Faceless assessment requires specific notice for final variations; additions beyond the proposed grounds fail for breach of natural justice.

Faceless assessments require a specific show cause notice for every proposed variation prejudicial to the assessee, so the final assessment cannot travel beyond the grounds already intimated. Where the assessment was initially proposed on an ad hoc turnover basis but was ultimately completed by making additions under section 68 and disallowances under section 37 without a fresh notice covering those changes, the mandatory procedure under section 144B(1)(xii) was not complied with. That breach, read with the principles of natural justice and section 144B(9), renders the resulting additions and disallowances unsustainable.

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Issues: Whether the assessment additions and disallowances were liable to be set aside for breach of the mandatory requirement of a show cause notice under section 144B(1)(xii) of the Income-tax Act, 1961 and violation of natural justice.

Analysis: The assessment was originally proposed on an ad hoc basis at 8% of turnover, but the final assessment was completed on different grounds by making additions under section 68 and disallowances under section 37 without issuing a further show cause notice specifically proposing those variations. In faceless assessment, the statutory requirement is to intimate the assessee of variations prejudicial to its interest and give an opportunity to explain them. Since the final additions were not covered by the proposed variation, the earlier notice did not satisfy the mandatory procedure. The breach of section 144B(1)(xii) also attracted the consequence under section 144B(9).

Conclusion: The procedural challenge succeeded, and the additions and disallowances were rightly held unsustainable for want of compliance with section 144B(1)(xii) and the principles of natural justice.

Ratio Decidendi: In faceless assessment, final variations prejudicial to the assessee cannot be made without a specific show cause notice covering those variations, and an assessment made in breach of that mandatory procedure is invalid.

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