Omya India Pvt. Ltd. Vs DCIT (ITAT, Mumbai)
Section 250 Notice Sent To An Employee Who Left In 2016 — Natural Justice Revives ₹45.84 Lakh Appeal, But With A “No More Defaults” Warning
Interest disallowance confirmed without hearing
The AO completed the assessment u/s 143(3) & made a disallowance of ₹45,84,429 u/s 36(1)(iii). One of the reasons recorded was that the assessee had not furnished any reply or submission concerning the issue.
The assessee filed an appeal before the CIT(A). However, it failed to respond to the hearing notices issued during the appellate proceedings.
The CIT(A) observed that the assessee had remained completely non-responsive. Since the contentions contained in the statement of facts could not be verified without the assessee’s participation or supporting material, he confirmed the disallowance.
Before the ITAT, the assessee challenged the addition on merits as well as the denial of a reasonable opportunity of hearing.
Five communications—and five different problems
To explain its non-compliance, the assessee filed an affidavit of its Financial Controller & Company Secretary, Shri Shyam Mahadik.
The affidavit gave a notice-by-notice explanation.
The first hearing notice u/s 250 dated 27.07.2021 was sent to Shri Mahadik’s registered email address. Although received, it was inadvertently not forwarded to the tax consultants because of the disruption & precautionary measures prevailing during the COVID-19 pandemic.
The hearing notices dated 17.01.2023 & 14.02.2023 were sent to the email address of Shri Sanjay Prasad, the former Director-Finance & Controlling, West Asia. However, Shri Prasad had left the organisation in November 2016, following which his email account had been deactivated. The assessee claimed that it did not know why communications continued to be directed to an email address belonging to a person who had left several years earlier.
The communication dated 23.09.2024 was received at Shri Mahadik’s email address. According to the assessee, it was merely an informative communication concerning the e-Dispute Resolution Scheme, 2022, rather than a specific hearing notice requiring a response in the pending appeal.
The final hearing notice dated 09.02.2026 was also received at Shri Mahadik’s email address. At that time, however, the Omya Group was undergoing corporate restructuring & the notice was inadvertently not forwarded to the tax consultants.
The assessee therefore pleaded that the defaults were neither deliberate nor intended to avoid the appellate proceedings.
Revenue says enough opportunities were already given
The Revenue opposed the request for restoration. It argued that adequate opportunities had been provided during both the assessment & appellate proceedings.
According to the Revenue, an assessee cannot repeatedly ignore statutory notices & thereafter claim violation of natural justice merely because an adverse order has been passed.
The orders of the AO & CIT(A), therefore, deserved to be sustained.
Natural justice is a right—but not a licence for indifference
The ITAT observed that a reasonable & effective opportunity of hearing is an integral part of natural justice.
At the same time, this right must be exercised with due diligence. It cannot be treated as an unrestricted licence to disregard assessment or appellate proceedings.
The Tribunal therefore did not unconditionally approve the assessee’s conduct. The real question was whether, considering the peculiar sequence of events, the assessee deserved one effective opportunity to place its explanation & documentary evidence before the CIT(A).
Explanation was not wholly devoid of substance
The Tribunal took note of the circumstances mentioned in the affidavit.
The notice issued in July 2021 fell during the period affected by COVID-19 restrictions. Two subsequent notices were sent to the address of a former employee who had left the organisation in 2016. Another communication was claimed to be merely informative, while the last notice was missed during a corporate restructuring exercise.
Viewed individually, each lapse might not conclusively justify non-compliance. However, when considered collectively, the explanation could not be dismissed as wholly devoid of substance.
More importantly, the substantive addition of ₹45.84 lakh had been confirmed without the assessee’s explanation & supporting documentary evidence being examined during the appellate proceedings.
An appeal should be decided on merits—not merely on an empty inbox
The CIT(A) had sustained the disallowance primarily because the assessee remained non-responsive & the statements made in its appeal could not be verified.
