Hearing notices sent to wrong email in tax appeal over unsecured loan accommodation entries; ex parte order set aside, remanded.

An ex parte first-appellate order was challenged on the ground of denial of natural justice, as hearing notices were issued to an email address not furnished by the assessee. The Tribunal held that service at an incorrect email vitiated the opportunity of hearing and explained the assessee's non-compliance; consequently, the ex parte order could not be sustained and was set aside with remand to the first appellate authority for de novo adjudication with a final opportunity to the assessee. On remand, the first appellate authority was directed to rigorously verify alleged accommodation entries routed as unsecured loans and to examine potential tax evasion/fraud, with additions to be sustained if the sham nature is established.

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1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether the first appellate order passed ex-parte, on the footing of non-prosecution, was vitiated because the hearing notices were sent to an email address not belonging to the assessee, thereby denying effective opportunity of hearing and violating principles of natural justice.

1.2 Whether, in consequence of such denial of opportunity, the appropriate relief was to set aside the ex-parte appellate order and remand the matter for denovo adjudication with directions to ensure proper service of hearing notices.

2. ISSUE-WISE DETAILED ANALYSIS

2.1 Validity of ex-parte disposal by the first appellate authority in light of alleged defective service of hearing notices

Legal framework (as discussed by the Court): The Court proceeded on the requirement that appellate adjudication must comply with principles of natural justice, including a meaningful opportunity to be heard, especially where an appeal is decided ex-parte for non-compliance.

Interpretation and reasoning: The assessee explained that non-compliance before the first appellate authority occurred because hearing notices were sent to an incorrect email address; the email provided for communication was different from the email to which the notices were actually sent as per the ITBA portal screenshots referred to during hearing. The Court examined the record and accepted that the department had indeed sent hearing notices to a wrong email address, making it not possible for the assessee to respond, which led to the ex-parte order. On these facts, the Court held that the ex-parte disposal was attributable to defective service rather than deliberate non-prosecution.

Conclusion: The ex-parte appellate order was treated as having been passed without effective opportunity to the assessee due to notices being sent to an incorrect email id, warranting interference on natural justice grounds.

2.2 Relief-whether the ex-parte appellate order should be set aside and the matter remanded for denovo decision with directions on service of notices

Legal framework (as discussed by the Court): The Court applied the remedial approach of setting aside an order passed in breach of natural justice and remanding for fresh adjudication, coupled with a direction to ensure proper issuance/service of hearing notices.

Interpretation and reasoning: Having found that the assessee was deprived of a practical opportunity to participate due to incorrect email service, the Court considered remand appropriate and granted a final opportunity to the assessee to present its case before the first appellate authority. The Court therefore set aside the impugned appellate order and restored the matter for denovo adjudication as per law, expressly directing that the first appellate authority be particular and alert in sending hearing notices to the correct email id furnished by the assessee. While making the remand, the Court also noted from the record and assessment narrative that the case involved alleged accommodation entries in the guise of unsecured loans and emphasized that the first appellate authority must verify and examine the matter in detail upon remand.

Conclusion: The Court set aside the ex-parte appellate order and remanded the case to the first appellate authority for denovo adjudication with directions to ensure correct service of hearing notices; the appeal was allowed for statistical purposes.

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