Faceless Assessment Framework Combined With Rigid Procedural Presumptions Has Potential To Create Confusion: Delhi HC Directs CBDT To Plug Procedural Gaps

The Delhi High Court has held that the faceless assessment framework, combined with rigid procedural presumptions, has the potential to create confusion and injustice. It held that the consequence of not forwarding objections to an unknown and faceless AO “cannot and should not be so drastic” as to deny the assessee a fair hearing and issued directions to Central Board of Direct Taxes (CBDT) to plug procedural gaps under faceless proceedings. The bench of Justice Dinesh Mehta and Justice Vinod Kumar has quashed a final income tax assessment order and the consequential demand notice passed without granting an effective opportunity of hearing, even though the assessee had failed to forward a copy of its objections to the Assessing Officer (AO). The procedural lapse, in the peculiar facts of faceless proceedings, could not result in drastic civil consequences for the taxpayer. The petitioner, Express Freight Consortium, challenged the final assessment order dated 18 December 2025 and the corresponding demand notice issued by the Income Tax Department. The dispute arose after a draft assessment order was issued on 6 November 2025 under the faceless assessment mechanism. Aggrieved by the draft order, the petitioner filed its objections before the Dispute Resolution Panel (DRP) on 5 December 2025. However, the assessee did not send a copy of these objections to the AO, under the bona fide belief that in a faceless regime, the DRP would automatically forward the objections to the concerned assessment unit. Despite the objections having been filed before the DRP, the AO proceeded to pass the final assessment order on 18 December 2025, treating the case as one where no objections had been filed and invoking Section 144C(4) of the Income Tax Act, 1961. The petitioner contended that the final assessment order was passed in complete violation of the principles of natural justice, as the objections raised before the DRP were not considered at all. It was argued that the assessment proceedings ought to have been kept in abeyance once objections were filed, particularly when the statutory limitation to complete the assessment was available till 31 January 2026. The assessee emphasized that the faceless nature of the proceedings itself created confusion and that the lapse in not forwarding the objections to the AO was neither deliberate nor intended to bypass the statutory process. The department opposed the writ petition, contending that once a final assessment order had been passed, the petitioner should avail the statutory appellate remedy rather than invoke the writ jurisdiction of the High Court under Articles 226 and 227 of the Constitution of India. It was further argued that Section 144C(2)(b) of the Income Tax Act clearly casts an obligation on the assessee to forward a copy of the objections to the AO, which the petitioner admittedly failed to do. The court acknowledged that, strictly in law, the assessee was required under Section 144C(2)(b) to send a copy of its objections to the AO. The Court also accepted that, in the absence of such communication, the AO was legally justified in presuming that no objections had been filed and in proceeding to finalize the assessment within the statutory timeframe. However, the Court took a pragmatic and equity-based view of the matter. It observed that the failure to send a copy of objections to the AO was a “small breach or lapse” which resulted in disproportionately adverse consequences for the assessee. Importantly, the Court emphasized that factually, objections had indeed been filed before the DRP, and ignoring this reality would defeat the very scheme of Section 144C, which is designed to safeguard natural justice. The Bench also flagged a larger systemic concern, questioning what would happen to the pending proceedings before the DRP if the final assessment order were allowed to stand. It noted that such a situation could lead to legal absurdities, particularly if the DRP were to subsequently allow the assessee’s objections. The Court cautioned that statutes should not be interpreted in a manner that leaves “too many loose ends,” as excessive presumptions are antithetical to the rule of law. While quashing the impugned assessment order and demand notice, the High Court issued prospective directions to the Central Board of Direct Taxes (CBDT). The Court directed that suitable circulars or office instructions be issued to ensure that the DRP does not accept objections unless proof is furnished that a copy has also been served on the AO. According to the Court, such a mechanism would prevent future assessees from facing similar hardships and would also deter any misuse of the procedure to delay assessments or manipulate limitation periods Allowing the writ petition, the Delhi High Court set aside the final assessment order and clarified that this would not prejudice the independent proceedings pending before the DRP, which would continue in accordance with law. Case Details Case Title: Express Freight Consortium Versus Assessment Unit, Income-Tax Department Case No.: W.P.(C) 578/2026 CM APPL.2864/2026 CM APPL.2865/2026 Date: 16.01.2026 Counsel For Petitioner: Nageswar Rao Counsel For Respondent: Gaurav Gupta Click Here To Read Order Read More: Delhi HC Quashes Retrospective GST Registration Cancellation, Imposes Rs. 10K Cost On Assessee

Faceless Assessment Framework Combined With Rigid Procedural Presumptions Has Potential To Create Confusion: Delhi HC Directs CBDT To Plug Procedural Gaps

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