Madras High Court Invalidates Faceless Assessment Order Over Denial of Video Conference Hearing Despite Written Request

The advent of the faceless assessment regime under the Income Tax Act, 1961, was designed to introduce greater transparency, eliminate physical interfaces, and streamline tax administration. However, the transition to a purely digital interface has frequently sparked disputes regarding procedural compliance and the fundamental principles of natural justice. A recurring point of contention is the right to a personal hearing through video conferencing.

In a significant judicial pronouncement, the Madras High Court in the matter of Process Sensing Technologies PST Private Limited Vs Assessment Unit (Faceless) addressed a critical issue: whether a statutory right to a personal hearing can be negated merely because the assessee failed to click a specific button on the e-filing portal, despite making an express written request. The Court's ruling reinforces the principle that substantive justice and statutory rights must prevail over hyper-technical procedural requirements.

The Framework of Faceless Assessments and Natural Justice

Before delving into the specifics of the case, it is imperative to understand the statutory backdrop. The faceless assessment mechanism is governed primarily by Section 144B of the Income Tax Act, 1961. This section lays down a detailed, step-by-step procedure for conducting assessments electronically.

A cornerstone of this procedure is the preservation of the assessee's right to be heard. When an assessment unit proposes an variation to the returned income that is prejudicial to the interest of the assessee, a show cause notice must be issued. Upon receiving this notice, the assessee has the right to file a response and, crucially, demand a personal hearing to present their case verbally. Under the faceless regime, this personal hearing is conducted exclusively through video conferencing.

The courts have consistently held that the opportunity for a personal hearing is not a mere formality but a mandatory requirement under Section 144B. Denial of this opportunity strikes at the very root of natural justice, rendering the subsequent assessment order legally vulnerable.

Factual Matrix of the Dispute

The case revolves around an assessment proceeding initiated against the assessee, Process Sensing Technologies PST Private Limited, for the Assessment Year 2024-25.

During the course of the faceless assessment, the Assessment Unit issued a show cause notice to the assessee, proposing certain additions or disallowances. In compliance with the statutory timelines, the assessee submitted a detailed reply on 09.02.2026.

Within the text of this written reply, the assessee explicitly articulated a request for a personal hearing via video conferencing to further explain their position and clarify the documentary evidence submitted.