Macdonald Estates applied for permission to build on the former Weathermac site in Auchterderran Road in April.
But the company failed to submit the correct paperwork before a council-imposed deadline.
Council planner Mary Stewart explained, "The developers were advised they needed to carry out a transportation assessment. However, the application was submitted in April without the assessment and it became clear that the required work had not been done.
"In these circumstances, the council could not properly assess the impact of the proposed supermarket on the local road network."
Macdonald Estates applied for a three-month extension on 3rd August but this was refused because "the application was already outwith the two-month period allowed by the legislation for determination," Mary Stewart explained.
If given the go ahead, the supermarket would have brought up to 180 jobs to Lochgelly.
Lochgelly Community Forum described the council's decision as "heavy handed".
Chairperson Eileen McKenna said, "We think it would have been better to give the developer the extra time required.
"We have be assisting in the consultation as we believe that it is important that as many people as possible in the community get the chance to give their view on the proposed supermarket.
"This process is not complete and we should be allowed the additional time to gather resident's opinion."
The town's Labour councillor, Mark Hood, has written to the local authority's chief executive, Ronnie Hinds, on behalf of Lochgelly Community Forum.
He said, "I have been asked by the forum to review the manner in which this application has been handled by officers.
"I'm keen to make sure that decisions taken by planning officers are transparent and can be understood by the community.
"This is particularly important when decisions are taken by officers without the benefit of a committee decision taken in public."
The council was keen to stress that the door is not closed on MacDonald Estates.
"The developer can submit a new application when the transportation assessment and public consultation are completed," added Mary Stewart,