Faceless assessment under Section 144B: your rights, the response timelines, and when video conferencing is mandatory

The Scenario

You opened your registered email on a quiet Tuesday and found a notice from the National Faceless Assessment Centre (NaFAC), Delhi. It cites Section 143(2) of the Income-tax Act 1961 and asks you to upload documentary evidence within 15 days via the e-filing portal. There is no jurisdictional officer name, no Aaykar Bhavan address to visit, only a Document Identification Number (DIN) and a deadline. Your case relates to AY 2024-25, and the time limit for completion of assessment under Section 153 expires on 31 March 2026.

This is the faceless regime in action: an algorithm-allocated Assessment Unit (AU) sits somewhere you will never know, your response travels through the National e-Assessment portal, and any meeting happens through your laptop camera. Many taxpayers panic at this stage because the old playbook of walking into a Range office no longer applies. The right question is no longer "who is my AO?" but "what does Section 144B oblige NaFAC to do for me before passing an order?" This article walks through the answer, the response clock, and the precise moment a video conference (VC) becomes a legal entitlement, not a courtesy.

Statutory Answer

Section 144B of the Income-tax Act 1961 was inserted by the Finance Act 2021 with effect from 1 April 2021, replacing the earlier scheme under Section 143(3A) and the e-Assessment Scheme 2019. It carved out a single nationwide procedure for scrutiny assessments under Sections 143(3) and 144 (other than central charges and international tax cases).

The architecture has five functional units, all under NaFAC at Delhi:

The sequence is rigid. NaFAC issues a Section 143(2) notice; the taxpayer responds; the AU may call for further information through NaFAC; a draft assessment order is prepared; if the draft is prejudicial to the taxpayer, a show-cause notice with the proposed variation is served under Section 144B(6)(vii); the taxpayer may seek a personal hearing via VC; the AU finalises the order, which is served along with a demand notice under Section 156 and (if applicable) a penalty notice under Section 274.

The right to a video conference flows from Section 144B(6)(viii), read with the Faceless Assessment (1st Amendment) Rules 2022 dated 29 March 2022. Where the AU proposes any "variation prejudicial to the interest of the assessee", NaFAC must allow the taxpayer an opportunity of being heard, and that hearing is held exclusively through video conferencing or video telephony. The Bombay High Court in Bharat Aluminium Company v. Union of India, WP(L) No. 11252 of 2021 (judgment 14 January 2022), set aside a faceless assessment order precisely because NaFAC denied a VC request after a show-cause notice. The court held that the denial vitiated the order and rendered it non-est.

The completion clock sits in Section 153. For AY 2024-25, the assessment must be completed within 12 months from the end of the assessment year — by 31 March 2026. For AY 2025-26, the outer limit is 31 March 2027. If NaFAC does not pass an order within this window, the return as filed becomes final; the department cannot extend the limit by administrative convenience.

Worked Resolution

Consider Rohan, a Bengaluru-based equity research analyst with FY 2024-25 (AY 2025-26) gross salary of Rs 26,55,000 and long-term capital gains of Rs 3,10,000 on listed shares. After claiming the Rs 75,000 standard deduction under Section 16(ia) and the Rs 1.25 lakh exemption under Section 112A, his taxable income worked out to Rs 25,80,000 under slabs and Rs 1,85,000 under LTCG. Total liability including 4% cess came to roughly Rs 3.92 lakh (computed using our income tax calculator for the FY 2025-26 slabs). He filed ITR-2 on 18 July 2025.

On 12 January 2026, NaFAC issued a Section 143(2) notice asking him to substantiate the cost of acquisition for shares of Company X, which he had purchased before 31 January 2018 and where he applied the grandfathering fair market value under Section 55(2)(ac). The notice gave him 15 days to upload contract notes, demat statements, and the BSE/NSE closing price proof.

The procedural clock then ran as follows:

Rohan's response established that his average cost of acquisition was below the grandfathered FMV, so the higher FMV applied. The AU initially proposed disallowing Rs 1,18,000 of the claimed cost. Rohan ticked the VC box on the show-cause reply. During the hearing, his CA produced the BSE bhavcopy for 31 January 2018 showing the relevant closing quote. The AU accepted the explanation and passed an assessment under Section 143(3) read with Section 144B accepting the returned income. No demand was raised.

Had Rohan ignored the show-cause notice, the AU could have proceeded under Section 144(1)(a) for best-judgment assessment, added the Rs 1,18,000 to LTCG, taxed it at 12.5% under Section 112A (Rs 14,750 additional tax plus 4% cess), and levied penalty under Section 270A for under-reporting at 50% of tax sought to be evaded. The arithmetic gap between responding and not responding here was roughly Rs 22,000 — for one upload that took fifteen minutes.

