Delhi High Court stays show cause notice by I-T dept under faceless assessment regime

The Delhi High Court has granted a stay order against a show-cause notice issued by the revenue department under the faceless assessment regime to a taxpayer who claimed there was a breach of principles of natural justice.

Legal experts said the court’s order could set a precedent for future income tax disputes.

Faceless assessment was started by the tax department to evaluate returns without any face-to-face interaction between those filing the returns and tax officers. The government introduced the scheme after complaints of harassment and allegations of bribery and corruption.


The Delhi High Court said the submission that there was a breach of principles of natural justice appears to be prima facie correct. The court also granted a stay on the income tax notice issued to the taxpayer.

According to the details of the case, the show-cause notice was issued on March 18 this year and the taxpayer was asked to respond to a draft assessment order by March 26. The taxpayer challenged the assessment order but even before the March 26 deadline, the assessment order was passed, a tax demand was made and a penalty was levied.

“These cases could be viewed as going beyond the initial pitfalls expected due to the automation of the assessment proceedings under the act as well as denial of natural justice, as pointed out by courts,” said Yashesh Ashar, a partner at Bhuta Shah & Co., a tax advisory firm. “To mitigate such instances, it is recommend that personal hearing is allowed ‘by default’ before the passing of the draft assessment order stage for cases of disagreements on additions/dis-allowance of expenses.”

In the first year of its introduction, the e-assessment system focussed on smaller amounts. This year onwards, some complicated cases have been taken up under faceless assessments.

In a separate case earlier, the Delhi High Court had issued a notice and stayed the operation of an assessment order passed under the faceless assessment scheme on a writ petition filed by a taxpayer.

The Kerala HC had admitted a similar writ petition with regard to faceless assessment.