Karnataka High Court on Validity of Ex-Parte E-Assessments Sent to Former Employee’s Email

Background of the Dispute

The Karnataka High Court in Sai Srushti Infrastructure Vs Assessment Unit Income Tax Department examined whether ex-parte assessment orders under the faceless scheme could be sustained when statutory e-notices were sent only to the email ID of an employee who had already exited the organisation.

The dispute related to assessment years 2018-19 and 2019-20, where the assessee challenged:

  • The assessment order at Annexure-A1 for AY 2019-20, and
  • The assessment order at Annexure-C1 for AY 2018-19.

Both orders were passed without any effective participation by the assessee, resulting in best judgment assessments.

Assessee’s Contentions Before the Court

1. Ex-parte orders due to non-receipt of notices

The assessee argued that:

  • The impugned assessment orders were ex-parte.
  • It could not submit a reply to the show cause notices because:
    • All departmental communications were sent to an official email ID that belonged to a former employee.
    • The concerned employee had already ceased to be in the company’s employment when the notices were issued.
  • As a result, the assessee asserted that it had no real knowledge of the ongoing assessment proceedings.

2. Lack of opportunity to present its case

The assessee further submitted that:

  • There was no deliberate avoidance of proceedings.
  • The failure to respond arose purely due to an internal administrative lapse relating to email management.
  • Since the orders were passed without considering any reply from the assessee, there was no proper opportunity to contest the proposed additions on merits.

On this basis, the assessee requested that the ex-parte assessment orders and all consequential proceedings be quashed, and that it be given a fresh opportunity to respond to the show cause notices.

Revenue’s Stand Before the High Court

1. Valid service of notice on recorded email ID

Counsel for the Revenue contended that:

  • The email ID to which all statutory notices were sent was the same email address that the assessee had furnished to the Income Tax Department.
  • Therefore, from the Department’s perspective:
    • Service of notice was proper and valid.
    • The assessee could not later claim non-service merely because it did not internally manage access to that email account after the employee’s exit.

2. Internal employment matters are irrelevant

The Revenue further argued that:

  • Any change in employment of staff, or non-availability of the employee operating that email ID, was purely an internal matter of the assessee.
  • The Department cannot be expected to track internal HR changes of the assessee.
  • Hence, the validity of the assessment orders could not be challenged on the ground that the email ID belonged to a former employee.