Court Remands Case for Fresh Assessment after Finding Inadequate Time and Non-Consideration of Petitioner's Reply in Jepee Construction Pvt. Ltd. v. National Faceless Assessment Centre
In a significant judgment delivered on October 6, 2026, the Rajasthan High Court (Division Bench) quashed an assessment order passed by the National Faceless Assessment Centre (NFAC) under the Income Tax Act, 1961, holding that the order was passed in clear violation of the principles of natural justice. The case, Jepee Construction Pvt. Ltd. v. Assessment Unit, National Faceless Assessment Centre, arose from a faceless assessment proceeding initiated against the petitioner involving a proposed addition exceeding Rs. 7 crore.
The Court observed that the notice under Section 144B of the Income Tax Act proposing variation was issued on March 11, 2024, at 5:16 p.m., requiring the petitioner to respond by 10:00 a.m. on March 14, 2024. This provided the petitioner with less than three working days to submit a detailed reply on a complex addition, which the Court found to be manifestly unreasonable and contrary to the standing procedural guidelines that mandate at least one week's time for such responses.
Despite the short notice, the petitioner prepared and attempted to upload its response through the Income Tax Department's e-filing portal. However, the "Submit Response" button on the portal failed to function, preventing digital submission. Immediately, the petitioner lodged a grievance with the Department's helpdesk, receiving Grievance No. 16423754, and subsequently sent the detailed reply and supporting documents by email on March 14, 2024, at 5:48 p.m. The National Faceless Assessment Centre acknowledged receipt and forwarded these documents to the Assessment Unit on March 15, 2024. Additionally, the petitioner submitted a physical copy of the reply to the jurisdictional Assessing Officer on March 15, requesting upload on the portal.
Despite these efforts, the impugned assessment order dated March 21, 2024, was passed recording that no reply had been filed and proceeded to make a substantial addition of Rs. 7,14,35,589/-. The petitioner challenged this order by filing a writ petition before the Rajasthan High Court.
The Court, presided over by Chief Justice Sanjay K. Agrawal and Justice Baljinder Singh Sandhu, rejected the respondents' submission that the writ petition was not maintainable due to availability of alternative remedies such as appeal. It noted that a coordinate bench had already entertained the writ on the ground of violation of natural justice and granted interim relief.
Relying on the Supreme Court's landmark decision in Canara Bank v. Debasis Das (2003) 4 SCC 557, the Court reiterated the paramount importance of the audi alteram partem principle, which mandates that no person should be condemned unheard. The Court emphasized that the notice must be precise, unambiguous, and coupled with adequate time to enable the party to make a representation. The absence of such reasonable opportunity vitiates the resulting order.
Finding that the impugned order was passed ignoring the petitioner's email submissions and physical documents and on the erroneous assumption that no reply was filed, the Court held the assessment order to be illegal. It observed that the extremely short notice period combined with the portal's malfunction and the failure to consider the petitioner's response amounted to a gross breach of natural justice.
Accordingly, the Court set aside the assessment order and remanded the matter to the Assessing Authority for a fresh decision in accordance with law, directing that the petitioner be given a reasonable opportunity to be heard and that the reply and documents already filed be duly considered. The Court clarified that it had not expressed any opinion on the merits of the case and disposed of the writ petition accordingly.
This judgment underscores the judiciary's vigilance in upholding fundamental procedural fairness in faceless assessments, ensuring that taxpayers are not deprived of fair hearing even in the evolving digital assessment framework.
Bottom Line:
Income Tax - Faceless assessment - Assessment order passed without granting reasonable time to respond and without considering reply/documents sent by e-mail and physically submitted - Order held violative of principles of natural justice - Availability of alternative remedy not a bar where order is passed in breach of natural justice.
Statutory provision(s):
Income Tax Act, 1961 Section 144B
