The Income Tax Appellate Tribunal, Bangalore, has clarified a critical procedural safeguard in faceless assessment proceedings: the validity of service of notice via email hinges on express consent recorded in Form 35. This judgment reinforces that procedural compliance is not optional but foundational to natural justice, especially when consequential tax additions are at stake.
Background & Facts
The Dispute
The appellant, M/s. Ashraya Constructions, a partnership firm engaged in civil construction, filed its income tax return for Assessment Year 2023-24 on 28.09.2023, declaring a total income of ₹2,67,76,510. The return was selected for scrutiny under Section 143(2) of the Income Tax Act, 1961, and notice was issued on 19.06.2024. Subsequently, the assessment proceedings were transitioned into the faceless assessment regime under the Income Tax Act.
Key Facts
- The Assessing Officer (AO) made three additions totaling ₹3,30,46,945:
- ₹1,11,55,437 for non-deduction of TDS under Section 194Q on purchases
- ₹1,44,69,255 as 30% of payments to contractors under Section 194C where TDS was allegedly not deducted
- ₹74,22,253 as unexplained sundry creditors
- The final assessment order was passed on 17.03.2025
- The assessee filed an appeal before the Commissioner of Income Tax (Appeals) [CIT(A)]
- Form 35 filed by the assessee did not contain any confirmation regarding receipt of notices via email - the relevant field was left blank
- The CIT(A) issued four email notices between July and August 2025
- The assessee did not respond to any of the four emails
- The CIT(A) dismissed the appeal on 10.09.2025 for non-prosecution, without addressing any of the substantive additions
Procedural History
- 28.09.2023: Income tax return filed for AY 2023-24
- 19.06.2024: Notice under Section 143(2) issued
- 17.03.2025: Assessment order passed under Section 143(3) read with Section 144B
- April 2025: Appeal filed before CIT(A) via Form 35
- July - August 2025: Four email notices issued by CIT(A) - no response received
- 10.09.2025: CIT(A) order dismissing appeal for non-prosecution
- 01.04.2026: Hearing before ITAT Bangalore
- April 2026: Judgment pronounced
Relief Sought
The appellant sought: (1) setting aside of the CIT(A)’s order dated 10.09.2025; (2) restoration of the appeal for adjudication on merits; and (3) opportunity to respond to the notices and substantiate its position on the three additions.
The Legal Issue
The central question was whether an appellate authority under Section 250 of the Income Tax Act may dismiss an appeal for non-prosecution solely on the ground of non-response to email notices, where the assessee has not expressly consented to email communication in Form 35.
Arguments Presented
For the Appellant
The appellant’s counsel, Sri B. Venugopal, argued that the CIT(A) acted beyond jurisdiction by dismissing the appeal without adjudicating the merits. He emphasized that Form 35, which governs the mode of communication, contained no affirmative confirmation of email receipt. Therefore, service of notices via email was invalid under the principles of natural justice and procedural fairness. He further contended that the CIT(A) had no power to bypass substantive adjudication and that dismissal for non-prosecution without considering the nature of additions was arbitrary.
For the Respondent
The Departmental Representative, Sri Balusamy N, contended that the CIT(A) had issued four notices and the assessee’s silence amounted to abandonment of the appeal. He relied on the procedural efficiency of the faceless system and argued that non-response justified dismissal. He maintained that the AO’s additions were well-reasoned and that the appellate authority was entitled to conclude that the assessee had no interest in pursuing the appeal.
The Court's Analysis
The Tribunal examined the statutory framework governing appellate proceedings under Section 250 and the procedural requirements for service of notice under the faceless assessment regime. It noted that while electronic communication is permitted, it is contingent upon the assessee’s express consent as recorded in Form 35.
"On careful perusal of form No. 35 filed before him, shown to us, we find that assessee did not either say 'yes' or 'no' where question is raised whether assessee would like to receive the notices through email. Thus, sending the notices to the assessee through email is no service of notice."
The Tribunal held that the CIT(A) had no legal authority to treat non-response to unsolicited email notices as abandonment. The power to dismiss an appeal for non-prosecution cannot override the fundamental requirement of valid service. The CIT(A)’s role is to adjudicate - to confirm, reduce, enhance, or annul the assessment - not to act as a procedural gatekeeper by default.
"The learned CIT appeal did not have this power. He has only powers of confirm, reduce, enhance or annul the assessment. Thus, the appellate order of the learned CIT - A is not sustainable in law."
The Tribunal further observed that the absence of any discussion on the merits of the three additions - which involved substantial tax liabilities - rendered the order legally untenable. Even if the assessee had been dilatory, the appellate authority was duty-bound to examine the substance of the case before resorting to dismissal.
The Verdict
The appeal was allowed for statistical purposes. The order of the CIT(A) dated 10.09.2025 was set aside. The matter was restored to the file of the CIT(A) with directions to: (1) issue fresh notices to the assessee via registered post or other valid mode; (2) afford the assessee a reasonable opportunity to respond; and (3) decide the appeal on merits, including a detailed analysis of the three additions. Compliance was to be completed within 8 weeks of receipt of this order.
What This Means For Similar Cases
Valid Service Requires Express Consent
- Practitioners must verify that Form 35 contains an affirmative 'yes' for email communication; silence or omission invalidates electronic service
- In faceless proceedings, always request written confirmation of communication mode and retain proof of submission
- Do not assume email notices are valid unless explicitly consented to in Form 35
Appellate Authorities Cannot Avoid Merits
- Dismissal for non-prosecution is permissible only after valid service and clear abandonment - not due to technical non-response
- CIT(A) must record reasons on each addition; mere reference to AO’s order is insufficient
- Courts and tribunals will not uphold dismissals that bypass substantive adjudication, especially where tax liability exceeds ₹1 crore
Procedural Compliance Is Non-Negotiable in Tax Appeals
- The faceless system does not override statutory safeguards under Section 250
- Non-compliance with procedural norms by revenue authorities cannot be used to penalize the assessee
- Any dismissal order lacking merit-based reasoning is liable to be quashed
