Faceless Scrutiny Assessment

A scrutiny assessment no longer means a visit to an income-tax office. It begins with an electronic notice from the National Faceless Assessment Centre, continues through written submissions uploaded to the portal, and ends with an order signed by an officer whose name and location the taxpayer will usually never learn. The reader’s difficulty is following a process with many stages and no face. Which notice comes first, what can be asked, when a hearing must be given, and by when the order has to be made?

Which Act governs which years

Under section 536(2)© of the Income-tax Act, 2025, notices and assessments for any tax year beginning before 1 April 2026 continue under the Income-tax Act, 1961, even when they are issued after that date. A scrutiny of assessment year 2026-27 or any earlier year therefore runs under section 143(2), section 142(1) and section 144B of the 1961 Act. Tax year 2026-27 onwards falls under the 2025 Act.

Point	1961 Act	2025 Act
Scrutiny notice	s.143(2)	s.270(8)
Limit for the scrutiny notice	proviso to s.143(2)	s.270(9)
Inquiry notice	s.142(1)	s.268(1)
Assessment order	s.143(3)	s.270(10)
Best judgment assessment	s.144	s.271
Faceless procedure	s.144B(1), step by step in the Act	s.273, with the steps in rule 176 of the Income-tax Rules, 2026
Time limit for the order	s.153	s.286, with a Table

The main structural change in the 2025 Act is that section 273 keeps only the framework: the Centre, the units, and the duty to give “an opportunity of being heard”. The detailed steps the 1961 Act wrote into section 144B(1) now sit in rule 176 of the 2026 Rules, in language that tracks the old clauses closely.

The notices that open and drive the case

• Section 143(2): the scrutiny notice. It requires the assessee to produce evidence in support of the return. “No notice under this sub-section shall be served on the assessee after the expiry of three months from the end of the financial year in which the return is furnished” (proviso to section 143(2); section 270(9)). A return filed in 2025-26 cannot be selected after 30 June 2026. The limit applies to service, not issue.
• Section 142(1): the inquiry notice. It may require a return to be filed, accounts or documents to be produced, or information to be furnished in writing.
• Section 144 show-cause notice. If the assessee does not comply, the assessment unit serves a notice under section 144 “giving him an opportunity to show-cause … as to why the assessment in his case should not be completed to the best of its judgment” (section 144B(1)(ix)).

Under section 144B(1)(ii) and (iii), the Centre first tells the assessee that the case will be completed faceless, and then serves the section 143(2) or 142(1) notice. Every notice is delivered to the registered account, to the registered e-mail address or through the Mobile App, “followed by a real time alert” (section 144B(6)(ii)).

Inside the faceless machine

Section 144B(3) and section 273(3) set up a National Faceless Assessment Centre and four kinds of unit:

• assessment units;
• verification units, which carry out enquiry, cross-verification and the recording of statements;
• technical units, which handle valuation, transfer pricing, legal and accounting questions;
• review units.

Cases reach units through an “automated allocation system”, defined as “an algorithm for randomised allocation of cases”. All communication between the units and the assessee passes through the Centre, “exclusively by electronic mode” (section 144B(5)).

The show-cause notice, and the draft order

The most frequently misunderstood stage is this one. Under section 144B(1)(xii), once the material is in, the assessment unit prepares either:

• “an income or loss determination proposal”, where “no variation prejudicial to assessee is proposed”; or
• “in any other case, a show cause notice stating the variations prejudicial to the interest of assessee proposed to be made to the income of the assessee and calling upon him to submit as to why the proposed variation should not be made”.

The show-cause notice is the assessee’s chance to answer every proposed addition before the order is made. The proposal may then go to a review unit. After that the assessment unit prepares a draft order (clauses (xvi) to (xx)).

Who sees the draft order depends on the assessee:

• Ordinary assessee: the draft order is internal. The Centre directs the unit “to pass the final assessment order in accordance with such draft order” (clause (xxii)). The order, the demand notice and any penalty notice are then served together (clause (xxiii)).
• “Eligible assessee” under section 144C (broadly, transfer pricing cases and foreign companies): the draft order is served on the assessee (clause (xxi)). The assessee may accept it or file objections with the Dispute Resolution Panel within the period in section 144C(2) (clause (xxiv)). See The Dispute Resolution Panel.

