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CA Final · Direct Tax Laws & International Taxation · Assessment Procedure

Under Rule 176 of the Income-tax Rules, 2026, Lakshmi Steels Pvt Ltd did not respond to a notice served on it in a faceless assessment. The NFAC intimated the failure to the assessment unit. What is the next step prescribed?

After the NFAC intimates the non-compliance, the assessment unit, through the NFAC, serves a notice under section 271 giving the assessee an opportunity to show cause why the assessment should not be completed to the best of its judgment. A direct best judgment order is not the prescribed course.

  1. AThe assessment unit directly passes a best judgment order without any further notice
  2. BThe assessment unit, through the NFAC, serves a notice calling upon the assessee to show cause why the assessment should not be completed to the best of its judgmentCorrect
  3. CThe case is transferred to the Assessing Officer having jurisdiction for physical hearing
  4. DThe Dispute Resolution Panel is approached to impose a penalty

Explanation

Rule 176(2)(h) requires the NFAC to intimate the failure to the assessment unit. Rule 176(2)(i) then requires the assessment unit, through the NFAC, to serve a notice under section 271 providing an opportunity to show cause why the assessment should not be completed to the best of its judgment. A direct best judgment order skips this required step.

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