PCIT's revision order quashed for improper service of show cause notice under section 263

ITAT Jaipur allowed the assessee's appeal against a revision order passed under section 263. The PCIT issued the order ex-parte without proper service of show cause notice, violating principles of natural justice. The notices were allegedly issued through online portal but were not served on the registered email-id or addresses mentioned in ITR/ITBA portal as required under section 282. The tribunal held that mere placement of notices on e-portal does not constitute valid service. Since the assessee was unaware of the proceedings due to improper service, the revision order was quashed as bad in law.

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Issues Involved:
1. Validity of the ex-parte order dated 25.03.2023 passed under section 263 of the Income-tax Act, 1961.
2. Non-service of notice dated 10.03.2023 issued under section 263 of the Act.
3. Compliance with mandatory provisions under section 282 of the Act regarding service of notices/orders.
4. Assessment order's alleged erroneous nature and its prejudicial impact on the interest of the revenue.
5. Principles of natural justice and their application in the proceedings.

Issue-wise Detailed Analysis:

1. Validity of the Ex-parte Order:
The appellant contended that the Principal Commissioner of Income Tax (PCIT) grossly erred in passing an ex-parte order dated 25.03.2023 under section 263 of the Income-tax Act, 1961, without affording an opportunity of being heard, thus violating the principles of natural justice. The PCIT's order was deemed bad-in-law and deserving of being set aside and quashed.

2. Non-service of Notice:
The appellant argued that the notice dated 10.03.2023 and the subsequent order dated 25.03.2023 were not served by post, hand, email, or SMS but were directly uploaded on the income tax portal. This non-service of notice was claimed to vitiate the entire proceedings, rendering them bad-in-law and deserving of being quashed. The appellant supported this claim with evidence showing no email ID was mentioned on the notice.

3. Compliance with Section 282:
The appellant emphasized that the impugned notice and order grossly suffered from non-compliance with the mandatory provisions under section 282 of the Act and relevant notifications regarding the service of notices/orders. This non-compliance was argued to invalidate the entire proceedings.

4. Alleged Erroneous Nature of Assessment Order:
The PCIT held that the assessment made by the Assessing Officer, National Faceless Assessment Centre, was erroneous and prejudicial to the interest of the revenue. The PCIT stated that the assessment order was passed in a routine and casual manner without verification of the issue. The appellant contested this, arguing that the assessment order was passed after thorough examination of facts and was neither erroneous nor prejudicial to the interest of the revenue.

5. Principles of Natural Justice:
The appellant contended that the ex-parte order violated the principles of natural justice, specifically the principle of "audi alteram partem" (no one should be condemned unheard). The Tribunal emphasized that natural justice principles are firmly rooted under Articles 14 and 21 of the Constitution, ensuring that judgments are just, fair, and reasonable. The Tribunal cited various case laws reinforcing the necessity of providing an opportunity to be heard before passing any order.

Tribunal's Findings:
The Tribunal found that the revisionary proceedings were initiated by the PCIT without proper service of the show cause notice (SCN) dated 10.03.2023. The SCN was not served through post, email, or SMS, and the PCIT proceeded to pass an ex-parte order on 25.03.2023 without ensuring proper communication. This failure to serve the notice violated the principles of natural justice and section 282 of the Act.

The Tribunal cited several case laws supporting the appellant's contention that orders passed without affording an opportunity of being heard are bad in law. It was emphasized that merely uploading the notice on the income tax portal does not constitute effective service as per section 282.

Conclusion:
The Tribunal concluded that the PCIT committed a gross error by not providing an effective/reasonable opportunity of being heard before passing the impugned order. Consequently, the revisional order dated 25.03.2023 was declared void ab initio and quashed. The other grounds of appeal were rendered academic and dismissed as infructuous.

Order:
The appeal filed by the assessee was allowed, and the order was pronounced in accordance with Rule 34(4) of the Income Tax (Appellate Tribunal) Rules on 05.07.2024.

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