2025 (10) TMI 309 - HC - Income Tax

Fresh opportunity to respond to Section 148B notice after ex-parte order due to chartered accountant noncommunication

HC held that the ex-parte proceedings arose from the petitioner's non-participation attributable to noncommunication by the petitioner's chartered ... Ex- parte proceedings - proceedings are admittedly ex-parte as the petitioner did not participate in the proceedings - as submitted non-participation is on account of noncommunication by the Chartered Accountant - AO himself notices that the email was not found. Therefore, to what email service has been effected is still a lurking doubt. - HELD THAT:- As in Vijay Shrinivasrao Kulkarni (Deceased) [2025 (2) TMI 296 - BOMBAY HIGH COURT] was considering the identical circumstance of the proceedings being ex-parte. The reason for the proceedings going ex-parte was a non-communication from the hands of the Chartered Accountant. In the light, the projection of the petitioner being similar, deem it appropriate to grant one opportunity to the petitioner with a direction to the petitioner to appear before respondent No. 3 and furnish reply to Section 148B notice. ISSUES PRESENTED AND CONSIDERED 1. Whether ex-parte assessment and penalty orders passed under Sections 147 read with Sections 144 and 144B, and Sections 271B/270A of the Income Tax Act, 1961, are vitiated for want of compliance with principles of natural justice when the assessee did not receive or was unaware of notices allegedly served by email. 2. Whether electronic service by email (where Assessing Officer's records show no email for the assessee) constitutes valid service sufficient to proceed to ex-parte orders under the Act. 3. Whether non-participation in assessment/appellate proceedings caused by the assessee's representative (Chartered Accountant) not communicating with or appearing for the assessee disentitles the assessee to relief from ex-parte orders. 4. Whether, in the circumstances of ex-parte orders arising from asserted non-service or non-communication, the appropriate remedy is quashing the impugned orders and remitting the matter for de novo consideration with an opportunity of hearing (including issuance of fresh Section 148B notice where relevant). ISSUE-WISE DETAILED ANALYSIS Issue 1 - Validity of ex-parte assessment/penalty orders when the assessee was unaware of proceedings (natural justice) Legal framework: The principles of audi alteram partem (right to be heard) under Article 14 as applied to administrative/adjudicatory tax proceedings govern the obligation to afford an assessee an opportunity to be heard before adverse orders (referenced by the Court to established constitutional jurisprudence). The statutory provisions enabling reassessment (Section 147), summary disposal (Section 144/144B), and levy of penalty (Section 271B/270A) must be exercised consistent with the duty to give notice and a reasonable opportunity to respond. Precedent treatment: The Court relied on higher-court authority holding that the right of hearing is integral to equal protection and that appellate/adjudicatory bodies must decide on merits rather than dismiss by default where appeal originates from an ex-parte order. The judgment of a coordinate High Court (Division Bench) addressing materially similar facts was followed to the extent it held that ex-parte orders passed without hearing require remand for fresh disposal. Interpretation and reasoning: The Court examined the admitted fact that the orders impugned were passed ex-parte and that the assessee received the assessment and demand notices by email only after orders were made. The Assessing Officer's own note that 'email was not found' raised a material doubt about the efficacy of electronic service. Given that the assessee had ceased operations and had entrusted documentation/responsibility to a Chartered Accountant who did not communicate/respond, the Court held that the absence of participation could be attributable to defective communication and therefore the fundamental requirement of hearing was not met. Ratio vs. Obiter: Ratio - where ex-parte tax orders result from defective or unproven service and the assessee is not given an effective opportunity to be heard, such orders are susceptible to quashing and remand for fresh consideration. Obiter - observations about broader administrative practice concerning digital service and conduct of representatives were made in aid of reasoning but are not formulated as binding propositions beyond the present facts. Conclusion: The ex-parte assessment and penalty orders were quashed to the extent they were passed without effective notice/participation, and the matter was remitted for fresh consideration with directions to afford an opportunity to be heard. Issue 2 - Sufficiency of electronic service by email where Assessing Officer's records do not corroborate the assessee's email Legal framework: Service of notices and orders in tax proceedings must be effective and traceable; where service is by electronic means, there must be clarity and cogent evidence that communication reached the addressee in time to permit effective response. Precedent treatment: The Court considered and relied upon reasoning in the referenced Division Bench decision which scrutinized electronic communications and emphasized the need to ensure that the party adversely affected had effective notice before orders were made. Interpretation and reasoning: The Court treated the Assessing Officer's admission that the assessee's email was 'not found' as