Andhra Pradesh High Court Sets Aside Faceless Assessment Order: CBDT SOP Mandates Seven Days to Respond to Show Cause Notice

Background of the Case

BVR Projects Vs Assessment Unit (Andhra Pradesh High Court)

A partnership firm operating in the construction sector challenged a faceless assessment order before the Andhra Pradesh High Court, raising a fundamental question of procedural fairness — whether an assessee must be granted the full seven-day period prescribed under the CBDT Standard Operating Procedure before a final assessment order can be passed under Section 144B of the Income Tax Act, 1961.

Facts of the Case

The assessee, a partnership firm engaged in construction activities, filed its return of income for Assessment Year 2024-25, declaring a total income of Rs. 35,63,490/-.

The sequence of events that led to the dispute is as follows:

  1. The first respondent — the Assessment Unit — issued an intimation under Section 144B of the Income Tax Act, 1961 dated 24.06.2025, accompanied by a notice under Section 143(2).

  2. In response to the said notices, the assessee submitted its financial statements, tax audit report, income computation, and other supporting documents on 09.07.2025.

  3. A further notice under Section 142(1) was subsequently uploaded on the Revenue's e-proceedings portal.

  4. The Assessment Unit then issued a show cause notice under Section 144 dated 28.02.2026, proposing substantial additions amounting to Rs. 5,22,51,078/- to the assessee's declared income, and directing the assessee to submit its objections by 13:02 hours on 06.03.2026.

  5. An assessment order was ultimately passed on 10.03.2026.

Core Grievance of the Assessee

The assessee raised two primary objections before the High Court:

Inadequate Time Granted to Respond

The show cause notice dated 28.02.2026 was issued on a Saturday. The following day, 01.03.2026, was a Sunday — a public holiday. As a result, the assessee effectively received only four working days to prepare and submit its objections to proposed additions exceeding Rs. 5 crore. The assessee contended that such a compressed timeline was wholly unreasonable and prejudicial.

Violation of CBDT Standard Operating Procedure

The assessee further contended that the assessment order dated 10.03.2026 was passed in direct violation of the Standard Operating Procedure (SOP) dated 03.08.2022, issued by the Central Board of Direct Taxes (CBDT) for the conduct and completion of faceless assessments under Section 144B(6)(xi) of the Income Tax Act, 1961.

Clause N.1.3.1 of the SOP explicitly mandates that an assessee must be granted a minimum period of seven days to file a reply to a show cause notice issued during faceless assessment proceedings.