2024 (6) TMI 521 - AT - Income Tax

Tribunal Remands Cases for Fair Hearing After Improper Notice Service and Breach of Natural Justice Principles.

The ITAT allowed the appeals, remanding the cases back to the ld. CIT(A) for a fair hearing due to a breach of natural justice principles. The ex-parte ... Issue of notice on wrong and invalid address - Violation of natural justice principles - ex-parte order passed by the CIT(A) due to lack of proper service of notice - CIT(A) has neither issued notice on the email address given in the profile information or alternate email address - HELD THAT:- Admittedly, CIT(A) has issued notice on the email address of the former CA given in the Income Tax Return (ITR). As undisputed fact on record that the CIT(A) has neither issued notice on the email address given in the profile information or alternate email address given. As per clause 11 of the CBDT Notification No. 139 dated 28.12.2021, the ld. CIT(A) is required to communicate the notice through the email id available in Form 35 of the appeal memo. In our view, the issue of notice by the ld. CIT(A) on the email address other than the email address given in Form 35 of the appeal, tantamount to issue of notice on wrong and invalid address and as such no service of notice. In our view, rejection of appeals without valid service of notice either by postal address or electric communication and further without discussing merits of the case would be held to be in gross violation of principles of natural justice. This issue of ex-parte order passed by the ld. CIT(A) due to lack of proper service of notice has been settled by various courts, acknowledging that it is impractical for the assessee to consistently monitor the e-portal of the Income Tax Department. Recently, in the case Munjal BCU Centre of Innovation and Entrepreneurship, Ludhiana v. CIT(E), Chandigarh [2024 (3) TMI 479 - PUNJAB & HARYANA HIGH COURT] observed that the Income Tax Department must communicate notices in accordance with the provisions of law and tax-payers are not accepted to keep the department e-portal open in all the times. As further observed that before any action is taken by the department, the communication of notice must be in terms of provisions of law. The provisions do not mention that communication to be presumed by placing notice on the e-portal. A pragmatic view has to be adapted always in these circumstances and individual or company is not accepted to keep the e-portal to the department open in all the times to have the knowledge of what the department 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 same are required to be necessarily followed. As evident that the appellant has not been given sufficient opportunity to put up pleas/submissions with regard to the compliance of the notices issued by the CIT(A) as he was not served, any of the notices. In our view, the assessee would be entitled to be granted sufficient opportunity of being heard to file his reply and the ld. CIT(A) of course be entitled to examine the same and pass afresh order thereafter. In view of natural justice, we consider it deem fit to remand back to the matter to the file of the CIT(A) to adjudicate the appeal afresh after granting sufficient opportunity of being heard and considering the submissions made by the appellant assessee. ISSUES PRESENTED AND CONSIDERED 1. Whether an appellate order passed ex parte by the Commissioner (Appeals) without issuing notices to the email address furnished in Form 35 (and/or profile information) constitutes lack of valid service and a violation of principles of natural justice. 2. Whether communication of notice by issuing it to an email address other than that provided in Form 35 (or profile information) amounts to service in law under the applicable electronic-notice regime (CBDT Notification No. 139 dated 28.12.2021, clause 11). 3. Whether an ex parte appellate order made without valid electronic/personal service and without adjudicating merits should be set aside and remitted for fresh adjudication after affording opportunity of hearing. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Validity of service where notices were sent to an email address different from the email in Form 35/profile Legal framework: The relevant electronic communication regime requires the Commissioner (Appeals) to communicate notices through the email id available in Form 35 of the appeal memo (CBDT Notification No. 139 dated 28.12.2021, clause 11). Principles of natural justice require valid service of notice sufficient to afford an opportunity to be heard before adverse orders are passed. Precedent treatment: The Tribunal relied upon recent High Court authority observing that departmental communications must comply with statutory provisions and cannot be presumed merely by placing notice on the e-portal; taxpayers are not required to keep departmental e-portals continuously monitored. Interpretation and reasoning: Where the appellant supplied one email in Form 35 and another in profile/ITR, but notices were sent only to the former CA's email (different from Form 35/profile), the Tribunal held that issuance of notice to an email other than that specified in Form 35 constitutes issuance to a wrong/invalid address. Such communication cannot be equated to valid service, particularly given the express requirement in clause 11. The Tribunal emphasized the impracticality of expecting assessee to continuously monitor departmental e-portals and endorsed a pragmatic approach to electronic service consistent with natural justice. Ratio vs. Obiter: Ratio - Sending notices to an email other than that specified in Form 35 (or profile) is not valid service under clause 11 and violates principles of natural justice. Obiter - Practical commentary on taxpayers not being required to keep e-portals open at all times and the need for pragmatic administration. Conclusion: Notices sent to an email address other than that provided in Form 35/profile amount to defective service and do not satisfy the requirement of valid communication under the electronic-notice regime; therefore, subsequent ex parte action is vitiated. Issue 2 - Consequence of defective service: setting aside ex parte appellate order and remand for fresh adjudication Legal framework: Fundamental requirement of audi alteram partem in appellate proceedings and statutory scheme allowing adjudication afresh where prior proceedings suffered from defect of notice; the appellate authority's power to pass orders under the relevant provision (identified in the record as section 250(6) procedure) must be exercised after affording opportunity to the party. Precedent treatment: The Tribunal referred to judicial pronouncements emphasizing that rejection of appeals or adjudication without valid service of notice and without discussing merits amounts to gross violation of natural justice and warrants restoration/remand. Interpretation and reasoning: Because the appellant did not receive notice on the email provided in Form 35/profile, the assessee was deprived of an opportunity to file submissions. The Tribunal found it appropriate to remit the matter to the Commissioner (Appeals) for fresh adjudication after valid service and affording sufficient opportunity to be heard. The Tribunal explicitly refrained from expressing any view on merits and left adjudication of substantive issues to the appellate authority on fresh hearing. Ratio vs. Obiter: Ratio - Ex parte appellate orders founded on defective service must be set aside and matter remitted for fresh adjudication after valid notice and opportunity to be heard. Obiter - None significant beyond confirming procedural fairness principles. Conclusion: The impugned ex parte orders were set aside; the matters were restored to the Commissioner (Appeals) to decide afresh after issuing notices to the email address in Form 35/profile and affording the assessee adequate opportunity. Issue 3 - Applicability of findings across multiple identical appeals Legal framework: Where multiple appeals involve identical facts and identical procedural defects, the principle of judicial economy permits applying a single finding mutatis mutandis across such appeals. Precedent treatment: The Tribunal applied the ratio developed in the lead appeal to other appeals having the same factual matrix and procedural issue. Interpretation and reasoning: Given the identical circumstances (notices served to CA's email rather than email in Form 35/profile) across four appeals, the Tribunal declared that the findings and orders in the lead appeal apply to the others mutatis mutandis, restoring all appeals for fresh adjudication. Ratio vs. Obiter: Ratio - A single reasoned finding on defective service and resultant remand is bindingly applicable to other appeals with identical facts; such appeals can be allowed for statistical purposes and remanded. Conclusion: The Tribunal restored all similarly affected appeals to the file of the appellate authority for fresh adjudication on service of proper notice and after affording an opportunity to be heard. Ancillary Observations 1. The Tribunal declined to express any view on the substantive merits of the assessments and left open the right of the Commissioner (Appeals) to adjudicate issues according to law upon fresh hearing. 2. The Tribunal condensed its remedial direction to restore the matters and remand for fresh adjudication; the outcome was procedural (allowing appeals for statistical purpose) rather than substantive.