Email Change Ignored by Department: Calcutta HC Sets Aside S.148A Reassessment Notice [Read Order]

The Calcutta High Court has set aside a reassessment order and the consequential notice issued under Section 148 of the Income Tax Act, 1961, noting that the Income Tax Department failed to effectively serve the notice under Section 148A of the Act, without ensuring proper communication through the updated email ID.

The petitioner, Basu Tea Pvt. Ltd., challenged an order passed under Section 148A(d) of the Income Tax Act, 1961, along with the consequential notice issued under Section 148 of the Act for the Assessment Year 2017-18. The proceedings originated from a notice issued under Section 148A(b) of the Income Tax Act, 1961, questioning the petitioner on the ground of “income escaping”. The petitioner ignored show cause notice, following which the Assessing Officer (AO) passed an order under Section 148A(d) and issued a reassessment notice under Section 148 of the Income Tax Act, 1961.

The core issue arose on the ignorance of the department to communicate all notices to the petitioner via updated email ID which was duly acknowledged and reflected in the Income Tax Return filed for Assessment Year 2023-24, in contrast to the actual matrix where they were uploaded on the income tax portal or sent to previous email address. Due to non-receipt of the notice, the petitioner was unaware and failed to participate in the reassessment process. Aggrieved by the reassessment order, the petitioner approached the High Court.

The counsel on behalf of the petitioners stressed upon the failure to serve notice on the updated email ID which deprived the petitioner of an opportunity to respond. Ultimately, rendering the reassessment initiated under Section 148 of the Income Tax Act, 1961 as unsustainable and liable to be set aside.

The Department contended that service of notice-in-question constitutes valid service back by Rule 127 of the Income Tax Rules, 1962 and the notification issued by the Central Board of Direct Taxes dated September 12, 2019.

Justice Om Narayan Rai noted that Rule 127 of the Income Tax Rules, 1962 mandates that after uploading a notice on the portal, a real-time alert must also be sent to the assessee. Observing that while service of notice through the income tax portal is a recognised mode of service, such service is not complete unless the procedural safeguards prescribed under the rules are complied with, absence of which in the case makes it defective.

Subsequently, the Department being aware about the change of email ID should have sent a real-time alert, which is not in the present matrix. In the light of deprived fair opportunity, the Court ruled that the reassessment proceedings suffered from violation of principles of natural justice.

Accordingly, the order set aside passed under Section 148A(d) of the Income Tax Act, 1961 and the consequential notice issued under Section 148 of the Act were set aside,remanding the matter back to the AO with directions to provide the petitioner a fresh opportunity to respond before taking any further action in accordance with law.

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