2025 (7) TMI 1175 - HC - Income Tax

Validity of Final assessment order being passed u/s 144B - non serving the Show Cause Notice proposing variation - HELD THAT - It is apposite to refer to section 144B(1)(xii) of the Act which mandates that before making an assessment of income adverse to the returned income of the Assessee service of a Show Cause Notice proposing variation to the returned income is mandatory before passing the final assessment order u/s 144B. Further in the affidavit in reply as filed by the Respondents there is no denial to the fact that the said Show Cause Notice proposing variation was sent on an email ID never provided by the Petitioner. Therefore admittedly the impugned Show Cause Notice proposing variation dated 10.03.2024 is not served on the Petitioner. Therefore in view of what has been laid down in the above judgments and based on the submissions of the Parties the impugned assessment order is quashed and set aside. We deem it appropriate to remand the matter back to the NFAC at the stage of the Show Cause Notice dated 10.03.2024. The Respondents shall provide the link to petitioner to which the response to the show cause notice can be uploaded. Petitioner is directed to file his response to the same and which shall be considered before passing the final order. The Petitioner shall also be granted a personal hearing if he so desires before passing the final assessment order. The assessment order shall comply with the procedure required u/s 144B and shall be passed within 12 weeks of this order getting uploaded. Any order passed shall be a reasoned order dealing with all the submissions of petitioner. Writ Petition is disposed of in the aforesaid terms.

Summary

ISSUES:

Whether the assessment order passed under section 143(3) read with section 144B of the Income Tax Act, 1961, without prior service of the Show Cause Notice proposing variation to the returned income, is valid.Whether service of the Show Cause Notice proposing variation via an unregistered or incorrect email address complies with the mandatory service requirements under section 144B(1)(xii) of the Act.Whether issuance of notices on secondary or unprovided email addresses, instead of the primary or registered email addresses as per the return of income, constitutes valid service under the faceless assessment scheme.Whether passing an assessment order without affording an opportunity to respond to the Show Cause Notice violates principles of natural justice.Whether remand to the Assessing Officer for fresh service of Show Cause Notice and opportunity to respond is appropriate in such circumstances.

RULINGS / HOLDINGS:

The assessment order passed without first serving the Show Cause Notice proposing variation to the returned income is invalid as it violates the mandatory requirement under section 144B(1)(xii) of the Act that such notice must be served before making an adverse assessment.Service of the Show Cause Notice proposing variation on an email address never provided by the assessee does not constitute valid service under the Act; the notice must be served on the registered or primary email addresses furnished in the return of income.Issuance of notices on secondary or unregistered email IDs, without service on the primary or registered email ID, is bad in law and results in jurisdictional error, as established by precedent.Passing an assessment order without affording the assessee an opportunity to respond to the Show Cause Notice violates principles of natural justice and is therefore unsustainable.The appropriate remedy is to quash and set aside the impugned assessment order and remand the matter to the Assessing Officer (NFAC) at the stage of the Show Cause Notice proposing variation, with directions to serve the notice correctly and provide opportunity for response and personal hearing before finalizing the assessment.

RATIONALE:

The Court relied primarily on the statutory mandate under section 144B(1)(xii) of the Income Tax Act, 1961, which requires mandatory service of a Show Cause Notice proposing variation before passing an adverse assessment order under the faceless assessment scheme.Precedents from this Court and other High Courts were applied, including the principle that valid service of notice on the primary or registered email address is a condition precedent to jurisdiction, and that service on secondary or unprovided email IDs is insufficient and results in jurisdictional error.The Court emphasized the importance of compliance with principles of natural justice, particularly the right to be heard, which mandates that the assessee must receive the Show Cause Notice and be given an opportunity to respond before an adverse order is passed.The Court noted the absence of any denial by the Revenue that the Show Cause Notice was sent to an unregistered email address and accepted the petitioner's submission that no response could be filed due to non-service.The Court adopted a remedial approach by quashing the impugned order and remanding the matter for fresh proceedings, ensuring compliance with statutory procedure and natural justice, without expressing any opinion on the merits of the assessment.