Orissa HC Sets aside Order passed by NFAC without allowing 7 days Time Stipulated u/s 144B of Income Tax Act [Read Order]

The Orissa High Court set aside the order passed by the National Faceless Assessment Centre (NFAC) as it was without allowing the 7 day time stipulatedd under section 144B of the Income Tax Act, 1961.

Ramshankar Mahapatra, the petitioner challenged the order dated 11.03.2025 passed by the opposite party no.4-The Assessment Unit, Income Tax Department, The National Faceless Assessment Centre under Section 147 read with Section 144B of the Income Tax Act, 1961 pertaining to assessment year 2017-18.

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The petitioner was selected for reassessment under Section 147 of the Income Tax Act, 1961 (“I.T. Act”, in short) having filed its return of income on 23.03.2024 in ITR-3 under Section 148 pertaining to assessment year 2017-18. On 16.01.2025, in continuation with the assessment proceedings, opposite party no.4- The Assessment Unit, Income Tax Department, The National Faceless Assessment Centre instructed the petitioner to upload certain evidences granting him barely four days, which is considered by the petitioner to be insufficient for compliance.

Since inadequate time was granted for uploading the documents and there was insufficient space allotted for uploading, it took considerable time for scanning the documents and submitting the same before the assessing officer. However, the assessment has been framed raising demand to the tune of Rs.1,36,,20,813/-.

Sri Chitrasen Parida, counsel appearing for the petitioner drew attention of the Court to Standard Operating Procedure dated 03.08.2022 issued by the Ministry of Finance, Central Board of Direct Taxes National Faceless Assessment Centre.Sri Subash Chandra Mohanty, Senior Standing Counsel along with Mr. Avinash Kedia, Junior Standing Counsel for the Income Tax Department on instructions submitted that the Faceless Assessment Unit has stipulated the date by which the petitioner was required to furnish documents. He further submitted that within the period stipulated, the petitioner could very well upload the documents available with him. The Assessing Authority having considered the documents available with him passed the appropriate order, which warrants no interference.

Section 144B(6)(xi) of the I.T. Act empowers the Principal Chief Commissioner or the Principal Director General, as the case may be, in-charge of the National Faceless Assessment Centre, to lay down the standards, procedures and processes for effective functioning of the National Faceless Assessment Centre and the units set up, in an automated and mechanised environment with prior approval of the Board.

The Standard Operating Procedure under the Faceless Assessment provisions of Section 144B of the I.T. Act issued by the Government of India, Ministry of Finance, Central Board of Direct Taxes National Faceless Assessment Centre on 03.08.2022 clearly lays down that in order to afford natural justice and reasonable opportunity to the assessee, seven days’ time from the issue of show cause have been stipulated.

Having glanced at show cause notice issued under Section 144(3), it is apparent that the same was issued on 16.01.2025 with stipulation for submission of reply by 20.01.2025. Therefore, on the face of the record, the time so specified by the Faceless Assessment Unit is not in consonance with the Standard Operative Procedure. Therefore, the Court viewed that there has been flagrant violation of the principles of natural justice.

The bench comprising Chief Justice Mr. Harish Tandon and Justice Mr. Murahari Sri Raman while diligently considering the material available on record, perceives that inadequate time was granted to the petitioner to furnish voluminous documents. The Court is inclined to set aside the Assessment Order dated 11.03.2025 passed under Section 147 read with Section 144B of the Income Tax Act and remit the matter to the opposite party no.4- The Assessment Unit, Income Tax Department, The National Faceless Assessment Centre for fresh adjudication of the matter with respect to financial year 2016-17 relevant to assessment year 2017-18.

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