Income Tax Reassessment Passed Ex Parte Due to Notices Sent to Wrong Email

The Karnataka High Court has intervened for DNR Properties after they faced an unexpected tax assessment due to the Income Tax Department sending crucial notices to former employees’ emails instead of the company’s registered email. This was deemed a violation of their right to a fair hearing, leading the Court to annul the ex parte orders and ‘reset’ the case, allowing the business to present its perspective to the Assistant Commissioner on May 18, 2026.

Facts of the Case:

The petitioner, DNR Properties, challenged an ex parte income tax assessment order for the Assessment Year 2015-16. The Income Tax authority passed this order because the petitioner had not filed a tax return for the relevant period, had unexplained sources of income used to purchase immovable property, and had not declared income from the sale of immovable property.

Because the petitioner did not reply to the show-cause notice or file a return in response to the Section 148 notice, the authority proceeded with the assessment based only on the material they had.

The petitioner argued that they never received the notices because the Income Tax Department sent all communications to the email addresses of the petitioner’s former employees.

The petitioner pointed out that their actual, correct email ID available on the portal is ‘[email protected]’.

Issue of the case:

Whether the High Court should quash the ex parte assessment order dated March 15, 2023, passed under Section 147 of the Income Tax Act, 1961, because the petitioner was not properly served with notices and therefore could not defend themselves.

The Court Held:

The High Court of Karnataka noted that the facts of the case require a reply from the petitioner on the actual merits of the tax issue.

To give the petitioner a fair chance, the Court decided to send the matter back to the stage of replying to the initial notice issued under Section 148A(b) of the act.

The Court set aside the previous orders and documents associated with the ex parte decision (specifically Annexures A1 to A12, B2, and B3). The Court directed the petitioner to appear before Respondent No. 1 (The Assistant Commissioner of Income Tax) on May 18, 2026, without waiting for any further notice.

The Court disposed of the petition while keeping all legal contentions and arguments open for the upcoming proceedings.

The Court invoked its writ jurisdiction to set aside the assessment, ruling that notice served to incorrect email addresses constituted a violation of the Principles of Natural Justice and denied the petitioner their statutory right to a fair hearing.