Delhi HC Quashes Faceless Assessment for Failure to Issue SCN with Draft Order to Ericsson India
The Delhi High Court has recently allowed a petition filed by Ericsson India Private Limited because the tax department failed to mandatory process of law. The main issue was that the company was not given an opportunity to be heard before being taxed and penalised, which violation of natural justice. The court ordered the tax authorities to reconsider the case properly, i.e., by issuing a show-cause notice and giving a hearing.
The present writ petition [W.P. (C) 2381/2022] is being filed by a company named M/s Ericsson India Private Limited (petitioner) against the National Faceless Assessment Centre (NFAC), Delhi, (respondent), in the Delhi High Court before the benches comprising of Hon’ble Judges Mr. Justice V. Kameswar Rao and Mr. Justice Vinod Kumar. The judgment was delivered on August 5, 2025.
Through the writ petition, the company challenged a final income tax assessment order dated December 31, 2021, issued by the NFAC (respondent). The order was related to the Assessment Year 2017-18. Along with this, they also challenged the notices issued under Section 156 and Section 274 read with 270A. The company claimed that the assessment order was illegal, as it was passed without giving them a chance to respond. Additionally, they claimed that the required SCN and draft assessment order were not issued to them, which is a compulsory step under the Faceless Assessment Scheme and Section 144B of the Income Tax Act.
The Faceless Assessment Scheme says that to make tax assessments more transparent and digital, the tax department must first issue a draft assessment order and SCN to the taxpayer. This gives the taxpayer a chance to understand what amendments the tax department is suggesting and helps them to respond to those amendments before the final order is passed. This ensures compliance with natural justice.
The company claimed that they were not served with any SCN notice or draft order before the issuance of the final assessment order and penalty order, which is not permitted under the law. On which the NFAC admitted that while a draft assessment order was sent for review on December 27, 2021, and a review report was received on December 30, 2021, they couldn’t issue the show cause notice due to technical issues while processing the return. As a result, the final order was issued without following the mandatory step of giving Ericsson a chance to respond.
When the court observed the entire case deeply, the judges concluded that even the tax department agreed that they did not issue the SCN due to technical reasons. Since issuing the SCN and draft order is mandatory, the final assessment order dated 31.12.2021, the computation sheet, and the notices issued under Sections 156 and 274 read with 270A cannot be considered fair. Therefore, the court quashed them all. The court remanded the case to the NFAC, with directions to issue a fresh show-cause notice along with the draft assessment order to Ericsson, award them a proper chance of hearing to respond, and then pass a fresh final assessment order as per law. Also, the court gave Ericsson the freedom to file additional submissions when the matter is heard again.