Faceless Assessment Orders Quashed: Natural Justice in 2026

Last reviewed: 25 September 2026. High Courts continue to set aside faceless assessment orders passed under Section 144B of the Income-tax Act — not because the underlying tax addition was necessarily wrong, but because the assessing unit ignored a hearing request, passed the order within hours of the reply deadline, or raised a fresh issue that was never put to the taxpayer. The line of authority is well established: in Sanjay Aggarwal v. National Faceless Assessment Centre, W.P.(C) 5741/2021 (Delhi High Court, 2 June 2021), the assessment order was set aside because repeated requests for a personal hearing were never acted on, and in Bharat Aluminium Co. Ltd v. Union of India (2022) 442 ITR 101 (Delhi High Court), the Court held that the faceless scheme does not take away the right to a personal hearing once it is sought. For businesses and professionals currently under faceless scrutiny, the procedural record is one of the most useful defences available — but, as set out below, it is not the automatic one it is sometimes made out to be. If you are still working out why the return was picked up in the first place, see the CBDT compulsory scrutiny criteria for FY 2026-27.

The legal framework: what Section 144B actually requires

The Faceless Assessment Scheme, embedded in Section 144B of the Income-tax Act, was designed to remove physical interface between the assessing officer and the taxpayer while preserving the core protections of assessment law. Two points matter, and the first is regularly misstated.

A personal hearing arises on request, not on variation. The assessment unit prepares an income determination proposal; where a variation prejudicial to the assessee is proposed, a show-cause notice is served setting out that proposed variation and calling on the assessee to respond. (The Finance Act 2022 restructured Section 144B and removed the draft-assessment-order stage from the ordinary faceless flow — a "draft order" survives only in the Section 144C Dispute Resolution Panel route, which is a different mechanism.) The proposed variation, by itself, does not entitle you to a hearing. Under Section 144B(6)(vii) the assessee may request a personal hearing; under Section 144B(6)(viii), where such a request has been received, the relevant unit shall allow it, exclusively through video conferencing. These clauses were numbered Section 144B(7)(vii) and (viii) before the Finance Act 2022 restructuring, which is the numbering used in the earlier decisions. The practical consequence is blunt: if you did not ask, in writing, you will struggle to complain.

The reply must actually be considered. Before a final order is passed, the assessing unit must genuinely engage with the assessee's reply to the show-cause notice, not merely record that a reply was "considered" as a formality. These are not discretionary courtesies. They flow from the constitutional principle of audi alteram partem — the right to be heard — which applies with full force to tax assessments, faceless or otherwise. The automation and standardisation that faceless assessment brings does not dilute this right; if anything, courts have been more alert to breaches precisely because the process is templated and can mechanically generate an order without a human actually reading the reply.

The limit courts have set: breach alone is not enough

This is where a good deal of published commentary overstates the position, and where a client can waste money. Section 144B(9), which had expressly provided that an assessment made otherwise than in accordance with the section shall be non est, was omitted by the Finance Act 2022 with retrospective effect from 1 April 2021. There is now no statutory consequence of nullity attached to a procedural breach. The Supreme Court, in National Faceless Assessment Centre v. Mantra Industries Ltd (SC, 14 April 2022), stayed the High Court observation that had declared an order non est on that footing. The Department's standing answer in every such petition is therefore that the assessee must go to the Commissioner (Appeals) like anyone else.

Alongside that, courts apply a prejudice test rather than treating every lapse as fatal. Where the hearing would have made no difference to the outcome, the "useless formality" doctrine can defeat the challenge — Dharampal Satyapal Ltd v. CCE, (2015) 8 SCC 519. The practical test a Thane or Mumbai client should apply before instructing counsel is simple: can you say, concretely, what you would have placed on record or argued had the hearing been given? If you can, the challenge is strong. If the honest answer is that the reply already contained everything, expect the Department to say so and expect the court to listen.

The fact patterns that succeed

Revenue's institutional position is that faceless assessment is efficient, standardised, and self-documenting — every notice, reply and order sits on the portal with a timestamp, so due process is, in the Department's view, inherently satisfied. Taxpayers who approach High Courts are not usually arguing that the scheme itself is unlawful; they are pointing to specific procedural lapses in individual cases. The reported decisions show a consistent set of fact situations that courts have treated as going to the root of the order:

• Hearing request ignored or denied without reasons — the assessee explicitly asked in writing for a video-conference hearing, as Section 144B(6)(vii) permits, and the request was never acted on before the order was passed. This is the Sanjay Aggarwal and Bharat Aluminium fact pattern, and it remains the strongest of the categories.
• Same-day or same-hour orders — a final order passed on the same date as, or within a few hours of, the deadline given for filing a reply, leaving no realistic window for the assessing unit to have read and considered the submission.
• Mechanical rejection of a justified adjournment request — a short, reasonable extension (for example, to collect a document from a third party) refused without any recorded reason, followed by an ex-parte order.
• Fresh issues sprung in the final order — an addition made on a ground that was never mentioned in the show-cause notice, denying the assessee any opportunity to respond to that specific point before it became final.

