Section 148 Income Tax Act | Uploading A Notice Onto The E-filing Portal Does Not Constitute A Valid Legal "Issuance" Or "Service": ITAT

The Bengaluru bench of the Income Tax Appellate Tribunal recently quashed a reassessment proceeding after the Income Tax Department failed to establish that a notice under Section 148 of the Income Tax Act, 1961 was actually served or communicated to the assessee, holding that merely uploading the notice on the e-filing portal was not enough to prove its issuance.

The tribunal passed the order in the case of Yella Vinod Kumar v DCIT, concerning Assessment Year 2015-16, after finding that while the Revenue could establish that the notice dated March 31, 2021 was generated and uploaded to the assessee’s e-filing account through the ITBA/e-filing portal, it could not produce evidence showing that the notice had been served or that any real-time communication had been sent to the assessee.

What is Section 148 of the Income Tax Act?

Section 148 of the Income Tax Act deals with reassessment of income that may have escaped assessment. It allows the Assessing Officer to issue a notice to an assessee where the officer has information suggesting that income chargeable to tax has not been assessed.

The notice requires the assessee to furnish a return of income for the relevant assessment year. Before issuing such a notice, the Assessing Officer has to comply with the procedural requirements prescribed under the Act, including the applicable provisions governing approval and the circumstances in which reassessment can be initiated.

In the present case, the dispute was not about the Department's power to reassess the assessee's income, but whether the Section 148 notice had actually been issued and communicated to him.

Reassessment followed cash deposits of Rs 1.14 crore

The assessee had not filed a return of income for AY 2015-16. Based on information available with the Income Tax Department, the Assessing Officer found that Rs 1,14,49,815 had been deposited in cash into the assessee’s savings bank account with ICICI Bank, Ballari.

After recording reasons and obtaining the required approval, the Assessing Officer issued a notice under Section 148 on March 31, 2021.

The assessee did not respond to the reassessment notices. The Assessing Officer consequently completed the assessment under Section 147 read with Sections 144 and 144B and added the entire cash deposit of Rs 1,14,49,815.

The assessee also remained non-compliant before the Commissioner of Income Tax (Appeals), which upheld the addition in the absence of supporting evidence.

Assessee challenged validity of Section 148 notice

Before the tribunal, the assessee raised an additional legal ground challenging the validity of the reassessment proceedings.

The assessee contended that the Section 148 notice dated March 31, 2021 had not been sent to any valid email address. According to the submission, the material produced by the Revenue showed only that the notice had been uploaded to the assessee’s e-filing account through the ITBA/e-filing portal.

The assessee further pointed out that the email relied upon by the Department did not contain the recipient’s email ID. He also referred to an RTI application through which he had sought information concerning service of the notice.

Relying on the Delhi High Court’s judgment in Suman Jeet Agarwal v ITO, the assessee argued that generation of a notice did not by itself establish that it had been issued.

ITAT distinguishes generation from issuance

The tribunal admitted the additional ground, observing that it went to the root of the reassessment proceedings.

It noted that the Revenue had acknowledged that the notice generated on March 31, 2021 had been uploaded to the assessee’s e-filing account. However, the Department could not provide evidence establishing that the notice had actually been served on the assessee or that any real-time communication regarding the notice had been triggered.

The tribunal considered the Delhi High Court’s judgment in Suman Jeet Agarwal, where the high court had held that an authority must perform an overt act to ensure despatch of a notice to its addressee for it to be treated as “issued”.

The Delhi High Court had also distinguished between generation and digital signing of a notice by the Assessing Officer and the subsequent triggering of an email to the assessee through the ITBA email software system.

Applying this principle, the Bengaluru ITAT held that the Revenue had failed to establish the necessary communication of the Section 148 notice.

It consequently held that the reassessment order passed under Section 147 read with Section 144 was without jurisdiction and quashed it.

Since the reassessment itself was held to be invalid, the tribunal did not examine the assessee’s other grounds concerning the Rs 1,14,49,815 cash-deposit addition, holding them to be academic.

The assessee’s appeal was accordingly allowed.