[Opinion] Faceless Assessments and the Problem of Reversed Assessment Chronology
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- Last Updated on 16 June, 2026
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CA Sidhant Goyal – [2026] 187 taxmann.com 460 (Article)
Chronology of the assessment process reversed
In income tax jurisprudence, the faceless era is now more than half a decade old- a history that has led to a fair share of tax controversies. One issue that has found little discussion is the chronology of the assessment process being reversed in many cases, for instance, I shall pick on some actual dates from one case:
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S No
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Document
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Date & Time of Signatures
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1
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Demand notice u/s 156 of the Act
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2026.01.07
13:29:19 IST
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2
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Computation Sheet
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2026.01.07
13:30:12 IST
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3
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Assessment Order u/s 144 r.w.s. 144B of the Act
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2026.01.07
15:09:36 IST
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In this case, it may be seen that the assessment has been carried out in a reverse chronological order, i.e. first the demand notice has been signed, then the computation sheet, then the assessment order. To draw an analogy, this is similar to a Judge signing a sentencing order or an execution warrant before even pronouncing the judgment of conviction. Just as a sentence cannot legally exist without a prior finding of guilt, the moot question is whether a tax demand can be raised without a prior, formalised assessment of income?
Foundational judicial principles on income tax assessments
To appreciate the gravity of this violation, we must first appreciate the foundational case laws on the assessment process:
a) In the case of Kalyankumar Ray v. Commissioner of Income-tax [1991] 191 ITR 634 (SC) (Hon’ble Supreme Court) whereinit has been held as follows:
“’Assessment’ is one integrated process involving not only the assessment of the total income but also the determination of the tax. The latter is as crucial for the assessee as the former. Section 144, which also describes the same process, makes no distinction as suggested. It will not, therefore, be correct to read the provision as leaving undefined the process of determination of the net sum payable by the assessee. In our opinion, therefore, learned counsel for the petitioner is right in his submission that the Income-tax Officer has to determine, by an order in writing, not only the total income but also the net sum which will be payable by the assessee for the assessment year in question and that the demand notice under section 156 has to be issued in consequence of such an order. ”
“’Assessment’ is one integrated process involving not only the assessment of the total income but also the determination of the tax. The latter is as crucial for the assessee as the former. Section 144, which also describes the same process, makes no distinction as suggested. It will not, therefore, be correct to read the provision as leaving undefined the process of determination of the net sum payable by the assessee. In our opinion, therefore, learned counsel for the petitioner is right in his submission that the Income-tax Officer has to determine, by an order in writing, not only the total income but also the net sum which will be payable by the assessee for the assessment year in question and that the demand notice under section 156 has to be issued in consequence of such an order. ”
b) In the case of Auto & Metal Engineers v. Union of India [1998] 97 Taxman 363/229 ITR 399 (SC) (Hon’ble Supreme Court) whereinit has been held as follows:
“7. In the Act, the provisions regarding procedure for assessment are contained in Chapter XIV (sections 139 to 158). Under the said provisions, the process of assessment involves (i) filing of the return of income undersection 139 or under section 142 in response to a notice issued under section 142(1); (ii) inquiry by the Assessing Officer in accordance with the provisions of sections 142 and 143; (iii) making of the order of assessment by the Assessing Officer under section 143(3) or section 144; and (iv) issuing of the notice of demand under section 156 on the basis of the order of assessment. The process of assessment, thus, commences with the filing of the return or, where the return is not filed, with the issuance by the Assessing Officer of a notice to file the return under section 142(1), and it culminates with the issuance of the notice of demand under section 156. ”
From the above, it is clear that the assessment process and the chronological steps thereon are embedded in the statute. It is no longer res-integra that a demand notice must be in consequence of an assessment order and not the other way round. Thus, it can be argued that a deviation from the compulsory process of law goes to the root of the proceedings and vitiates the jurisdiction assumed.
A trinity of factors
The chronological inversion of generating a demand notice prior to the execution of an assessment order fundamentally offends the rule of strict statutory compliance cemented in Nazir Ahmad v. King Empero r (1936) 38 BOMLR 987. Section 156 of the Income Tax Act explicitly conditions the issuance of a demand notice upon it being “in consequence of any order passed” under the Act. This statutory phrasing leaves no room for procedural flexibility or reverse-engineered execution. Under the Nazir Ahmad doctrine, which mandates that when a statute prescribes a specific method for exercising a power, it must be exercised in that exact manner or not at all. The mechanical generation and signing of a demand prior to the legal crystallisation of the assessment order, it can be argued, is not a mere procedural irregularity curable under Section 292B. It is a fatal usurpation of jurisdiction that renders the consequent executive action void ab initio.
This sequencing defect inevitably cascades into a severe violation of administrative law, squarely triggering the embargo against post-facto rationalization laid down by the Constitution Bench in Mohinder Singh Gill v. Chief Election Commissioner 1978 (1) SCC 405. In administrative jurisprudence, a coercive state action must be supported by a contemporaneous speaking order, and its validity is tested exclusively on the reasons recorded at the time of its issuance. When the ITBA portal’s metadata reveals that the Computation Sheet and Notice of Demand were digitally executed prior to the Assessment Order, the tax liability is already crystallized. Consequently, the subsequently signed Assessment Order ceases to be a primary quasi-judicial determination. Instead, it is reduced to a mere post-facto rationalisation drafted to justify an already crystallised demand, a practice strictly prohibited by the Apex Court.
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