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Facts
The assessee filed a return of income declaring a loss. The assessment was selected for scrutiny. The Assessing Officer (AO) issued notices under Section 143(2) and 142(1) of the Income-tax Act, 1961, along with a show-cause notice. However, these notices were allegedly sent to incorrect email addresses and postal addresses, and the assessee claimed to have not received them properly, leading to a violation of natural justice.
Held
The CIT(A) quashed the assessment order, holding that the notices were not properly served on the assessee, thus violating the principles of natural justice. However, the Tribunal disagreed, stating that non-service of notices u/s 142(1) or show cause notice are curable defects. The Tribunal set aside the CIT(A)'s order and restored the matter to the AO for fresh adjudication.
Key Issues
Whether the assessment order was vitiated due to non-service of notices and violation of principles of natural justice, and if so, whether it warrants quashing of the order.
Sections Cited
143(2), 142(1), 144B, 56(2)(x), 69C
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Income Tax Appellate Tribunal, MUMBAI BENCH “D” MUMBAI
Before: SHRI OM PRAKASH KANT & MS. KAVITHA RAJAGOPAL
This appeal by the Revenue is directed against order dated 26.03.2024 passed by the Ld. Commissioner of Income-tax (Appeals) – National Faceless Appeal Centre, Delhi [in short ‘the Ld. CIT(A)’] for assessment year 2018-19, raising following grounds:
1) Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in holding that the order passed by the AO is in violation of the principles of natural justice even though ample violation of the principles of natural justice even though ample violation of the principles of natural justice even though ample opportunities were given to the assessee through issue opportunities were given to the assessee through issue of notices u/s of notices u/s 143(2), 142(1) and show cause notice and to which the assessee also 143(2), 142(1) and show cause notice and to which the assessee also 143(2), 142(1) and show cause notice and to which the assessee also responded but failed to comply fully with the requirements of the said responded but failed to comply fully with the requirements of the said responded but failed to comply fully with the requirements of the said notices. 2) Whether on the facts and circumstances of the case, the id. CIT(A) 2) Whether on the facts and circumstances of the case, the id. CIT(A) 2) Whether on the facts and circumstances of the case, the id. CIT(A) erred in allowing the a erred in allowing the appeal of the assessee without discussing the ppeal of the assessee without discussing the merits of the case. merits of the case. 3) The appellant prays that the order of the CIT(A) on the above grounds The appellant prays that the order of the CIT(A) on the above grounds The appellant prays that the order of the CIT(A) on the above grounds be set aside and that of the Assessing Officer be restored be set aside and that of the Assessing Officer be restored 2. Briefly stated, facts of the case are that the assessee Briefly stated, facts of the case are that the assessee Briefly stated, facts of the case are that the assessee filed return of income for the year under consideration on 30.10.2018 return of income for the year under consideration on 30.10.2018 return of income for the year under consideration on 30.10.2018 declaring total loss of Rs.31,65,89,37,504/ declaring total loss of Rs.31,65,89,37,504/-. Thereafter the . Thereafter the assessee revised its return of income though keeping total loss assessee revised its return of income though keeping total loss assessee revised its return of income though keeping total loss which was declared in the original return of income. The return of which was declared in the original return of income. The retu which was declared in the original return of income. The retu income filed by the assessee was selected for scrutiny assessment income filed by the assessee was selected for scrutiny assessment income filed by the assessee was selected for scrutiny assessment and statutory notices u/s 143(2) of the Income and statutory notices u/s 143(2) of the Income-tax Act, 1961 (in tax Act, 1961 (in short ‘the Act’) was issued and served upon the assessee. short ‘the Act’) was issued and served upon the assessee. short ‘the Act’) was issued and served upon the assessee. Subsequently, the Assessing Officer issued notice u/s 142(1) of the Subsequently, the Assessing Officer issued notice u/s 142(1) Subsequently, the Assessing Officer issued notice u/s 142(1) Act on 11.12.2020 and served upon the