2026 (3) TMI 184 - HC - Income Tax

Procedural fairness: faceless assessment set aside where prior judicial directions failed to reach AO; documents supplied and fresh adjudication ordered.

Challenge to a faceless assessment under Section 144C(1) turned on procedural fairness where an earlier judicial direction supplying relied-upon ... Draft order u/s 144C(1) - Failure to communicate court order - either due to some communication gap or otherwise, the order of this Court did not reach the AO(who is a FAO) and therefore, he passed a draft order under Section 144C(1) - HELD THAT: - We are of the view that due to communication gap or on account of the order being uploaded on 10.02.2026 (Tuesday), the AO has passed the order for which he cannot be said to be at any fault. Therefore, the impugned order is hereby set aside. The order dated 05.01.2026 passed by the TPO has already been set aside and TPO has already supplied copies of the relied upon agreements to the petitioner on 12.02.2026. Now the petitioner shall file its reply latest by 16.03.2026. On reply being filed, the TPO shall pass fresh order by 16.04.2026. All the timelines of the proceedings before the TPO/AO and DRP shall stand extended by sixty days qua which the petitioner shall be precluded from raising any objection. Final Conclusion: The writ petition is allowed: the assessment order dated 10.02.2026 is set aside for non-communication of this Court's earlier order; the TPO has furnished the relied upon agreements and the petitioner is directed to file its reply within the fixed time, after which the TPO shall pass a fresh order; all timelines before TPO/AO and DRP are extended and the petitioner is precluded from objecting to the extension. Issues: Whether the order dated 10.02.2026 passed under Section 144C(1) of the Income-tax Act, 1961 by the Faceless Assessing Officer can be sustained where an earlier High Court order dated 06.02.2026 in the same matter did not reach the Assessing Officer due to a communication gap.Analysis: The dispute concerns the validity of an assessment order passed after a prior High Court order in the same matter had been pronounced but, owing to a communication lapse, had not been received by the Faceless Assessing Officer. The legal framework includes procedural fairness and the statutory scheme for faceless assessments under Section 144C(1) of the Income-tax Act, 1961, as well as the procedural safeguards in transfer pricing proceedings requiring provision of relied upon documents and opportunity to reply. In the circumstances where the earlier judicial order directed supply of relied upon agreements, and those directions had not been placed before the Assessing Officer due to a communication failure, the assessment order was rendered without the assessment authority having the benefit of the earlier judicial direction and without the parties having the intended procedural opportunities. The remedy applied entails setting aside the impugned assessment order, directing compliance with the earlier judicial directions (supply of agreements with permissible redaction), permitting filing of a reply within a specified timeframe, and mandating the TPO/AO to pass fresh orders within extended timelines to secure effective adjudication of disputes in accordance with principles of fairness.Conclusion: The impugned order dated 10.02.2026 is set aside; the petitioner is directed to be supplied the relied upon agreements with permissible redaction, shall file a reply by 16.03.2026, and the Transfer Pricing Officer shall pass a fresh order by 16.04.2026; all timelines before the TPO/AO and DRP are extended by sixty days and the writ petition is allowed.