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Luv Procon Private Limited Vs ITO (ITAT Ahmedabad)
In a recent ruling, the Income Tax Appellate Tribunal (ITAT) in Ahmedabad has set aside the dismissal order of the Commissioner of Income Tax (Appeals) (CIT(A)) for Luv Procon Private Limited due to procedural irregularities involving notices sent via email. The case pertains to the Assessment Year 2015-16 and highlights the importance of adhering to communication preferences specified by taxpayers.
The appeal was filed against the order dated October 31, 2023, issued by the National Faceless Appeal Centre (NFAC) in Delhi. The primary issue revolved around the manner in which notices were communicated to the assessee. Luv Procon had specifically indicated in Form No. 35 that it preferred no correspondence via email, yet the CIT(A) proceeded to send all notices electronically.
Background of the Case
The appeal process was marred by a delay of 53 days in filing the response to the NFAC’s order. The assessee explained this delay through an affidavit, stating that the notification was sent to an email address ([email protected]) that had not been accessed for a considerable period due to the office being closed during the Diwali festival. Consequently, the delay was not contested by the Senior Departmental Representative (Sr. DR), leading the ITAT to condone it.
Initially, Luv Procon filed its income tax return for the Assessment Year 2013-14 on May 21, 2014, reporting nil income. However, the Assessing Officer (AO) initiated proceedings under Section 147 of the Income Tax Act based on information that the assessee had received accommodation entries from entities linked to a person named Jignesh Shah. During the assessment, the assessee did not comply with the AO’s requests, resulting in a total income assessment of Rs. 66 lakhs under Section 147 read with Section 144.
After the AO’s order, Luv Procon filed an appeal with the CIT(A), but this was dismissed on the grounds of delay and lack of opportunity for a hearing.
Key Issues Raised
In the current appeal before the ITAT, Luv Procon raised two critical points:
- The CIT(A) failed to provide reasonable hearing opportunities and relied solely on email communications despite the explicit request for physical notices.
- The dismissal of the appeal due to delay was not justified, as the merits of the case were not considered.
Luv Procon’s representative, Shri Mehul K. Patel, argued that the reliance on email for communication was inappropriate given the clear instructions provided in Form No. 35. The inability of the assessee to check their email led to a lack of compliance with the CIT(A)’s notices, culminating in the dismissal of their appeal.
ITAT’s Findings
Upon reviewing the case, the ITAT noted that the CIT(A) had indeed disregarded the taxpayer’s preference for physical notice communication. The tribunal emphasized that the procedural lapses by the CIT(A) in issuing only electronic notices violated the principles of natural justice.
The ITAT referenced Form No. 35, which explicitly stated the taxpayer’s choice against email communication. It stated that the CIT(A) acted incorrectly by dismissing the appeal based solely on missed e-notices. The tribunal also acknowledged the affidavit submitted by Luv Procon, which provided reasonable grounds for the delay, including the director’s loss of access to the email account.
In light of these observations, the ITAT set aside the CIT(A)’s dismissal and remanded the case back to the CIT(A) for fresh adjudication. The tribunal directed that physical notices be sent alongside any electronic communication to ensure compliance and that the appeal be considered on its merits.
Conclusion
The ITAT’s ruling in favor of Luv Procon underscores the critical need for tax authorities to respect taxpayers’ communication preferences, particularly in a digital age where electronic notices are increasingly common. This decision serves as a reminder that procedural fairness and the opportunity for taxpayers to present their cases are paramount in the tax adjudication process. The case has been allowed for statistical purposes, paving the way for a re-examination by the CIT(A) with due process.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
This appeal is filed by the assessee against the order of the National Faceless Appeal Centre (NFAC), Delhi, (in short ‘the CIT(A)’) dated 31.10.2023 for the Assessment Year 2015-16.
