The ITAT Nagpur has reaffirmed that compliance with the principles of natural justice is non-negotiable in tax appellate proceedings. An appeal dismissed without ensuring proper service of notice, even if technical, cannot stand. This ruling reinforces the foundational requirement of a fair hearing before any adverse order is passed.
Background & Facts
The Dispute
The assessee, Jijau Commercial Co-op. Bank Ltd., challenged the assessment order dated 24.12.2019 passed under Section 143(3) of the Income Tax Act, 1961 by the DCIT, Circle, Amravati, for Assessment Year 2017-18. The appeal against this order was dismissed by the National Faceless Appeal Centre (NFAC), Delhi, on 24.03.2025 under Section 250 of the Act. The assessee contended that the dismissal was procedurally flawed due to non-compliance with the mandate of natural justice.
Key Facts
- The assessee filed its appeal before the NFAC within the statutory period.
- The NFAC, in its order dated 24.03.2025, dismissed the appeal without granting a meaningful opportunity of hearing.
- The NFAC relied on records of notices issued but failed to establish the mode of service or proof of actual receipt by the assessee.
- The assessee’s email address, as provided in Form No. 35, was not used for any notice issuance.
- No evidence was produced to show that notices were sent via registered post, courier, or any other verifiable mode.
- The NFAC cited CIT v. B.N. Bhattacharjee & Another (118 ITR 461) to justify dismissal, but failed to apply its core principle: that procedural fairness cannot be sacrificed for technical convenience.
Procedural History
- 24.12.2019: Assessment order passed by DCIT, Circle, Amravati under Section 143(3).
- [Date unspecified]: Appeal filed by assessee before NFAC, Delhi.
- 24.03.2025: NFAC dismissed the appeal without addressing the merits or verifying service of notices.
- 09.06.2026: Appeal filed before ITAT Nagpur challenging the NFAC order.
- 09.06.2026: Hearing concluded and order pronounced.
The Parties' Positions
For the Assessee
The assessee, represented by Shri K.P. Dewani, Advocate, argued that:
- The dismissal of the appeal without establishing service of notice violated the principles of natural justice.
- The reliance on B.N. Bhattacharjee was misplaced, as that case required actual proof of notice, not mere record entries.
- The absence of service via the email address furnished in Form No. 35 rendered the proceedings fundamentally defective.
- The NFAC’s mechanical dismissal without adjudication on merits was contrary to Section 250(6) of the Act.
For the Respondent
The Revenue, represented by Shri Pankaj Kumar, CIT-DR, defended the NFAC order by asserting that:
- Notices were recorded in the system and therefore deemed served.
- The assessee had ample opportunity to respond and failed to do so.
- The dismissal was justified on grounds of non-cooperation and procedural lapse.
Relief Sought
The assessee sought:
- Setting aside of the NFAC order dated 24.03.2025.
- Restoration of the appeal to the file of the CIT(A) for fresh adjudication with proper opportunity of hearing.
- Direction to the CIT(A) to consider the appeal on merits.
The Legal Issue
The central question was whether an appellate authority under Section 250 of the Income Tax Act may dismiss an appeal without establishing that the assessee was duly served with notice, thereby violating the principles of natural justice.
Arguments Presented
For the Appellant/Petitioner
The assessee relied on the Supreme Court’s decision in CIT v. B.N. Bhattacharjee & Another (118 ITR 461), which held that mere recording of notice issuance is insufficient; actual service must be proved. The counsel emphasized that the assessee had furnished a valid email address in Form No. 35, and the absence of any communication to that address rendered the proceedings void ab initio. The failure to provide a hearing, even in a faceless system, cannot be excused by administrative convenience.
For the Respondent/State
The Revenue contended that the NFAC’s internal records showed issuance of notices and that the assessee’s failure to respond indicated acquiescence. It argued that the faceless regime under the Act dispenses with formalities and that technical objections should not defeat the revenue’s right to finality. However, no evidence was adduced to prove actual receipt or service.
The Court's Analysis
The Tribunal observed that the NFAC’s order was devoid of any factual foundation regarding the mode of notice service. While the NFAC referenced dates of notices, it did not address whether the notices were sent to the email address provided in Form No. 35, nor did it produce any delivery receipts, system logs, or affidavits of service.
"The mere recording of a notice in the system does not constitute proof of service. The principles of natural justice demand more than administrative formality; they require actual opportunity to be heard."
The Tribunal distinguished the Revenue’s reliance on administrative efficiency under the faceless regime, noting that efficiency cannot override fundamental rights. The Supreme Court in B.N. Bhattacharjee had laid down that procedural fairness is not a technicality but a substantive right. The Tribunal held that the NFAC’s dismissal was legally unsustainable.
Section 250(6) of the Act empowers the appellate authority to restore the case to the file of the CIT(A) for fresh adjudication where the order is found to be defective. The Tribunal found this provision applicable, as the defect was procedural and curable.
The Verdict
The appeal filed by the assessee is allowed for statistical purposes. The order of the National Faceless Appeal Centre dated 24.03.2025 is set aside. The matter is restored to the file of the CIT(A) for fresh adjudication. The CIT(A) shall grant the assessee an adequate opportunity of being heard, including service of notice via the email address provided in Form No. 35, before passing a fresh order.
What This Means For Similar Cases
Notice Service Must Be Proven, Not Assumed
- Practitioners must now insist on proof of service - email receipts, courier slips, or system logs - in all faceless proceedings.
- Mere system entries or timestamps are insufficient to discharge the burden of proof under natural justice.
Faceless Does Not Mean Ruleless
- The faceless regime under the Income Tax Act does not eliminate the requirement of fair hearing.
- Any dismissal based on non-appearance must be preceded by verifiable notice service.
Section 250(6) as a Remedial Tool
- Appeals dismissed on procedural grounds can be restored under Section 250(6) even if the appeal is otherwise time-barred or technically defective.
- This provides a critical safeguard for taxpayers against arbitrary dismissals in digital proceedings.
Procedural Lapses Are Not Waived by Silence
- The assessee’s failure to respond does not cure the defect of non-service.
- The burden remains on the revenue to prove notice was received, not on the taxpayer to prove it was not.
The Burden Shifts to the Revenue
- In future appeals, the Revenue must produce concrete evidence of notice service before seeking dismissal.
- Failure to do so will result in restoration of the appeal, regardless of the merits.
Practical Takeaway for Practitioners
- Always file a written request for service confirmation in Form No. 35.
- Retain copies of all email communications and system acknowledgments.
- If an appeal is dismissed without notice, immediately move for restoration under Section 250(6).
