Taxpayer alleges Faceless Assessment SOP Breach by Income Tax Dept: Orissa HC orders to take appellate remedy [Read Order]
The court noted that the Income Tax Act offered a comprehensive appellate mechanism capable of adjudicating both legal and factual issues, including SOP violations and procedural lapses.
The Orissa High Court has declined to interfere in a writ petition filed against a faceless assessment order, despite the taxpayer’s allegation that the Income Tax Department violated the Standard Operating Procedure (SOP) prescribed under Section 144B of Income Tax Act, 1961.
The Court held that allegations of breach of natural justice and procedural irregularities must be examined by the statutory appellate authority, and not in a writ petition under Article 226, especially when an effective alternative remedy is available.
The petitioner, M/s J.M. Steel Traders challenged the assessment order dated 19 March 2025 passed under Section 143(3) read with Section 144B of the Income Tax Act for Assessment Year 2023-24.
The primary grievance raised before the Court was that the Assessing Officer had allegedly violated clause N.1.3 of the Faceless Assessment SOP issued by the CBDT on 3 August 2022.
According to the petitioner, the show-cause notice dated 21 February 2025 granted only 6 days to respond, contrary to the mandatory timelines prescribed in the SOP, rendering the entire assessment vitiated.
The petitioner further argued that the Assessing Officer exceeded the scope of the show-cause notice by making an addition of ₹5.27 crore without issuing any further notice or furnishing the basis for such variation. It was contended that the assessment order violated principles of natural justice and merited outright quashing by the High Court.
However, the Senior Standing Counsel for the Department submitted that the assessee had in fact submitted its reply within the time granted in the show-cause notice and had never complained of inadequate opportunity before the authority concerned.
The Revenue argued that since the assessee responded to the notice and participated in the proceedings, it could not claim prejudice at a later stage.
Whether the officer travelled beyond the contents of the show-cause notice, the Department contended, was a factual matter that must be examined at the appellate stage, not in writ jurisdiction.
After hearing both sides, the Bench of Chief Justice Harish Tandon and Justice Murahari Sri Raman observed that the petitioner had admittedly furnished its response within the period stipulated in the notice.
In such circumstances, the Court held that it could not be said that the assessee suffered any prejudice merely because the notice granted a shorter time than prescribed in the SOP.
The court, with regard to the question of whether the Assessing Officer had introduced issues beyond the show-cause notice, said it required appreciation of facts, evidence, and assessment records, which are outside the scope of writ jurisdiction.
Additionally, the court noted that the Income Tax Act offered a comprehensive appellate mechanism capable of adjudicating both legal and factual issues, including SOP violations and procedural lapses.
Thus, the bench ruled that the petition was not maintainable and dismissed the writ but granted liberty to the petitioner to pursue statutory remedies under the Income Tax Act.
Furthermore, the Court clarified that the appellate authority is empowered to examine issues of procedural violation, excess of jurisdiction, and incorrect additions, if raised by the assessee.
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