2. There was a delay of 53 days in filing of this appeal. The assessee has filed an affidavit explaining the reason for delay. It was submitted that the appeal order passed by NFAC was sent on the email ID [email protected], which was not accessed and checked for a long time for the reason that the office was closed for a long duration of Diwali. Otherwise, also the assessee was not checking its mail regularly and due to this reason, there was a delay in filing of this appeal. It was further submitted that the order was not uploaded on the Portal. The Ld. Sr. DR also has not raised any objection to the condonation of delay. Considering the reason as explained by the assessee, the delay is condoned.
3. The brief facts of the case are that the return of income for A.Y. 2013-14 was filed on 21.05.2014 declaring Nil income. The AO had initiated proceeding under Section 147 of the Act on the strength of information received that assessee had received accommodation entries from entities controlled by one Shri Jignesh Shah. In the course of assessment proceeding, no compliance was made by the assessee and assessment was completed under Section 147 r.w.s. 144 of the Income Tax Act, 1961 (in short ‘the Act’) on 29.03.2022 at total income of Rs.66 Lacs.
4. Aggrieved with the order of the AO, the assessee had filed an appeal before the first appellate authority, which has been decided by the Ld. CIT(A) vide the impugned order and the appeal of the assessee was dismissed.
5. The assessee is now in appeal before us. The assessee has taken following grounds in this appeal:
“1. That the learned NFAC has grievously erred in passing ex parte order and not giving reasonable opportunity of hearing, and in issuing notices through e mail, though not opted for by appellant.
2. That on facts and law the learned NFAC has grievously erred in dismissing the appeal on account of delay and in not deciding the appeal on merits.”
6. Shri Mehul K. Patel, Ld. AR for the assessee explained that the Ld. CIT(A) has passed an ex-parte order and the appeal of the assessee was dismissed on the ground of delay in filing the appeal before him and without considering the merits of the case. He explained that all the communication was sent by the Ld. CIT(A) on the email ID, whereas the assessee in Form No.35 had categorically mentioned that no notice/communication should be sent on the email. Since, no physical notices were sent by the Ld. CIT(A) and the assessee not being a tech-savvy did not check the email account. As a result, no compliance could be made before the Ld. CIT(A). The Ld. AR submitted that in the interest of justice, the matter may be remanded to the Ld. CIT(A) with a direction to condone the delay in filing of the appeal and also to decide the matter on the merits of the case.
7. The Ld. Sr. DR did not express any objection if the matter was set aside to the Ld. CIT(A).
8. We have considered the submissions of the assessee and the facts of the case. It is found from Form No.35 that the assessee had indicated its choice that no notice / communication may be sent on email. It appears from the order of the Ld. CIT(A) that all the opportunities provided by him were by way of e-notices and no physical notice was sent to the assessee. When the assessee had categorically notified in Form No.35 that no notice / communication should be on email, the Ld. CIT(A) was not correct in dismissing the appeal by sending e-notices only. The assessee had also explained the reason for delay in Form No.-35. It was submitted that the Director had lost his password and could not check his email account on which the order was sent. The matter come to the notice of the assessee when there was a notice for refund adjustment. The Ld. CIT(A) may decide the delay in filing of appeal before him on merits, taking a considerate view in the matter and after allowing a proper opportunity of being heard to the assessee. The matter is, therefore, set aside to the Ld. CIT(A) for fresh adjudication of the matter after allowing opportunity to the assessee by sending physical notices along with e-notices.
9. In the result, appeal preferred by the assessee is allowed for statistical purposes.
This Order pronounced on 14/08/2024
Author Bio
This is the lacuna in the system, which is to be corrected immediately. Otherwise, many such cases will come. As of now the hearing notice, Demand notice, Penalty Notice etc., are being sent by mail. But it so happens that such notices are not received either in the email id of the assessee or in the alternate email id. The Department also is not able to prove the date and time of sending the notice by evidence. The assessee is also not able to prove that he has not received the said notice. Hence it is better to go back to the old system of sending notices by Regd.A.D. Post and get ack.