.