e Act on 11.12.2020 and served upon the e-mail ID provided for the mail ID provided for the purpose purpose of of communication communication i.e. i.e. cgmca@mahadiscom.in cgmca@mahadiscom.in and cao_cadiscom1@rediffmail.com. The assessee made part compliance cao_cadiscom1@rediffmail.com. The assessee made part compliance cao_cadiscom1@rediffmail.com. The assessee made part compliance of the queries raised und of the queries raised under said notice. Thereafter, the Assessing er said notice. Thereafter, the Assessing Officer issued another notice u/s 142(1) of the Act on 16.09.2021. Officer issued another notice u/s 142(1) of the Act on 16.09.2021. Officer issued another notice u/s 142(1) of the Act on 16.09.2021. However, However, same same was was served served on on e-mail e mail namely namely seosmanabad@mahadiscom.in. Thereafter, the Assessing Officer seosmanabad@mahadiscom.in. Thereafter, the Assessing Officer seosmanabad@mahadiscom.in. Thereafter, the Assessing Officer issued show cause notice dated 21.09.2021 al issued show cause notice dated 21.09.2021 also on the e so on the e-mail ID seosmanabad@mahadiscom.in due to non seosmanabad@mahadiscom.in due to non-compliance on the part compliance on the part of the Assessing Officer computed the income of the assessee of the Assessing Officer computed the income of the assessee of the Assessing Officer computed the income of the assessee observing as under:
“8. Show Cause Notice along with Draft Assessment Order was issued Show Cause Notice along with Draft Assessment Order was issued Show Cause Notice along with Draft Assessment Order was issued to Assessee on 21.09.2021 bu to Assessee on 21.09.2021 but Assessee has not replied to the same t Assessee has not replied to the same despite sufficient opportunities and subject to the above remarks and on despite sufficient opportunities and subject to the above remarks and on despite sufficient opportunities and subject to the above remarks and on basis of data made available on record, the total income of the assessee basis of data made available on record, the total income of the assessee basis of data made available on record, the total income of the assessee is determined as under: is determined as under: Total Loss declared in ITR Rs. 31,65,89,37,504/- 31,65,89,37,504/ Add: Addition of any other amount allowed as deduction in Addition of any other amount allowed as deduction in Rs. 5655,86,61 ,81 21- 5655,86,61 ,81 21 Schedule BP of return as per para 4 Schedule BP of return as per para 4 Addition u/s 69C of the Act as per para 5 Addition u/s 69C of the Act as per para 5 Rs. 5,26,35,674/- 5,26,35,674/ Addition of excess contribution to Addition of excess contribution to recognised provident Rs. 80,40,70,486/- 80,40,70,486/ fund as per para 6 Addition u/s 56(2)(x) as per para 7 Addition u/s 56(2)(x) as per para 7 Rs. 69,97,000/- 69,97,000/ Gross Total Income Rs. 2576,34,27,468/- 2576,34,27,468 3. On further appeal, the Ld. CIT(A) however quashed the On further appeal, the Ld. CIT(A) however quashed the On further appeal, the Ld. CIT(A) however quashed the assessment order holding that the notice u/s 142(1) dated assessment order holding that the notice u/s 142(1) dated assessment order holding that the notice u/s 142(1) dated 16.09.2021 show cause notice dated 21.09.2021 were issued on e- 16.09.2021 show cause notice dated 21.09.2021 were issued on e 16.09.2021 show cause notice dated 21.09.2021 were issued on e mail ID which was not not provided by the assessee for the purpose provided by the assessee for the purpose of communication and therefore, the queries/show cause notice nd therefore, the queries/show cause notice nd therefore, the queries/show cause notice issued could not be served upon the assessee. The Ld. CIT(A) held issued could not be served upon the assessee. The Ld. CIT(A) held issued could not be served upon the assessee. The Ld. CIT(A) held that no meaningful opportunity was afforded to the assessee which that no meaningful opportunity was afforded to the assessee which that no meaningful opportunity was afforded to the assessee which is a clear violation of the principle of natural justice and accordingly is a clear violation of the principle of natural justice and accordingly is a clear violation of the principle of natural justice and accordingly he quashed the assessment order as bad in law. hed the assessment order as bad in law.
Aggrieved the Revenue is in appeal before the Tribunal by way Aggrieved the Revenue is in appeal before the Tribunal by way Aggrieved the Revenue is in appeal before the Tribunal by way of raising grounds as reproduced above. of raising grounds as reproduced above.
