2025 (11) TMI 1131 - AT - Income Tax

Appeal allowed where dismissal for non-prosecution set aside because notices sent only by email despite opting out

ITAT set aside the CIT(A)'s dismissal for non-prosecution where notices were sent only to the assessee's email despite the assessee having opted not to ... Mode of receipt of notice - CIT(A) had dismissed the appeal on account of non-prosecution for the reason that no compliance could be made before him - as submitted all the notices of Ld. CIT(A) were sent on the email which was not accessed by the assessee. HELD THAT:- It is found that the email address mentioned in Form No. 35 was [email protected] and the assessee had given his option that no notice/communication may be sent on the email. Under the circumstances, the disposal of the appeal by the Ld. CIT(A) by sending notice on the email and without sending any physical notice to the assessee, cannot be held as correct. When the Department had given an option to the assessee regarding mode of receipt of notice and the assessee has opted not to receive any notice/communication on email, in such case, a physical notice was required to be served upon the assessee. Though the Ld. CIT(A) also adjudicated the matter on merits, his order was without considering any explanations/details/submissions on the part of the assessee. In the interest of justice, we therefore, deem it proper to set-aside the matter to the file of Ld. CIT(A) with a direction to allow one more opportunity to the assessee to represent his case by serving a physical notice along with the notice sent through email. Appeal of the assessee is allowed for statistical purposes. ISSUES PRESENTED AND CONSIDERED 1. Whether the dismissal of an appeal by the first appellate authority for alleged non-prosecution is valid where notices/communications were sent only by e-mail despite the assessee having opted in Form No.35 not to receive communications by e-mail. 2. Whether the reassessment notice issued under section 148 and consequential assessment under section 143(3) r.w.s.147 are valid (raised as a ground but not finally adjudicated by the Tribunal in the present order). 3. Whether an addition under section 68 on account of alleged on-money payment (cash payment for property) was sustainable (raised before the Tribunal but the appeal was remanded without deciding the substantive claim). ISSUE-WISE DETAILED ANALYSIS Issue 1: Validity of dismissal for non-prosecution where assessee had opted out of e-mail communications Legal framework: Assessments, appeals and related communications require valid service of notices. An assessee's declared mode of communication (as indicated in statutory/administrative forms such as Form No.35) governs the Department's obligation to serve notices; if the assessee has expressly opted not to receive communications by e-mail, physical service remains necessary to satisfy principles of fair hearing and natural justice. Precedent Treatment: The order does not rely on or overrule any specific precedent; the Tribunal applies statutory/administrative practice and principles of natural justice to the facts. Interpretation and reasoning: The Tribunal found that the assessee's Form No.35 recorded a specific option that no notice/communication should be sent on the e-mail address. The appellate order was communicated only via e-mail and no physical notice was sent. Because the assessee had expressly opted out of e-mail communications, reliance solely on e-mail to effect communication rendered the appellate authority's procedural step of dismissing the appeal for non-prosecution deficient. The Tribunal also noted that the appellate order adjudicated merits without any explanation/details/submissions from the assessee, indicating the absence of a fair hearing opportunity. Ratio vs. Obiter: Ratio - where an assessee has exercised an option not to receive notices by e-mail, service of notice solely by e-mail does not satisfy the requirement for effective service and may vitiate an order dismissing an appeal for non-prosecution; natural justice requires physical service in such circumstances. Obiter - guidance that the assessee should keep checking e-mail going forward is ancillary to the operative direction. Conclusions: The Tribunal set aside the appellate order and remanded the matter to the first appellate authority with directions to serve a physical notice (in addition to e-mail) and to afford the assessee one more opportunity to represent his case. The appeal was allowed for statistical purposes to effect the remand. Issue 2: Validity of reassessment notice under section 148 (and consequential assessment under section 143(3) r.w.s.147) Legal framework: Reassessment under section 147/148 requires recording of reasons to form belief that income has escaped assessment and valid service of notice to the assessee. Validity can be contested on sufficiency of reasons and procedural compliance. Precedent Treatment: The Tribunal did not finally pronounce on the legal validity of the section 148 notice in this order; no precedent was applied, distinguished or overruled in relation to this ground. Interpretation and reasoning: Although raised as a ground of appeal, the Tribunal did not adjudicate the legal sufficiency of the reopening or the consequential assessment because the primary procedural defect relating to service before the appellate authority required remand for fresh consideration with the assessee's participation. The Tribunal's treatment indicates that procedural fairness at the appellate stage was a threshold issue preventing final determination of the reassessment challenge. Ratio vs. Obiter: Obiter in this order - no substantive conclusion on the validity of notice under section 148/147 is reached; the matter is left open for fresh adjudication after proper service and hearing. Conclusions: The question of validity of the reassessment notice remains undecided and is to be considered afresh by the appellate authority on remand with the assessee's submissions. Issue 3: Sustainment of addition under section 68 for alleged on-money payment Legal framework: Additions under section 68 (unexplained cash credits) require the revenue to discharge evidentiary burden to show the credit is unexplained or to treat particular cash payments as unexplained cash; when on-money for property is alleged, evidence relating to bank transactions, contemporaneous documents and explanations offered by the assessee are material. Precedent Treatment: The Tribunal did not apply or distinguish precedents on evidentiary standards for additions under section 68 in this order. Interpretation and reasoning: The Tribunal noted that the Assessing Officer made an addition of Rs.4,00,000 as on-money based on information and unexplained cash deposits in the assessee's bank account; however, because the appellate order was set aside for defective service and absence of the assessee's submissions, the Tribunal refrained from expressing any view on the merits of the section 68 addition. The issue of unexplained cash and on-money remains open for consideration on remand with opportunity to the assessee to produce explanations/documents. Ratio vs. Obiter: Obiter - the Tribunal's action not to decide the section 68 addition is procedural and preservative; no ratio on the substantive taxability under section 68 is laid down. Conclusions: The sustainment of the section 68 addition is not upheld or reversed on merits by the Tribunal; the matter is remanded for fresh adjudication by the appellate authority after service of physical notice and hearing, enabling the assessee to place on record explanations and supporting evidence. Remand and Disposition Legal framework and reasoning: In light of defective mode of communication to the assessee and consequent denial of effective opportunity of hearing before the appellate authority, principles of natural justice warranted remand. The Tribunal directed physical service of notice in addition to e-mail and required the appellate authority to give one further opportunity to the assessee to be heard. Ratio vs. Obiter: Ratio - where procedural defect impairs the opportunity of hearing (here, service contrary to the assessee's declared communication preference), the appropriate remedy is to set aside the order and remit the matter for fresh consideration after valid service and hearing. Obiter - the Tribunal's ancillary instruction that the assessee should also monitor e-mail in future is permissive guidance. Conclusions: Both appeals were allowed for statistical purposes by remanding them to the first appellate authority with directions to serve physical notice (alongside e-mail), afford the assessee a hearing, and thereupon decide the grounds including the validity of reopening and the addition under section 68 on merits.