Identify the governing Act and notice
Section 144B of the Income-tax Act, 1961 governs specified faceless assessments under that Act. The Finance Act, 2022 revised its procedure and omitted the former subsection (9) retrospectively from 1 April 2021. Use the provision in force for the proceeding rather than treating every deviation as automatically fatal. For proceedings governed by the Income-tax Act, 2025, check section 273, the notified rules and the transition in section 536.
| Centre or unit | Function under section 144B | What the taxpayer should do |
|---|---|---|
| National Faceless Assessment Centre (NFAC) | Facilitates the process and exchanges or serves electronic communications in accordance with the statute. | Respond through the registered account for the relevant notice and preserve acknowledgements. |
| Assessment Unit | Identifies issues, seeks information, analyses responses and makes the assessment. | Answer each issue separately and reconcile it to the underlying record. |
| Verification Unit | Conducts assigned verification, including examination of records and witnesses. | Provide corroborating documents and respond to adverse findings. |
| Technical Unit | Provides specialised assistance, for example on valuation, accounting or treaty issues. | Identify the applicable standards and support assumptions and computations. |
| Review Unit | Reviews an assigned income determination proposal and relevant evidence and issues. | Keep the submission self-contained; review does not guarantee a change. |
Respond at the right stage
Identify the statutory notice, its date of service, the relevant period and its response deadline. Under the applicable 1961 Act wording, section 143(2) generally requires service within three months of the end of the financial year in which the return was furnished; verify the version and exceptions for the case. Section 142(1) information requests have their own specified deadlines. A request for more time does not itself change the deadline.
Section 144B provides for a show-cause opportunity where a prejudicial variation is proposed. Distinguish an information request, the proposed variation, and any draft assessment order and route under section 144C. Check that the proposed issues and supporting material have been communicated sufficiently to enable a response. Where applicable, the Assessment Unit considers the material and completes the assessment; NFAC serves the order, demand and any penalty initiation notice as prescribed. A draft or show-cause notice is not the final demand.
Request and document a hearing
Under the amended section 144B(6), clause (vii) addresses requesting a personal hearing when a variation is proposed and a show-cause notice gives that opportunity. Clause (viii) provides that, when the request is received, the relevant unit shall allow the hearing through NFAC by video conference or video telephony, to the extent technologically feasible under the applicable procedure. File a written response on time and separately preserve the hearing request and its acknowledgement. Follow the current e-Proceedings workflow and confirm any adjournment or changed slot.
Bharat Aluminium and Piramal Enterprises address fair hearing on their respective facts and statutory versions; RMSI addresses a missing show-cause notice. Under Article 226, Whirlpool and Radha Krishan Industries recognise circumstances where a High Court may entertain a writ despite an alternative remedy, including serious breach of natural justice, lack of jurisdiction, enforcement of fundamental rights or a challenge to legislative validity. A writ or remand is discretionary; identify the appropriate appeal, deadline and interim relief separately.
| Problem | Evidence | Response |
|---|---|---|
| Uncommunicated proposed adjustment | Notice and final order, with a line-by-line comparison. | Identify the missed opportunity to respond and its effect. |
| Hearing request not acted on | Acknowledgement, scheduled link if any, messages and order. | Seek a hearing and assess the remedy if an order follows without one. |
| Short response window | Actual timestamps, record volume and extension request. | Explain the prejudice and what time is needed; there is no universal 15-day minimum. |
| Reply shown as missing | Download of the filed response and submission acknowledgement. | Raise the specific discrepancy and preserve the proof for review. |
Structure an electronic submission
Start with an issue index, notice reference, amount, position and evidence. Explain facts and law issue by issue. Show the ledger-to-return and third-party reconciliations, including items that remain unmatched. Use searchable indexed exhibits and check the limits displayed for the current portal response. Where the record cannot fit, seek an authorised way to submit the remainder and an extension where needed. Retain the exact filed version and acknowledgement; an email or grievance is not necessarily a valid statutory response.
Six worked illustrations
The facts and amounts are hypothetical. They illustrate the evidence and arithmetic rather than an expected adjudication result.
1. Loan addition and an unanswered hearing request
Assume three lenders advanced ₹4.50 crore. A notice served 18 March 2024 gives five calendar days, through 23 March. The taxpayer files a 65-page response and requests a hearing on 21 March. An order on 28 March makes the addition without a hearing. Keep the three lenders’ bank and financial records and establish the section 68 elements, including the source explanation where the applicable law requires it. At an assumed section 115BBE rate of 60% with 25% surcharge on the tax and 4% cess, the effective rate is 78% and the tax on ₹4.50 crore is ₹3.51 crore before interest, other taxes and credits. The hearing objection does not decide the merits or the final demand.