The Tribunal considered that the dispute u/s 36(1)(iii) involved a substantive tax issue requiring examination of the assessee’s explanation & evidence. Final confirmation merely for want of participation, despite a plausible explanation for the earlier defaults, would prevent adjudication on the actual merits.
Accordingly, the principles of natural justice required that the assessee be granted one further effective opportunity.
Remand is not deletion of the addition
The ITAT expressly clarified that it had not expressed any opinion on the merits of the disallowance of ₹45,84,429 u/s 36(1)(iii).
The CIT(A)’s order was set aside & the appeal was restored to his file for fresh adjudication. The CIT(A) was directed to:
- Provide a reasonable & effective opportunity of hearing;
- Consider the explanation & documentary evidence furnished by the assessee; &
- Pass a speaking & reasoned order in accordance with law.
All issues concerning the merits of the disallowance were left open.
The second chance carries reciprocal obligations
The Tribunal directed the assessee to extend full cooperation, furnish all relevant information within the time permitted & comply with every notice issued by the CIT(A).
The assessee was specifically cautioned not to seek unnecessary adjournments so that the restored appeal could be disposed of expeditiously.
Natural justice thus worked both ways: the authority must grant an effective hearing, while the assessee must diligently avail it.
Decision
The order of the CIT(A) confirming the ₹45.84 lakh disallowance u/s 36(1)(iii) was set aside & the appeal restored for fresh adjudication.
The disallowance was neither deleted nor confirmed on merits. The assessee’s appeal was allowed for statistical purposes, subject to full cooperation in the restored proceedings.
FULL TEXT OF THE JUDGMENT/ORDER OF ITAT MUMBAI
1. This appeal has been preferred by the assessee against the order dated 24.02.2026 passed by the learned Commissioner of Income-tax (Appeals), National Faceless Appeal Centre, Delhi [hereinafter referred to as “the ld. CIT(A)”], under section 250 of the Income-tax Act, 1961 (hereinafter referred to as “the Act”), for the Assessment Year 2018-19.
2. Briefly stated, the facts of the case are that the Assessing Officer completed the assessment under section 143(3) of the Act vide order dated 08.04.2021, wherein an addition of Rs.45,84,429/- was made under section 36(1)(iii) of the Act. The said addition was made, inter alia, on the ground that the assessee had not furnished any reply or submission in respect of the issue under consideration. The assessee carried the matter in appeal before the ld. CIT(A). During the appellate proceedings, the assessee did not respond to the notices issued by the ld. CIT(A). Consequently, the ld. CIT(A), while passing the order under section 250 of the Act, confirmed the addition made by the Assessing Officer, observing that the assessee had remained completely non-responsive to the various notices issued during the appellate proceedings and, therefore, the contentions raised in the statement of facts could not be verified. Aggrieved by the order of the ld. CIT(A), the assessee is in appeal before the Tribunal, raising grounds challenging the addition on merits as well as the denial of reasonable opportunity of being heard and violation of the principles of natural justice.
3. During the course of hearing before us, the learned Authorised Representative (“ld. AR”) submitted that the assessee could not respond to the notices issued during the appellate proceedings for reasons beyond its control and that the non-compliance was neither intentional nor deliberate. The ld. AR accordingly requested that, in the interest of justice, the matter may be restored to the file of the ld. CIT(A) with a direction to adjudicate the appeal afresh after providing the assessee a reasonable and effective opportunity of being heard.
4. In support of the explanation furnished for the non-compliance, an affidavit was filed by Shri Shyam Mahadik, Financial Controller and Company Secretary of the assessee-company, explaining the circumstances in which the notices issued during the appellate proceedings could not be responded to. The relevant details furnished in the affidavit are summarized below.
| Notice/Letter reference | Email id on which communication was sent as per Income-tax portal | Remarks |
|---|---|---|
| Hearing notice u/s. 250 dated 27.07.2021 | [email protected] | This Notice was received by the Appellant on the said email id, however, due to the prevailing situation on account of outbreak of COVID19 and precautionary measures in respect thereof the same was inadvertently missed out to be shared with consultants. |
| Hearing notice u/s. 250 dated 17.01.2023 | [email protected] | Mr. Sanjay Prasad -Director Finance & Controlling – West Asia has left the organization in November 2016 due to which his email id was deactivated.
