Actual notice and effective hearing are essential in tax appeals; ex parte disposal and scheme rejection cannot survive without proof of service.

Section 250 appellate procedure requires actual notice of hearing and a real opportunity to participate; where service of notice is not proved, an ex parte disposal cannot stand and must be set aside for fresh hearing. On that footing, a declaration under the Direct Tax Dispute Resolution Scheme, 2016 cannot be rejected merely because the related appeal was treated as dismissed; once the appellate order falls and the appeal is revived, the declaration must be reconsidered on the basis that the appeal was pending on the declaration date, subject to other eligibility conditions.

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Issues: (i) Whether an ex parte appellate order passed under section 250 of the Income-tax Act, 1961, without proof of actual service of notice of hearing, was sustainable. (ii) Whether rejection of the declaration under the Direct Tax Dispute Resolution Scheme, 2016 on the footing that the penalty appeal had already been dismissed was sustainable.

Issue (i): Whether an ex parte appellate order passed under section 250 of the Income-tax Act, 1961, without proof of actual service of notice of hearing, was sustainable.

Analysis: Section 250 requires the Commissioner (Appeals) to fix a hearing and give notice to the appellant, and the appellate scheme under sections 250 and 251 is intended to secure effective participation of the assessee and a reasoned adjudication. The notices were shown to have been dispatched, but actual service was not established. In such circumstances, the absence of proof of service deprived the assessee of an effective opportunity of hearing and the ex parte disposal could not be sustained.

Conclusion: The ex parte appellate order was set aside and the appeal was ordered to be revived for fresh consideration after hearing the assessee.

Issue (ii): Whether rejection of the declaration under the Direct Tax Dispute Resolution Scheme, 2016 on the footing that the penalty appeal had already been dismissed was sustainable.

Analysis: The Scheme applied only where the dispute remained in appeal on the relevant date. Once the appellate order was held unsustainable and the appeal stood revived, the basis for rejecting the declaration disappeared. The designated authority was therefore required to reconsider the declaration on the footing that the appeal was pending on the date of declaration, while leaving other eligibility conditions open.

Conclusion: The rejection of the declaration under the Scheme was set aside and the matter was directed to be dealt with as if the appeal was pending on the date of declaration.

Final Conclusion: The petitions succeeded in substance, the ex parte appellate orders and the consequential rejection under the Scheme were quashed, and the appeals were restored for fresh disposal after due hearing.

Ratio Decidendi: Where the statutory appellate procedure is designed to secure a real opportunity of hearing, an ex parte disposal without proof of service of notice cannot stand, and any consequential rejection of a tax-settlement declaration based on the erroneous assumption that the appeal had ceased to be pending must also fall.

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