Service of Notice before Income Tax Reassessment is Mandatory: Jharkhand HCC Quashes Penalty u/s 271(1)(b) [Read Order]

The Jharkhand High Court has held that valid service of notice is a mandatory jurisdictional requirement before initiating reassessment proceedings under the Income Tax Act, 1961, and quashed the penalty imposed under Section 271(1)(b)for alleged non-compliance.

General Traders, filed writ petition before the high court The Division Bench ruled that reassessment proceedings, ex parte assessment orders and penalty orders are vitiated when statutory notices under Sections 148 and 142(1) are not properly served on the assessee.

The petitioner contended that although it had updated its active email ID with the Income Tax Department in July 2020 after the earlier email became inactive following the closure of the service provider the Department continued issuing statutory notices to the old, defunct email address.

The Court noted that the Department had, in fact, sent multiple communications to the petitioner’s new email ID both before and after the alleged date of service of the Section 148 notice, confirming that the updated address was duly recorded in the system.

It was observed that service of statutory notices on an outdated email, despite the taxpayer having furnished a new registered email and receiving acknowledgments from the Department, amounted to a violation of Section 282 of the Act and Rule 127 of the Income Tax Rules.

While rejecting the Revenue’s argument that uploading notices on the e-proceeding portal constituted valid service, the Bench observed that law does not permit service of notices merely by presumption.

A taxpayer cannot be expected to keep the e-portal open at all times to discover proceedings initiated against them. The Court depended on decisions of the Punjab & Haryana High Court, Allahabad High Court, Chhattisgarh High Court and Bombay High Court to confirm that service of notice under Section 148 is not a procedural formality but a jurisdictional precondition.

Since the Revenue failed to prove proper service of notice, Chief Justice Tarlok Singh Chauhan and Justice Rajesh Shankar held that the entire reassessment proceedings including the ex parte assessment order passed under Sections 147/144/144B and the penalties under Sections 271(1)(c) and 271(1)(b) were invalid.

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The Court consequently quashed all the impugned notices, assessment orders and penalty orders, and remanded the matter to the Assessing Officer to proceed afresh after ensuring proper service and granting due opportunity of hearing to the petitioner.

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