In each of these, the usual remedy directed by courts is not a decision on the merits of the tax dispute at all; it is to set aside the order and remand the matter for a fresh, properly conducted assessment where the hearing is actually given and the reply actually considered. Nothing is written off. The addition comes back for argument.

Revenue's view versus the taxpayer's view

It is worth being precise about where the genuine dispute lies, because it is narrower than it first appears. The Department does not argue that natural justice is dispensable in a faceless environment — that would be an unsustainable position. Its practical stance is instead that the portal log itself is proof of compliance: a notice was uploaded, a window was given, a reply portal was open, therefore due process occurred; and that in any event the remedy lies in appeal. Taxpayers' counsel push back that availability of a channel is not the same as a "hearing" — a video-conference request that sits unactioned, or a reply filed shortly before a same-day order, cannot be treated as genuinely heard. Courts have generally sided with the taxpayer's framing on this specific point: the test is not whether a channel existed on the portal, but whether the assessing unit actually engaged with what was submitted before finalising the order.

Comparison: procedural fact pattern vs likely judicial response

Worked example: how the timeline itself becomes the evidence

Consider a mid-sized trading company that received a show-cause notice under Section 144B proposing a disallowance of ₹42,00,000. The notice gave the company seven days to reply. The company filed a detailed reply on day 6, attaching ledger extracts and bank statements, and in the same submission expressly requested a video-conference hearing given the quantum involved. The final assessment order was uploaded on day 7 itself — barely eighteen hours after the reply was filed — confirming the entire addition of ₹42,00,000 with a single line: "reply considered, found unsatisfactory." No hearing was granted, and the order did not engage with a single document that had been submitted.

On these facts the company has a real natural-justice case, and it does not depend on whether the ₹42,00,000 addition was correct. The submission log — the reply timestamp on day 6 evening, the order timestamp less than a day later, and an explicit, unaddressed hearing request in between — establishes a breach of Section 144B(6)(viii). Two things still have to be done properly. First, the petition must identify the prejudice: what the company would have demonstrated at the hearing that the one-line order shows was never considered. Second, the Section 246A appeal should be filed within 30 days under Section 249(2) in parallel, so that limitation is protected if the High Court relegates the company to the statutory remedy. The relief realistically available is to set aside the order and remand for a fresh assessment with an actual hearing, leaving the ₹42,00,000 addition to be argued afresh on a level procedural footing.

Common mistakes that weaken a natural-justice challenge

• Not explicitly requesting a personal hearing in writing — a proposed variation does not entitle you to one; the request under Section 144B(6)(vii) is what triggers the obligation, and it needs to be on record.
• Being unable to say what difference the hearing would have made. Without articulated prejudice, the Department will invoke the "useless formality" line and it frequently works.
• Filing replies at the very last moment without also flagging that a hearing is still pending, which gives the assessing unit room to argue the reply was itself considered before the order.
• Treating an adjournment request casually — a vague request for more time without a specific, justified reason is more easily rejected, and more easily defended by the Department, than a request stating exactly why more time is needed and for how long.
• Letting the Section 246A appeal period lapse while pursuing a writ. Limitation is 30 days under Section 249(2); the writ can be dismissed on alternative-remedy grounds, and you do not want to be arguing condonation afterwards.
• Not preserving the portal's own submission log and timestamps — this log is frequently the single most persuasive piece of evidence in these cases and should be downloaded and preserved as soon as an issue is suspected.

What business owners and professionals should do now

If your company or firm currently has a matter pending before a faceless assessment unit, treat the procedural record as seriously as the substantive reply. Four steps make the biggest difference. First, wherever any variation to returned income is proposed, expressly request a personal hearing through video conferencing in your written reply — the obligation under Section 144B(6)(viii) is triggered by the request, not by the variation. Second, keep a clear, timestamped paper trail of every submission and every adjournment request; the portal's own submission log is strong, self-authenticating evidence and should be saved independently rather than relied on to remain accessible later. Third, if a final order is passed that ignores a timely reply, a pending hearing request, or raises an issue never put to you in the show-cause notice, file the Section 246A appeal within limitation and evaluate a writ in parallel — a writ can be quicker where the breach is clear on the face of the record, but the alternative-remedy objection is real and a protective appeal costs little. Fourth, be ready to state the prejudice in concrete terms. A professional experienced in faceless-assessment litigation can assess within days whether your fact pattern fits the categories courts have been acting on.

One point worth settling at the outset: which Act applies. Faceless assessments for assessment year 2026-27 and earlier continue to be governed by Section 144B of the Income-tax Act, 1961, notwithstanding the commencement of the Income-tax Act, 2025 on 1 April 2026 — Section 536(2)(c) of the new Act preserves the old law for tax years beginning before that date, whatever the date of the notice or order. For tax year 2026-27 onwards, the corresponding faceless assessment provision is Section 273 of the Income-tax Act, 2025, which carries the scheme forward in substance. For those tax years, the appeal to the Commissioner (Appeals) lies under Section 357 of the Income-tax Act, 2025 (old Section 246A), to be filed within 30 days under Section 358(3) (old Section 249(2)).

Frequently asked questions

This article is general information on a contested area of tax law as of the review date above, not opinion on any specific case; the legal position may change, and outcomes always depend on the specific facts of the case — please consult a professional before acting.