As to how the notice(s) were sent to his email id is not known.
|
| Hearing notice u/s. 250 dated 14.02.2023 | [email protected] | |
| Hearing letter dated 23.09.2024 | [email protected] | This communication was received by the Appellant on the said email id, however, the same was only informative in nature making the Appellant aware of ‘the e-Dispute Resolution Scheme 2022‘. |
| Hearing notice u/s. 250 dated 09.02.2026 | [email protected] | This Notice was received by the Appellant on the said email id, however, due to the corporate restructuring which was taking place in Omya group the same was inadvertently missed out to be shared with our tax consultants. |
5. The hearing notice under section 250 dated 27.07.2021 was sent to the e-mail address of Shri Shyam Mahadik as available on the Income-tax portal. According to the affidavit, although the communication was received at the said e-mail address, owing to the prevailing circumstances arising out of the outbreak of COVID-19 and the precautionary measures then in force, the notice was inadvertently not shared with the assessee’s tax consultants.
6. The hearing notice under section 250 dated 17.01.2023 was sent to the e-mail address of Shri Sanjay Prasad. It has been explained that Shri Sanjay Prasad, who was the Director – Finance & Controlling – West Asia, had left the organisation in November 2016 and, consequently, his e-mail account had been deactivated. It has further been stated that the assessee was not aware as to how the notice came to be sent to the said e-mail address. A similar hearing notice dated 14.02.2023 was also sent to the e-mail address of Shri Sanjay Prasad, who had already left the organisation.
7. As regards the hearing letter dated 23.09.2024 sent to the e-mail address of Shri Shyam Mahadik, it has been explained that the communication was received by the assessee; however, according to the assessee, the communication was general and informative in nature and related to the e-Dispute Resolution Scheme, 2022, rather than being a specific hearing notice requiring compliance in respect of the appeal. The hearing notice dated 09.02.2026 was again sent to the e-mail address of Shri Shyam Mahadik. The explanation furnished by the assessee is that, although the notice was received, the assessee was then undergoing corporate restructuring within the Omya group and, in the course of such restructuring, the notice was inadvertently not shared with the tax consultants. The assessee has, therefore, submitted that the non-compliance with the notices was attributable to the aforesaid circumstances and was not deliberate or with the intention of avoiding the appellate proceedings.
8. The ld. AR reiterated the aforesaid circumstances and submitted that the assessee had sufficient cause for not responding to the notices issued by the ld. CIT(A). It was submitted that the explanation furnished in the affidavit clearly demonstrates that the non-compliance occurred on account of circumstances which were not deliberate or willful. The ld. AR further submitted that the addition under section 36(1)(iii) had been sustained without considering the explanation and supporting documentary evidence that the assessee could furnish in support of its claim. It was accordingly pleaded that, in the interest of substantial justice, an effective opportunity may be granted to the assessee to present its case before the first appellate authority.
9. The learned Departmental Representative (“ld. DR”), on the other hand, supported the orders of the lower authorities. The ld. DR submitted that adequate opportunities had been granted to the assessee during the assessment as well as appellate proceedings and that the assessee had failed to avail itself of those opportunities. It was, therefore, submitted that the order passed by the ld. CIT(A) confirming the addition deserved to be upheld.