We have heard rival submission of the parties and perused the We have heard rival submission of the parties and perused the We have heard rival submission of the parties and perused the relevant material on record. The Ld. CIT(A) relevant material on record. The Ld. CIT(A) has quashed the has quashed the assessment order observing as under: assessment order observing as under:
5. Observation and Decision: Observation and Decision: In ground No. 1, the Appellant has contested the order u/s 143(3) r.w.s. In ground No. 1, the Appellant has contested the order u/s 143(3) r.w.s. In ground No. 1, the Appellant has contested the order u/s 143(3) r.w.s. 144B of the IT Act, 1961 dated 26/09/2021 for the A.Y. 2018 144B of the IT Act, 1961 dated 26/09/2021 for the A.Y. 2018 144B of the IT Act, 1961 dated 26/09/2021 for the A.Y. 2018-19 of the AO by holding that the order ha AO by holding that the order has been passed in violation of the s been passed in violation of the principles of natural Justice. principles of natural Justice. I have carefully considered the submissions made by the Appellant. It is I have carefully considered the submissions made by the Appellant. It is I have carefully considered the submissions made by the Appellant. It is observed that the AO issued notice u/s 143(2) of the IT Act, 1961 on observed that the AO issued notice u/s 143(2) of the IT Act, 1961 on observed that the AO issued notice u/s 143(2) of the IT Act, 1961 on 22/09/2019. Thereafter notice u/s 142(1) was 22/09/2019. Thereafter notice u/s 142(1) was issued on 11/12/2020 issued on 11/12/2020 calling for specific details in response to which the Appellant filed the calling for specific details in response to which the Appellant filed the calling for specific details in response to which the Appellant filed the requisite information. Thereafter show cause notice along with Draft requisite information. Thereafter show cause notice along with Draft requisite information. Thereafter show cause notice along with Draft Assessment Order was issued to the Appellant on 21 Assessment Order was issued to the Appellant on 21-09-2021 fixing the 2021 fixing the case for hearing on 25 case for hearing on 25-09-2021. It is observed that the notices were 2021. It is observed that the notices were sent to the email id seosmanabad@mahadiscom.in which is not the sent to the email id seosmanabad@mahadiscom.in which is not the sent to the email id seosmanabad@mahadiscom.in which is not the official email id of the Appellant. The email ids reported in the ROl are official email id of the Appellant. The email ids reported in the ROl are official email id of the Appellant. The email ids reported in the ROl are cmca@mahadiscom.in and cao cadiscom1@rediffmail.com. The postal cmca@mahadiscom.in and cao cadiscom1@rediffmail.com. The postal cmca@mahadiscom.in and cao cadiscom1@rediffmail.com. The postal Address given by the Appellant in the ROl is Bandra East, Mumbai but given by the Appellant in the ROl is Bandra East, Mumbai but given by the Appellant in the ROl is Bandra East, Mumbai but the Postal Address mentioned by the AO is Solapur Road, Tuljapur. It is the Postal Address mentioned by the AO is Solapur Road, Tuljapur. It is the Postal Address mentioned by the AO is Solapur Road, Tuljapur. It is also observed that the notice u/s 143(2) was issued on 22/09/2019. also observed that the notice u/s 143(2) was issued on 22/09/2019. also observed that the notice u/s 143(2) was issued on 22/09/2019. After a long gap of 14 months, notice u/s 142(1) was is After a long gap of 14 months, notice u/s 142(1) was is After a long gap of 14 months, notice u/s 142(1) was issued on 11/12/2020 which was complied upon by the Appellant. Thereafter, 11/12/2020 which was complied upon by the Appellant. Thereafter, 11/12/2020 which was complied upon by the Appellant. Thereafter, after a long gap of 9 months, show cause notice was issued on 21 after a long gap of 9 months, show cause notice was issued on 21 after a long gap of 9 months, show cause notice was issued on 21-09- 2021 giving only four days time to the Appellant to file its response and 2021 giving only four days time to the Appellant to file its response and 2021 giving only four days time to the Appellant to file its response and the assessment order was hurriedly passed the assessment order was hurriedly passed on 26-09-2021. The notices 2021. The notices were sent to the wrong email id and not the registered email ids. The were sent to the wrong email id and not the registered email ids. The were sent to the wrong email id and not the registered email ids. The postal address mentioned by the AO is also not the postal address postal address mentioned by the AO is also not the postal address postal address mentioned by the AO is also not the postal address mentioned by the Appellant in its ROl. There is a gap of 14 months mentioned by the Appellant in its ROl. There is a gap of 14 months mentioned by the Appellant in its ROl. There is a gap of 14 months between the issue of 143( between the issue of 143(2) notice and the issue of 142(1) notice. There 2) notice and the issue of 142(1) notice. There is again a gap of 9 months from the issue of 142(1) notice and issue of is again a gap of 9 months from the issue of 142(1) notice and issue of is again a gap of 9 months from the issue of 142(1) notice and issue of show cause notice and only four days were afforded to the Appellant to show cause notice and only four days were afforded to the Appellant to show cause notice and only four days were afforded to the Appellant to respond to the show cause notice. In view of the above, it is evi respond to the show cause notice. In view of the above, it is evi respond to the show cause notice. In view of the above, it is evident that a proper and meaningful opportunity has not been afforded to the a proper and meaningful opportunity has not been afforded to the a proper and meaningful opportunity has not been afforded to the Appellant to present its case before the AO. There is a clear violation of Appellant to present its case before the AO. There is a clear violation of Appellant to present its case before the AO. There is a clear violation of the principles