A few practical points the worked timeline brings out. First, the 15-day initial reply window is not negotiable past one adjournment; missing it directly triggers Section 144 best-judgment territory. Second, the VC right is not automatic — the taxpayer must affirmatively request it inside the show-cause reply, otherwise NaFAC may finalise the order on documents alone. Third, the demand notice under Section 156 carries its own 30-day appeal clock to CIT(A) under Section 246A; this runs in parallel to any rectification under Section 154 you may pursue. Fourth, if the addition relates to capital gains, our capital gains tax calculator lets you stress-test the marginal cost of conceding versus litigating before you draft the VC submission.

If your scrutiny stems from an old return that has crossed the revision deadline under Section 139(5), you can still correct genuine errors via the updated-return route — see our ITR-U guide for the 48-month window mechanics. For LTCG-specific defences involving Section 54EC bonds, the 54EC explainer covers the Rs 50 lakh annual cap that often comes up in faceless additions on land sales.

FAQ

What happens if NaFAC denies my VC request after a show-cause notice?

The denial is itself a legal ground to set aside the order. The Bombay High Court in Bharat Aluminium Company v. Union of India, WP(L) 11252/2021 (judgment 14 January 2022), held that Section 144B(6)(viii) confers a statutory right and that refusing VC vitiates the assessment. File a writ petition in your jurisdictional High Court within a reasonable period, or raise the ground in your CIT(A) appeal under Section 246A. The Madras High Court in Salem Sree Ramavilas Chit Co. Pvt. Ltd. v. ITO (2020) took the same view on natural-justice grounds even before Section 144B was on the books.

Can I get an adjournment beyond the 15-day reply window?

Yes, but only once and only for a further 15 days. NaFAC's standard operating procedure under Section 144B(1)(vi) accepts a single adjournment request filed before the original deadline expires. A second adjournment requires exceptional circumstances and Principal Chief Commissioner-level approval. If your CA is travelling or you are awaiting third-party documents, file the request the moment you receive the notice; back-dated requests are routinely rejected.

Is faceless assessment mandatory for every scrutiny case?

No. Section 144B(8) carves out central charges (cases handled by the Directorate of Investigation), international tax assessments, search cases under Section 153A/153C, and cases transferred under Section 127 to a specific jurisdictional officer. For salaried individuals and most resident taxpayers picked up under CASS (Computer-Assisted Scrutiny Selection), faceless is the default route. Check the issuing officer designation on your notice — if it reads NaFAC or NFAC, you are in the faceless lane.

What if NaFAC misses the 12-month limit and the order is passed late?

A late order is non-est. Section 153(1) prescribes 12 months from the end of the relevant assessment year for cases selected under Section 143(2). For AY 2024-25, the outer limit is 31 March 2026; for AY 2025-26, it is 31 March 2027. An order dated even one day later is void ab initio and can be quashed in writ. NaFAC's own dashboard timeline reflects this — once the clock runs out, the system locks further actions.

Can I file ITR-U to pre-empt a faceless notice?

Only before NaFAC issues a Section 143(2) notice. The updated return under Section 139(8A) is barred once any search, survey, or proceedings under the Act has commenced. A 143(2) notice counts as a proceeding. If you spot an error after filing but before scrutiny is triggered, ITR-U remains open for 48 months from the end of the AY, subject to additional tax of 25-70%. See our ITR-U updated return article for the exact slabs.

Will the new regime versus old regime choice affect my faceless scrutiny?

The regime choice itself is not a scrutiny trigger, but mismatches between Form 16, AIS, and your claimed deductions are. Under the new regime for FY 2025-26, the rebate under Section 87A is Rs 60,000 for income up to Rs 12 lakh, and Section 80CCD(1B) (the Rs 50,000 NPS top-up) is NOT allowed under the new regime — it is only available under the old regime. Claiming 80CCD(1B) inside a new-regime return is therefore a guaranteed scrutiny flag. Run your numbers through our old vs new regime calculator before you respond to a 143(2), because conceding a deduction may push you across the rebate threshold and trigger surcharge that did not apply at filing.

What documents should I upload as a default response pack?

Bank statements for the AY, Form 26AS, AIS and TIS downloads, Form 16/16A from each deductor, the computation sheet matching your ITR, proofs for every deduction or exemption claimed, contract notes for capital gains, and a covering letter mapping each document to the specific query. Keep each PDF under 10 MB and name files clearly (for example, 26AS_AY2024-25.pdf). NaFAC's portal rejects ZIP archives and password-protected files.