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Facts
The appellant, a co-operative society, did not file an income tax return for AY 2014-15. Based on cash deposits, the AO initiated reassessment proceedings under Section 148 and issued notices under Section 142(1). As the appellant did not comply, the AO passed a best judgment assessment under Section 144, treating the cash deposits as unexplained money, which was upheld by the CIT(A) ex-parte.
Held
The Tribunal condoned the delay in filing the appeal. It found that proper notices of hearing were not served by the NFAC and service through the ITBA portal was not a valid method as per Section 282(1) of the Income-tax Act. Consequently, the matter was remitted back to the Assessing Officer for a de novo adjudication after providing a reasonable opportunity to the appellant.
Key Issues
The key legal issues concerned the validity of serving notices through the ITBA portal and whether a best judgment assessment could be made without ensuring proper service of hearing notices and providing adequate opportunity to the assessee.
Sections Cited
139(1), 148, 142(1), 144, 143(2), 282(1), 12A(1)(ac)(iii)
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Income Tax Appellate Tribunal, COCHIN BENCH
Before: SHRI INTURI RAMA RAO, AM & SHRI SONJOY SARMA, JM
O R D E R Per: Inturi Rama Rao, AM These appeals filed by the assessee are directed against the orders of the National Faceless Appeal Centre, Delhi [CIT(A)] dated 18.02.2025 & 05.03.2025 for Assessment Years (AY) 2014-15 and 2016-17, respectively. The appellant also filed stay application for the relevant assessment years.
Since identical issues and facts are involved in these appeals, they are heard together and disposed of by this common order.
& 426/Coch/2025 & SAs Nadathara Grama Vikasana Co-op. Society Ltd. 3. For the sake of convenience and clarity the facts relevant to the appeal bearing ITA No. 246/Coch/2025 for AY 2016-17 are stated herein.
Brief facts of the case are that the appellant is a co-operative society registered under the Kerala State Co-operative Societies Act, 1969. It is classified as primary agricultural credit co-operative society. It is engaged in the business of accepting deposits from members and providing credit facilities to members. The return of income for AY 2014-15 was not filed u/s. 139(1) of the Income Tax Act, 1961 (the Act). Subsequently, based on the information that the appellant co-operative society made cash deposit, the National Faceless Appeal Centre, Delhi [CIT(A)] (hereinafter called "the AO") formed opinion that income escaped assessment to tax. Accordingly, issued a notice u/s. 148 of the Act on 31.03.2021 and also issued notice u/s. 142(1) calling upon the appellant to file return of income. The appellant neither complied with the notice u/s. 148 nor notices u/s. 142(1) of the Act. In the circumstances, the AO proceeded with framing of best judgement assessment u/s. 144 of the Act by brining to tax the cash deposits of Rs. 5,70,34,279/- as unexplained money of the appellant society.
Being aggrieved, an appeal was filed before the CIT(A), who vide the impugned order dismissed the appeal exparte by passing a cryptic order.
At the outset we find that there is a delay of 25 days in filing the present appeal. The appellant filed a petition along with an affidavit seeking condonation of delay in filing the appeal, wherein it is stated that the delay had occurred as the appellant was engaged in critical year end closing activities and disbursement of pensions to members across 11 wards. Hence, the delay is not willful or deliberate. Therefore, it is prayed that the delay in filing the appeal may be condoned and the appeal may be admitted for adjudication. Having regard to the averments made in the affidavit seeking condonation of delay, in the absence of any evidence contrary, we are of the considered opinion that the appellant society is prevented by sufficient reasonable cause in filing the appeal within the prescribed limit. Accordingly, we condone the delay and admit the appeal for adjudication.
We have heard the rival contentions and perused the material available on record. In the facts of the present case, ordinarily, the matter would have been remitted to the file of NFAC, however from the perusal of the impugned order, it would reveal that no proper service of notice of hearing appears to have been issued nor reasonable opportunity was given by the NFAC. Further, there is no evidence that proper notices u/s.143(2) were issued to the appellant, in view of the submission of ld. AR, notices were issued through & 426/Coch/2025 & SAs Nadathara Grama Vikasana Co-op. Society Ltd. ITBA portal. In our considered opinion, it is not a valid method and manner of service of notice as specified under the provisions of section 282(1) of the Income-tax Act, 1961 Act and Rule 127(1) of the Income-tax Rules, 1962. Therefore, it is crystal clear that the notices were not served upon the appellant. To fortify our view, we would like to make reference to a decision rendered by the Hon’ble Punjab & Haryana High Court in the case of Munjal BCU Centre of Innovation and Entrepreneurship Vs. CIT (Exemptions) (2024) 463 ITR 560 (P&H), wherein the Hon’ble High Court after making reference to provisions of 282(1) held that service of notice through ITBA portal is not valid service and remanded the matter to AO for denovo disposal of case. The relevant paragraphs of the judgment are reproduced below: - “7. We are afraid that we cannot subscribe to the submissions as advanced by the learned counsel for the Revenue-respondent. The provisions of section 282(1) of the Act of 1961 and rule 127(1) of the Income-tax Rules, 1962 provides for a method and manner of service of notice and orders which read as follows : . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
In view of the above, it is essential that before any action is taken, communication of the notice must be done in terms of the provisions as enumerated hereinabove. The provisions do not mention communication to be “presumed” by placing notice on the e-portal. A pragmatic view has to be adopted always in these circumstances. An individual or a company is not expected to keep the e-portal of the Department open all & 426/Coch/2025 & SAs Nadathara Grama Vikasana Co-op. Society Ltd. the time so as to have knowledge of what the Department is supposed to be doing with regard to the submissions of forms etc. The principles of natural justice are inherent in the income-tax provisions and the same are required to be necessarily followed.
Having noticed as above, this court is of the firm view that the petitioner has not been given sufficient opportunity to put up its please with regard to the proceedings under section 12A(1)(ac)(iii) of the Act of 1961 and as it was not served with any notice. Therefore, he would be entitled to file his reply and the Department would of course be entitled to examine the same and pass a fresh order thereafter.
In view of the above, the writ petition is allowed and the order dated January 16, 2023 (annexure P-5) is quashed and set-aside. The Department would provide an opportunity of hearing to the petitioner and they will also allow the petitioner to appear personally for the purpose and pass a speaking order independent of the order passed earlier by them on January 16,2023. The same shall be done expeditiously provided the petitioner file his reply within a period of three weeks.”
In view of the above legal position, we are of the considered opinion that proper notice(s) of hearing were not served properly to the appellant. Therefore, in the interest of justice, the matter should be remitted back to the file of Assessing Officer for denovo adjudication after affording reasonable opportunity to the appellant, in accordance with law.
& 426/Coch/2025 & SAs Nadathara Grama Vikasana Co-op. Society Ltd. 11. As the quantum appeals are restored to the file of AO for de novo adjudication the stay application becomes infructuous.
In the result, the appeals filed by the assessee stand partly allowed and the stay applications are dismissed.
Order pronounced in the open court on 15th July, 2025.