10. We have carefully considered the rival submissions and perused the material available on record. We have also considered the explanation furnished by the assessee through the affidavit filed before us. It is evident from the record that the hearing notice dated 27.07.2021 was issued during the period when the COVID-19 pandemic and the consequential restrictions and precautionary measures were prevailing. The assessee has explained that, although the notice was received at the e-mail address of its officer concerned, it was inadvertently not forwarded to the tax consultants. As regards the notices dated 17.01.2023 and 14.02.2023, the explanation furnished is that the notices were sent to the e-mail address of Shri Sanjay Prasad, who had left the organization in November 2016 and whose e-mail account had consequently been deactivated. The assessee has also explained that it was not aware as to why the said e-mail address continued to be reflected for the purpose of communication.
11. In respect of the communication dated 23.09.2024, the assessee has stated that the same was essentially informative in nature and related to the e-Dispute Resolution Scheme, 2022. In respect of the hearing notice dated 09.02.2026, the assessee has explained that the notice was received at the e-mail address of Shri Shyam Mahadik but, owing to the corporate restructuring then being undertaken within the Omya group, the same was inadvertently not communicated to the tax consultants. Thus, the explanation furnished by the assessee is that the failure to respond to the notices was occasioned by the aforesaid circumstances and was not a case of conscious or deliberate disregard of the appellate proceedings.
12. It is a settled principle that the right to a reasonable and effective opportunity of being heard constitutes an integral facet of the principles of natural justice. At the same time, such right has to be exercised by an assessee with due diligence and cannot be construed as an unqualified license to disregard statutory proceedings. The issue before us, therefore, is whether, in the peculiar facts and circumstances of the present case, the assessee deserves one effective opportunity to place its case before the first appellate authority.
13. In the present case, the addition of Rs.45,84,429/- under section 36(1)(iii) of the Act has been sustained by the ld. CIT(A) without the assessee having placed its explanation and supporting documentary evidence on record during the appellate proceedings. The ld. CIT(A) proceeded to confirm the addition primarily on the ground that the assessee had remained non-responsive to the notices issued and that the contentions raised in the statement of facts could not be verified. While we do not approve of the failure of the assessee to comply with the notices issued by the appellate authority, the explanation furnished before us, particularly in the context of the multiple circumstances referred to in the affidavit, cannot be said to be wholly devoid of substance. More importantly, the addition involves a substantive issue on which the assessee seeks to place its explanation and supporting evidence before the appellate authority.
14. In our considered view, the principles of natural justice require that the assessee be afforded one effective opportunity to present its case before the ld. CIT(A), particularly when the assessee has placed before us a specific explanation for the earlier non-compliances and has expressed its willingness to participate in the proceedings. At the same time, the grant of such an opportunity must necessarily be accompanied by a corresponding obligation on the assessee to extend full cooperation and to comply with all notices issued by the appellate authority within the time stipulated therein.
15. Having regard to the totality of the facts and circumstances of the case, and without expressing any opinion on the merits of the addition made under section 36(1)(iii) of the Act, we consider it just and proper to set aside the impugned order of the ld. CIT(A) and restore the appeal to his file for fresh adjudication in accordance with law. The ld. CIT(A) shall provide the assessee a reasonable and effective opportunity of being heard and shall thereafter adjudicate the issues arising in the appeal afresh after duly considering the explanation and documentary evidence, if any, furnished by the assessee in support of its claim. Needless to state, the ld. CIT(A) shall pass a speaking and reasoned order in accordance with law.
16. We make it clear that we have not expressed any view on the merits of the addition of Rs.45,84,429/- made under section 36(1)(iii) of the Act. All issues relating to the merits of the addition are left open for consideration by the ld. CIT(A) in accordance with law.
17. The assessee is also directed to extend full cooperation in the proceedings before the ld. CIT(A) and to furnish, within the time allowed by the appellate authority, all relevant information, explanations and documentary evidence upon which it seeks to place reliance. The assessee shall not seek unnecessary adjournments and shall comply with the notices issued by the ld. CIT(A) so that the appeal may be disposed of expeditiously.
18. In the result, the appeal of the assessee is allowed for statistical purposes.
Order pronounced in the open Court on 21st August, 2026.
