AO Is Quasi-Judicial Authority, Must Act Dispassionately: Delhi High Court Sets Aside Income Tax Assessment Order

The Delhi High Court has set aside an income tax assessment order after the Assessing Officer (AO) failed to consider the assessee's reply filed before the assessment was finalised.

The Division Bench of Justices Dinesh Mehta and Aditi Choudhary observed that an AO, being a quasi-judicial authority, is expected to act objectively and dispassionately while dealing with the material available on record.

It directed the Assessing Officer/National Faceless Assessment Centre (NFAC) to provide the assessee a hearing through video conferencing (VC), consider his reply and oral submissions, and pass a fresh order in accordance with law.

The Court was hearing a writ petition challenging an assessment order dated March 6, 2026, passed under Sections 144 and 144B of the Income Tax Act, 1961, on the ground that the principles of natural justice had been violated.

Petitioner-assessee contended that after responding to a notice issued under Section 142(1) of the Act on August 20, 2025, he received no communication from the AO for nearly six months. Thereafter, a show-cause notice dated February 4, 2026, accompanied by a lengthy questionnaire, required him to submit a response by February 8, 2026.

Since only four days were granted to respond, Petitioner sought an adjournment on February 9, 2026, requesting time until February 24. He subsequently filed his reply on the assessment portal on March 3, 2026, which was viewed by the AO on March 4, 2026.

However, the assessment order was passed without considering the reply. Petitioner also contended that his request for a VC hearing had not been granted.

Opposing the petition, Revenue argued that Petitioner had sought an adjournment only after the deadline for filing the reply had expired. It submitted that Petitioner was required to seek an extension within the stipulated period and could not take advantage of his own failure to adhere to the timeline.

The Court agreed that Petitioner ought to have sought an adjournment before the deadline and that the AO could not be faulted merely for proceeding after the stipulated date.

However, it noted that the AO had neither passed an order closing Petitioner's right to file a reply nor informed him that such right had been closed.

It further observed that the AO had granted only four days to respond to a lengthy questionnaire after remaining silent for six months following the initial notice.

In these circumstances, the Court held that once Petitioner had filed his reply on March 3, 2026, and the AO had viewed it on March 4, 2026, the reply ought to have been considered before passing the assessment order.

“An AO being a quasi-judicial authority is supposed to do justice and deal with the material available on record objectively and dispassionately,” the Court observed.

As such, the Court quashed the impugned assessment and directed reconsideration.

For Petitioner: Advocates Jaspal Singh Sethi, Lakshika Kaushik & Rashmi Jha

For Respondents: Anurag Ojha, SSC with V.K. Saksena, JSC & Hemlata Rawat, JSC.