Show cause notice dropped in e-filing portal requiring reply on the same date was in gross violation of the principles of natural justice.
In a recent judgment, ITAT Visakhapatnam has quashed order u/s 263 holding that show cause notice dropped in the e-filing portal account of the assessee society requiring assessee to filed its explanation on the same day was in gross violation of the principles of natural justice.
ABCAUS Case Law Citation:
4644 (2025) (07) abcaus.in ITAT
In the instant case, the assessee had challenged the order u/s 263 of the Income Tax Act, 1961 (the Act) passed by the CIT(Exemption).
The Assessing Officer (AO) based on information that the assessee society had not accounted for the bank interest in its return of income for the relevant Assessment Year, initiated proceedings u/s 147 of the Act. Notice u/s 148 of the Act was issued to the assessee society. In compliance, the assessee filed its return of income declaring nil income after claiming exemption u/s 11 of the Act.
The A.O. thereafter framed the assessment vide his order u/s 143(3) r.w.s. 147 of the Act, wherein the income returned by the assessee society was accepted as such.
The CIT(E), after completion of the reassessment proceedings called for the assessment records and observed that assessee society had failed to apply 85% of its gross receipts, which, resulted to a deficit/shortfall in the application of funds.
Accordingly, the CIT, vide his Show Cause Notice (SCN) called upon the assessee society to explain why the aforesaid surplus may not be brought to tax in its hands. However, the assessee society failed to comply with the notice issued by the CIT (Exemptions) u/s 263 of the Act.
As a result, the CIT(E) treating the order passed by the AO u/s 143(3) r.w.s. 147 of the Act as erroneous insofar as it was prejudicial to the interests of the revenue, vide his order u/s 263 of the Act set aside the same with a direction to examine the issue afresh.
Before the Tribunal, the assesee submitted that Show Cause Notice”(SCN) issued by the CIT (Exemptions) u/s 263 of the Act, calling upon the assessee society to put forth an explanation on or before the specified date was served upon the assessee society on the wee hours (4:46 AM) of the next day that was fixed for compliance. The assessee placed on record the screenshot of the e-mail that was dropped in the e-mail account of the assessee society.
It was submitted that it was incomprehensible that the CIT(Exemptions), had called it to put forth its explanation on a date which had already lapsed a day before. AS such, assessee society was expected to do something impossible, therefore, it was a case where the CIT(Exemptions) had passed the order u/s 263 of the Act without putting the assessee society to notice as required under the mandate of law.
The Income Tax Department submitted that it was incorrect for the assessee to claim that the SCN was served upon the assessee society for the first time after the specified date had already passed. It was submitted that SCN on its generation, would have automatically been dropped in the e-filing portal account of the assessee society. The SCN was thereafter forwarded/dropped in the e-mail account provided by the assessee society. To sum up, it was submitted that as the SCN was served upon the assessee society at the very point of its generation therefore, it was incorrect on its part to claim that the same was served upon it for the first time on the next day.
The Tribunal observed that the Department had not placed any material/evidence that would substantiate its claim that the SCN was, at the stage of its generation, dropped/forwarded in the e-filing portal account of the assessee society.
The Tribunal opined that even if that be so (for assumption) then also the same did not place the case of the revenue on any better footing for the reason that it was incomprehensible that the dropping of the SCN on the same date in the e-filing portal account of the assessee directing it to file its explanation on the said date itself, would in all probabilities, not come to the notice of the assessee society on the said date itself.
The Tribunal opined that the CIT (Exemptions) had passed the order u/s 263 of the Act without allowing any sufficient opportunity to the assessee society to come forth with its explanation, based on which the assessment order passed by the A.O. u/s 147 r.w.s. 143(3) of the Act was revised by him, therefore, the same being in gross violation of the principles of natural justice i.e. audi alteram partem cannot be sustained and is liable to be quashed for want of valid assumption of jurisdiction.
Accordingly, the Tribunal quashed the order passed by the CIT (Exemptions) and restored the order passed by the A.O. u/s 143(3) r.w.s. 147 of the Act.
Download Full Judgment Click Here >>
- AO to give list of judgments he wish to rely in taking adverse view against assessee.
- Changes in Speed Post Tariff & new features from 01.10.2025. students to get 10 % discount
- U.P. Power Corporation Limited. Empanelment of lnternal Auditor for 2025-26 & 2026-27
- A mere error in exercise of jurisdiction would not vitiate legality or validity of proceedings
- Writ petitions not to be entertained in cases of alleged fraudulent availment of ITC