Rule 176(2) of the 2026 Rules reproduces this sequence for 2025 Act years, with eligible assessees defined by reference to section 275.

Personal hearing by video

Section 144B(6)(vi) states that a person “shall not be required to appear either personally or through authorised representative” before any unit. The right to be heard orally is triggered by a variation:

• Where a variation is proposed and a show-cause notice is served, “the assessee or his authorised representative … may request for personal hearing” (section 144B(6)(vii)).
• Where the request is received, the authority “shall allow such hearing”. The hearing is “conducted exclusively through video conferencing or video telephony … to the extent technologically feasible” (section 144B(6)(viii)).
• Examination or recording of statements is likewise to be done by video (section 144B(6)(ix)).

Rule 176(3)(g) to (i) of the 2026 Rules repeats these provisions for the 2025 Act. Section 273(4)(b)(i) adds that the order is to be made “after giving the assessee an opportunity of being heard”.

On the portal, the user manual for e-Proceedings describes a “Seek Video Conferencing” option on the notice. It notes that the option “will be available only if Assessing Officer has flagged the notice for raising a video conferencing request”. The statute, by contrast, ties the right to the request, not to a flag. Where the button is absent, a written request in the reply to the show-cause notice is the means the Act itself contemplates.

Time limits for the order

Under section 153(1), for assessment years 2022-23 onwards, no order under section 143 or 144 may be made after twelve months from the end of the assessment year in which the income was first assessable. So:

• assessment year 2024-25: by 31 March 2026;
• assessment year 2025-26: by 31 March 2027;
• assessment year 2026-27: by 31 March 2028.

Other periods apply in particular cases:

• an updated return: twelve months from the end of the financial year in which it was furnished (section 153(1A));
• a return filed under a section 119(2)(b) order: the same twelve months (section 153(1B));
• a reference to the Transfer Pricing Officer: an extra twelve months (section 153(4));
• a search initiated while the assessment is pending: an extra twelve months (section 153(3A)).

Under the 2025 Act, Table entry 1 of section 286(1) allows “one year” from the “end of the financial year succeeding the relevant tax year”. For tax year 2026-27 that is 31 March 2029, the same date the 1961 Act would give for the equivalent assessment year 2027-28.

What to have ready

• Every notice in the case, downloaded from e-Proceedings, with its date and response date.
• The return as filed, the computation, the tax audit report and the audited accounts.
• Books of account, ledgers, bank statements and invoices for each item the notice questions, prepared in the categories the portal’s upload screen asks for.
• AIS, TIS and Form 26AS, which are often the source of the questions. See Reconciling AIS, TIS and Form 26AS.
• Third-party confirmations for loans, purchases or receipts under question.

Responding on the portal

The e-Proceedings user manual describes the steps:

1. Go to Pending Actions > e-Proceedings and View Notice.
2. Click Submit Response and read the attachment instructions.
3. Choose Partial Response (more than one submission, or more than ten categories) or Full Response.
4. Enter a written response of up to 4,000 characters, select a category for each attachment and upload it. Each file can be at most 5 MB.
5. Submit. A Transaction ID and an Acknowledgment Number are issued.

A Seek/View Adjournment option lets the assessee ask for a later date, with reasons. Under section 144B(6)(i)©, a response filed by logging into the registered account is authenticated by that login. Once the Centre sends its acknowledgement containing the hash result, the response is “deemed to be authenticated” (section 144B(6)(iv)).

Summary

1. Confirm which Act applies, and that the section 143(2) notice was served within three months from the end of the financial year in which the return was filed.
2. Answer each section 142(1) and 143(2) notice through e-Proceedings by its date, or seek an adjournment with reasons.
3. On receiving a show-cause notice proposing variations, reply to each variation, and request a personal hearing by video if wanted.
4. For an eligible assessee, decide within the section 144C period whether to accept the draft order or object before the Dispute Resolution Panel.
5. Check that the final order was made within the section 153 or section 286 time limit. Then deal with the demand and any penalty notice served with it.

The next guide in this set covers reassessment notices under sections 148A and 148.