2. AIS/26AS and book turnover in FY 2022–23
Assume the matched starting population from AIS and Form 26AS is ₹56.40 crore, without adding the same records twice. Book turnover is ₹48.20 crore; the apparent difference is ₹8.20 crore.
| Book reconciliation item | Amount | Evidence and separate tax check |
|---|---|---|
| Matched statement population | ₹56.40 crore | Compare payer, period, invoice and source data. |
| GST included in the payer figures | Less ₹5.20 crore | Confirm it was included; check invoice terms and Circular 23/2017 for the separate withholding treatment of GST on services. |
| Mobilisation advances | Less ₹2 crore | Assume no book revenue yet. Review contract milestones, the applicable accounting basis and tax treatment independently. |
| Retentions excluded from book revenue | Less ₹1 crore | Assume this is the documented book treatment. For a construction contract governed by section 43CB, contract revenue includes retention money. |
| Reconciled book turnover | ₹48.20 crore | Book difference is nil. If only the retention is added for the tax comparison on the assumed facts, the corresponding tax revenue is ₹49.20 crore. |
3. ₹1.85 crore of purchases disputed on third-party statements
Request the material relied on and an opportunity to answer it and, where appropriate, cross-examine the relevant witnesses. Kishinchand Chellaram concerns adverse material in income-tax proceedings; Andaman Timber concerned reliance on statements in an excise case. Trace the three suppliers’ invoices to transport, weighment, stock entries, bank settlement and production. An invoice or e-way bill does not independently prove physical movement or the supplier’s payment of tax. If sales are assumed at ₹10 crore, the stated 18.2% gross margin means ₹1.82 crore of gross profit; the margin does not establish whether the disputed ₹1.85 crore was incurred or its source was explained.
4. Wind generation and a historical section 80-IA claim
Assume an undertaking claiming ₹3.40 crore can document beginning generation on 1 October 2016. That date falls within the section 80-IA(4)(iv)(a) generation window ending 31 March 2017. Still check the undertaking’s eligibility, deduction period, qualifying profits, audit report and the splitting-up, reconstruction and used-asset tests under section 80-IA(3) and applicable exceptions. Evidence that all specified turbines were new addresses part of that inquiry. Support the commencement date with grid, commissioning and generation records. Do not assume ₹3.40 crore is deductible merely because the project is a wind facility.
5. Failed uploads near a deadline
Assume a 21 March 2024 notice sets 26 March as the response date, five calendar days later. The taxpayer records 14 failed attempts on 25 and 26 March. Keep timestamped screenshots, exact file sizes, notices and the submission record. Use the official portal help or grievance process and request an extension or reopened response window through an authorised channel. A grievance does not itself file the response or extend time. If a best judgment order follows, preserve evidence of both the failure and the material the taxpayer could not submit.
6. Gross margin contraction and cost evidence
Gross margin falls from 22.4% to 14.8%, a decline of 7.6 percentage points. An assumed addition of 5% of ₹35 crore turnover is ₹1.75 crore. Aluminium at ₹185 to ₹248 per kg rose 34.1%; gas at ₹34.50 to ₹52 per standard cubic metre rose 50.7%, each rounded to one decimal. Material consumption rose from 52.8% to 61.2% of sales, or 8.4 percentage points. Power and fuel rose from 8.5% to 11.4% of manufacturing cost, or 2.9 percentage points. The denominators differ, so these changes cannot simply be added to explain the margin. Use purchase invoices, consumption and yield, product mix and contract price changes to reconcile the result.
Frequently asked questions
Does replying to a questionnaire by itself trigger a hearing?
No. Apply the proposed-variation and show-cause conditions in clause (vii), then the hearing rule in clause (viii) if requested.
What if the link fails?
Document the error and the attempt to join, ask through an authorised channel for a new slot, and retain the written response and acknowledgement.
Can limited scrutiny be expanded?
Check the original scope and the instructions and approval requirements applicable to the assessment. Request the grounds and approval record where the issues appear to have expanded; avoid treating every new question as an unlawful expansion.
What happens if a High Court sets aside the order?
Read the actual directions and assess the applicable limitation rules. There is no universal period for a remand and no automatic extinction of the proceeding.
Can I use documents that were not filed before the hearing?
Ask how to place them formally on record and obtain acknowledgement. A screen share alone is not evidence of filing.
Who handles the assessment?
Use the official channel on the notice. NFAC coordinates the proceeding; the assigned unit performs its statutory role. Do not assume that the officer's identity, location or visibility on a call decides the validity of the assessment.
Sources
- Income-tax Act, 1961: sections 43CB, 68, 69C, 80-IA, 115BBE, 142, 143, 144B, 144C and 153
- Income-tax Act, 2025: section 273 and section 536 transition
- Notified Income-tax Rules, 2026: faceless assessment procedure
- Income Tax Department: e-Proceedings, response, adjournment and video conference
- Income Tax Department: video hearing and adjournment user guidance
- CBDT Circular 23/2017: separately indicated GST on services and withholding
- Delhi High Court, Bharat Aluminium Company Ltd v Union of India: requested hearing
- Bombay High Court, Piramal Enterprises Ltd v Additional Commissioner: fair hearing
- Delhi High Court, RMSI Pvt Ltd v NFAC: show-cause notice
- Calcutta High Court, Rangila Fabrics Pvt Ltd v NFAC: opportunity in faceless assessment
- Supreme Court, Kishinchand Chellaram v CIT: opportunity to meet adverse material
- Supreme Court, Andaman Timber Industries v CCE: reliance on witness statements and cross-examination
- Supreme Court, Whirlpool Corporation v Registrar of Trade Marks
- Supreme Court, Radha Krishan Industries v State of Himachal Pradesh