2025 (7) TMI 446 - HC - Income Tax

Notice issued on wrong email id - Violation of principles of natural justice on wrongful communication of notice - HELD THAT - Admittedly original email address of the petitioner was different from that of the present email address furnished in Form No.35. But however the fact remains that the notices were sent to the earlier email address of the petitioner even after that the correspondence made by the petitioner by changing the email address to [email protected] . Once the email address is changed and it is within the knowledge of the department the department ought to have issued notice or communication to the petitioner to the present email address to facilitate him to contest the case and provide fair opportunity of hearing and decide the matter in accordance with law. Admittedly this is not done in the present case therefore the impugned order passed by the respondents cannot be sustained in view of no proper notice and no proper opportunity of fair hearing provided to the petitioner.

Summary

1. ISSUES PRESENTED and CONSIDERED

- Whether the impugned order dated 17.03.2025 passed under Section 250 of the Income Tax Act, 1961, and the assessment order dated 13.02.2024 can be quashed on grounds of violation of principles of natural justice due to improper communication of notices and hearing opportunities?

- Whether the failure of the Income Tax Department to update and communicate notices to the petitioner's correct and updated email address, despite the petitioner having furnished the correct email in Form No.35, vitiates the assessment and appellate proceedings?

- Whether the petitioner was denied a reasonable opportunity of hearing and thus prejudiced in the assessment and appeal process?

- Whether the appeal filed by the petitioner deserves reconsideration by the appellate authority after rectifying procedural defects?

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Violation of principles of natural justice due to improper communication of notices and hearing opportunities

The relevant legal framework includes the principles of natural justice, which mandate that no person shall be condemned unheard and that adequate notice and opportunity to be heard must be provided before adverse orders are passed. Under the Income Tax Act, 1961, notice requirements and communication are crucial procedural safeguards to ensure fairness in assessment and appellate proceedings.

The Court observed that the petitioner's original email address was registered with the department via his former Auditor. However, the petitioner replaced his Auditor and furnished a new email address ("[email protected]") in Form No.35 filed on 29.03.2024 during the appeal process. Despite this, the department continued to send notices and communications to the earlier email address, which resulted in the petitioner remaining unaware of the proceedings and unable to respond or participate effectively.

The Court emphasized that once the petitioner updated his email address and the department was made aware of this change, it was incumbent upon the department to send notices to the updated email address to provide a fair opportunity of hearing. The failure to do so constituted a breach of the principles of natural justice.

Respondents argued that the notices were sent as per the initial records and that it was the petitioner's responsibility to update the department promptly. However, the Court found this argument insufficient to justify the procedural lapse, especially since the petitioner had taken steps to update the email and had specifically provided the correct email in the appeal form.

Consequently, the Court held that the impugned orders passed without proper communication and hearing are vitiated and cannot be sustained.

Issue 2: Effect of failure to update and communicate to the correct email address on the validity of assessment and appellate proceedings

The Income Tax Act mandates that assessments and appeals must be conducted in accordance with prescribed procedures, including proper service of notices. The Court noted that the petitioner's case was selected for scrutiny under CASS (Computer Assisted Scrutiny Selection), and notices were issued electronically to the earlier Auditor's email address.

Due to the department's failure to update the petitioner's email address despite clear communication in Form No.35, the petitioner was denied knowledge of the notices and opportunity to submit information or objections. The assessment order under Sections 143(3) and 144(B) was passed ex-parte, disallowing claims solely on the ground of non-furnishing of details, which arose from the petitioner's unawareness of the proceedings.

The Court found that this procedural irregularity caused prejudice to the petitioner's rights and rendered the assessment and appellate orders unsustainable.

Issue 3: Denial of reasonable opportunity of hearing and prejudice to petitioner

The Court underscored that the petitioner became aware of the assessment proceedings only through a telephonic conversation with the department much later. The failure to send hearing notices to the correct email address meant that the petitioner was deprived of the opportunity to contest the assessment or present his case effectively.

The Court held that such denial of a reasonable opportunity of hearing is a fundamental violation of natural justice and warrants quashing of the impugned orders.

Issue 4: Necessity of reconsideration of appeal after rectification of procedural defects

Given the procedural lapses and violation of natural justice, the Court directed that the appellate authority must reconsider the appeal afresh in accordance with law. The appellate authority was also directed to rectify the email address for communication as furnished by the petitioner and provide a reasonable opportunity of fair hearing before passing any further orders.

This direction ensures that the petitioner's appeal is adjudicated on merits without procedural handicaps.

3. SIGNIFICANT HOLDINGS

- "Once the email address is changed and it is within the knowledge of the department, the department ought to have issued notice or communication to the petitioner to the present email address to facilitate him to contest the case and provide fair opportunity of hearing and decide the matter in accordance with law."

- The impugned order passed without proper notice and opportunity of hearing is "in clear violation and breach of the Act and the procedure laid down, which has caused prejudice to the rights of the petitioner."

- The Court quashed the impugned order dated 17.03.2025 passed under Section 250 of the Income Tax Act, 1961, and directed the appellate authority to reconsider the appeal afresh after rectifying the communication address.

- The core principle established is that procedural fairness and adherence to principles of natural justice are mandatory in income tax proceedings, and failure to update communication details resulting in denial of hearing vitiates the proceedings.

- The Court's final determination was to allow the petition, quash the impugned order, and mandate fresh consideration of the appeal with proper notice and opportunity of hearing.