Karnataka HC Quashes I-T Assessment Over Notice Sent to Old Email, Cites Denial of Fair Hearing

An income tax assessment order has been quashed by the High Court of Karnataka, holding that the department’s failure to send notices to the applicant’s updated email address denied a fair hearing.

Suresh Kumar Paruchuri, taxpayer, was a registered taxpayer with Permanent Account Number (PAN) No. ACSPP1326Q had regularly submitted his ITRs. In the pertinent assessment year, his source of income was rent and capital gains.

From M/s. Shree Manjunatha Constructions, land has been purchased by him on 13.10.2010, constructed a commercial-cum-residential apartment complex, and thereafter sold it to individual buyers.

On 07.11.2022, a total income of ₹58,35,000, including long-term capital gains of ₹2,80,510, was submitted in his ITR-03. Under CASS, his case was selected for scrutiny. He mentioned that the notices of assessment were inadvertently sent to the email address of his former auditor, who had been superseded.

The counsel of the taxpayer mentioned that the applicant, by mistake, did not update the new email ID of the auditor in the department records. All the notices due to this were sent to the old email address, and the applicant was clueless about the assessment proceedings and could not answer.

On 13.02.2024, an ex parte assessment order was passed disallowing some claims for not furnishing crucial details. One of the officers calls the applicant, and the applicant comes to know about the order.

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On 29.03.2024, an appeal was submitted via him, filing Form No.35 and paying 20% of the disputed tax. An appropriate email ID has been provided by him in the appeal. Though on the old email address, the department continued to send notices and did not provide him a chance to be heard.

As per the counsel, there was a breach of natural justice and asked to quash the order.

As per the department, the notices were sent before the email given earlier, and the applicant must have updated the records. As per them, the order was valid, and the petition must be dismissed.

As per the court, the applicant has updated his email ID while filing the Form No. 35. The department then continued to send the notices to the old email address associated with the former auditor. The applicant, due to the same, was clueless about the proceedings and did not get a fair chance to answer.

For all future communication, the department needs to use the updated email after it is updated, Justice Pradeep Singh Yerur held. Fair hearing shall not be given if it is overlooked, which breaches the principles of natural justice. Hence, the assessment order cannot be kept.

The petition has been permitted by the Karnataka High Court. On 17.03.2025, it quashed the appellate order and asked the appellate authority to reconsider the appeal. Authority was directed to update the email address and furnish the applicant with a chance of hearing before passing a fresh order.