of natural Justice. Moreover, the AO also seems to be the principles of natural Justice. Moreover, the AO also seems to be the principles of natural Justice. Moreover, the AO also seems to be contradicting himself as apparent fro contradicting himself as apparent from the order. In Para 3 of his order, the AO states that in response to the notices In Para 3 of his order, the AO states that in response to the notices In Para 3 of his order, the AO states that in response to the notices issued u/s 142(1) dated 11/12/2020, the issued u/s 142(1) dated 11/12/2020, the "assessee - company filed company filed the requisite information as called for. After going through the the requisite information as called for. After going through the the requisite information as called for. After going through the information furnished, the assessment is c information furnished, the assessment is completed as under". ompleted as under". Then suddenly in Para 4,5 and 7, the AO states that the assessee has Then suddenly in Para 4,5 and 7, the AO states that the assessee has Then suddenly in Para 4,5 and 7, the AO states that the assessee has not submitted any details till date/ no reply is received from the assess not submitted any details till date/ no reply is received from the assess not submitted any details till date/ no reply is received from the assess
till date. In view of the above, the AO has passed the order in clear till date. In view of the above, the AO has passed the order in clear till date. In view of the above, the AO has passed the order in clear violation of the princi violation of the principles of natural Justice and the assessment order is ples of natural Justice and the assessment order is bad in law and hereby quashed. This ground is allowed bad in law and hereby quashed. This ground is allowed.” 5.1 We find that according to the Ld. CIT(A) due to service of the We find that according to the Ld. CIT(A) due to service of the We find that according to the Ld. CIT(A) due to service of the notice on e-mail ID which was not provided for communication in mail ID which was not provided for communication in mail ID which was not provided for communication in the return of income, those notices could not be served and ome, those notices could not be served and ome, those notices could not be served and therefore, the addition made by the assessee in the assessment therefore, the addition made by the assessee in the assessment therefore, the addition made by the assessee in the assessment order passed is in violation of principle of natural justice, order passed is in violation of principle of natural justice order passed is in violation of principle of natural justice accordingly, he quashed the assessment order. However, we do not he quashed the assessment order. However, we do not he quashed the assessment order. However, we do not agree with the finding agree with the finding of the Ld. CIT(A) for the reason that non of the Ld. CIT(A) for the reason that non- service of query letter/show cause notice are curable defects being service of query letter/show cause notice are curable defect service of query letter/show cause notice are curable defect irregularity and not illegality. It is undisputed that notice u/s irregularity and not illegality. It is undisputed that notice u/s irregularity and not illegality. It is undisputed that notice u/s 143(2) of the Act was duly served upon the assessee which is one of 143(2) of the Act was duly served upon the assessee which 143(2) of the Act was duly served upon the assessee which the jurisdictional requirement tional requirement. The notice u/s 142(1) is issued for notice u/s 142(1) is issued for raising certain queries on the assessee and non raising certain queries on the assessee and non-service of the same service of the same could have been rectified by the Ld. CIT(A) providing further could have been rectified by the Ld. CIT(A) providing could have been rectified by the Ld. CIT(A) providing opportunity to the assessee for filing the reply in respect of those opportunity to the assessee for filing the reply in respect of those opportunity to the assessee for filing the reply in respect of those queries. In our opinion, merely for non ueries. In our opinion, merely for non-service of the notice u/s service of the notice u/s 142(1) or show cause notice, the assessment order cannot be held 142(1) or show cause notice, the assessment order cannot be held 142(1) or show cause notice, the assessment order cannot be held to be illegal. Accordingly, we set aside the order of the Ld. CIT(A). to be illegal. Accordingly, we set aside the order of the Ld. CIT(A). to be illegal. Accordingly, we set aside the order of the Ld. CIT(A). Since the assessee could not file the response before the Assessing Since the assessee could not file the response before th Since the assessee could not file the response before th Officer therefore, we feel it appropriate to restore the matter back to Officer therefore, we feel it appropriate to restore the matter back to Officer therefore, we feel it appropriate to restore the matter back to the Assessing Officer for deciding afresh after considering the Assessing Officer for deciding afresh after considering the Assessing Officer for deciding afresh after considering submission of the assessee. The Assessing Officer is directed to submission of the assessee. The Assessing Officer is directed to submission of the assessee. The Assessing Officer is directed to issue notice on the address/e issue notice on the address/e-mail address as per the procedure er the procedure laid down under Rule 127 of the Income laid down under Rule 127 of the Income-tax Rules, 1962. The tax Rules, 1962. The grounds of appeal of the Revenue are accordingly allowed for grounds of appeal of the Revenue are accordingly allowed for grounds of appeal of the Revenue are accordingly allowed for statistical purposes.
In the result, the appeal of the Revenue is allowed for In the result, the appeal of the Revenue is allowed for In the result, the appeal of the Revenue is allowed for statistical purposes. statistical purposes.
Order pronounced in the open Court on unced in the open Court on 17/10/2024. /10/2024.