creating a genuine doubt about the claimed email service. Where the service record is ambiguous or silent, the presumption in favor of effective service cannot be invoked to validate ex-parte disposal. The Court therefore concluded that email-transmission alone, without corroborative proof of receipt and with internal inconsistency in departmental records, is insufficient to sustain ex-parte orders that deprive the assessee of the right to be heard. Ratio vs. Obiter: Ratio - in tax proceedings, proof of electronic service must be demonstrably reliable; where departmental records negate or do not support the claimed electronic service, ex-parte orders based on such purported service are liable to be set aside. Obiter - the Court's remarks about best practices for electronic service implicate administrative prudence but are not exhaustive rules beyond the facts. Conclusion: Electronic service, when not supported by reliable departmental records of the assessee's email or evidence of receipt, does not justify ex-parte orders and mandates quashing/remand for fresh proceedings with valid notice. Issue 3 - Effect of non-communication/inaction by the assessee's Chartered Accountant on entitlement to relief Legal framework: An assessee's chosen agent or authorised representative ordinarily acts for the assessee; however, relief from ex-parte actions may still be appropriate where non-communication by the agent results in the assessee being unaware of proceedings, especially when the record shows the assessee had ceased operations or was otherwise incapacitated from active participation. Precedent treatment: The Court followed the approach of the referenced Division Bench which granted relief where the absence of effective participation was attributable to the representative's failure to communicate and the tribunal/authority proceeded ex-parte without ensuring the party himself had actual notice. Interpretation and reasoning: The Court accepted the petitioner's factual case that operational cessation and reliance on the Chartered Accountant led to non-participation. It found that mere absence of the representative cannot automatically disentitle the assessee to relief where there is credible explanation and where fundamental fairness was compromised by lack of effective notice. Accordingly, the Court exercised equitable remedial power to grant a further opportunity to the assessee to appear and reply to statutory notices. Ratio vs. Obiter: Ratio - non-participation attributable to a representative's failure to act, coupled with inadequate or unproven service, can justify setting aside ex-parte tax orders and remanding for fresh hearing. Obiter - the Court's comparative remarks about counsel conduct and administrative expectations are ancillary observations. Conclusion: The attributed failure of the Chartered Accountant to communicate justified grant of a fresh opportunity to the assessee; non-appearance by a representative does not ipso facto bar relief where lack of effective notice and fairness is shown. Issue 4 - Appropriate remedy: quashing impugned orders and remitting for de novo proceedings with directions (including fresh Section 148B notice) Legal framework: Where orders are vitiated for want of hearing or defective service, judicial relief ordinarily takes the form of quashing such orders and remitting the matter for fresh consideration, subject to directions to secure compliance with natural justice and statutory safeguards (including issuance of requisite notices and reasonable time to respond). Precedent treatment: The Court applied the remedy endorsed in the followed Division Bench decision and Supreme Court authority emphasizing merits disposal and hearing where ex-parte orders were passed without an effective opportunity to be heard. Interpretation and reasoning: Considering the admitted ex-parte nature of the orders, the inconsistency in departmental records about email service, and the representative's failure to respond, the Court concluded that quashing the impugned orders and remitting to the appropriate authority for de novo consideration was the proportionate remedy. The Court directed a specific date for appearance and directed the authority to serve Section 148B notice on appearance, permit the assessee to furnish reply, and regulate further procedure. The Court also made clear that failure to avail the opportunity would revive the impugned orders. Ratio vs. Obiter: Ratio - where ex-parte tax orders are set aside for defective service/lack of hearing, the proper course is remand for de novo disposal with directions to serve valid notices and afford an opportunity to be heard; the court may fix a date and condition revival of the impugned orders upon non-appearance. Obiter - procedural specifics towards administrative scheduling beyond the set directions are illustrative. Conclusion: The Court quashed the impugned orders, remitted the matter for fresh consideration, directed personal appearance on a specified date, ordered service of Section 148B notice upon such appearance, granted opportunity to reply and directed the authority to proceed in accordance with law; non-appearance would result in revival of the impugned orders. Cross-references See Issue 1 (natural justice) and Issue 2 (electronic service) for overlapping reasoning on the insufficiency of uncorroborated email service; see Issue 3 for the interplay between representative conduct and entitlement to relief; see Issue 4 for the remedial disposition flowing from the Court's conclusions on Issues 1-3.