2024 (6) TMI 1484 - AT - Income Tax

Validity of Revision u/s 263 - allegation of non service of notice though prescribed mode - scope of prescribed mode of transmission between Income Tax Authority and the assessee under the provisions of section 144B (6)(ii)(a) of the Act. HELD THAT - In present case department have admitted that the notice could not be served through email but have also claimed that it has been despatched through Dak however unable to substantiate the same with any corroborative evidence/ document or despatch register even after several opportunities granted to prove the same. It could also not be established by the revenue that any real time alert is send to the assessee while the notice was uploaded on the portal on the contrary assessee denied receipt of any real time alert by submitting an affidavit to this effect. This indicates that the department has no documentary proof to support their claim that they have validly served the notice to the assessee. We thus find merits in the contentions raised by the Ld. AO that notice u/s 263 in absence of service though prescribed mode cannot be treated as a valid notice and so the order passed u/s 263 initiated by issue of such notice is unsustainable. In view of guiding principles enumerated in the case of Suman Jeet Agarwal 2022 (9) TMI 1384 - DELHI HIGH COURT we accept the conditions of the assessee considering the facts of the present case that the assessee was not validly put to notice for proceedings initiated u/s 263 of the Act therefore the order passed following such notice which is not validly server is liable to be quashed and we do so. In result Ground No 2 of the present appeal of the assessee stands allowed.

Summary

ISSUES:

Whether the order passed under Section 263 of the Income Tax Act, 1961 is sustainable when the assessing officer's order is alleged to be erroneous and prejudicial to the interest of revenue due to inadequate inquiry into genuineness of unsecured loans.Whether the notice issued under Section 263 of the Income Tax Act, 1961 was validly served on the assessee in compliance with the prescribed statutory procedure.Whether the failure to provide the assessee with a valid and timely opportunity of hearing before passing the revisionary order under Section 263 renders the order null and void.

RULINGS / HOLDINGS:

On the validity of the Section 263 order: The revisionary order was passed on the ground that the Assessing Officer "failed in performing his duties" by not conducting necessary inquiries regarding the genuineness of unsecured loans, and the order was "erroneous in so far as it is prejudicial to the interest of revenue" under Explanation (2) of Section 263.On service of notice: The notice under Section 263 was uploaded on the ITBA portal but was not served through email or physical mode, and no "real time alert" was sent to the assessee, thus the service was not in accordance with the prescribed mode under Section 144B(6)(ii)(a) of the Income Tax Act.On opportunity of hearing: Since the notice was not validly served, the assessee was deprived of the mandatory "opportunity of hearing" under Section 263, making the revisionary order "null and void ab initio."Consequently, the order passed under Section 263 without valid service of notice and without providing opportunity of hearing is liable to be quashed.

RATIONALE:

The Court applied the statutory framework of the Income Tax Act, 1961, specifically Sections 263, 144B(6)(ii)(a), and Explanation (2) of Section 263, along with procedural requirements under Section 282 and Rule 127 of the Income Tax Rules for valid service of notices.The Court relied heavily on the judgment of the Hon'ble Delhi High Court in Suman Jeet Agrawal & Ors. vs. Income Tax Officer & Ors., which clarified that mere uploading of notices on the e-filing portal without sending a "real time alert" or serving through prescribed modes does not constitute valid service under the Act.The Court noted the absence of any documentary proof or dispatch register from the revenue to establish valid service of notice, and the assessee's affidavit denying receipt of any such notice or real time alert.The Court emphasized that providing the assessee with an opportunity of hearing before passing a revisionary order under Section 263 is a "mandatory requirement under the settled principle of law."Following the principle that invalid service of notice equates to "no due despatch," the Court held that the revisionary order under Section 263 is unsustainable and must be quashed.No further adjudication on the merits of the revisionary order was undertaken due to the fundamental procedural defect in service of notice.