Case Law Details
ITO Vs Shamsundar Kaliram Agarwal (ITAT Pune)
ITAT Pune: CIT(A) Cannot Remand 143(3)/144B Assessment – Must Decide on Merits- New 251(1) Proviso Not Applicable – Tribunal Quashes NFAC’s Remand to AO
Pune Tribunal considered whether CIT(A) was justified in remanding an assessment back to AO by invoking the new proviso to section 251(1) inserted by Finance Act 2024.
Assessee’s assessment was originally completed u/s 143(3) r.w.s 144B on 20.04.2021 at ₹50.80 crore against returned income of ₹2.93 lakh. CIT(A) by order dated 29.05.2023 had directed AO to recompute income based on peak credits. On Revenue’s appeal, ITAT (order dated 14.03.2024 in ITA 853/PUN/2023) set aside CIT(A)’s order for fresh adjudication on merits, holding that CIT(A) could not merely remit to AO without deciding grounds.
Subsequently, CIT(A)/NFAC, while giving effect to ITAT, again remanded matter to AO on 23.12.2024 relying on the new proviso to section 251(1) (effective 01.10.2024) which empowers CIT(A) to set aside best judgment assessments u/s 144. Revenue filed rectification plea, arguing that assessment was not u/s 144 but u/s 143(3) r.w.s 144B, hence proviso inapplicable. CIT(A) rejected rectification on 28.03.2025.
Tribunal observed that ITAT had already directed CIT(A) to adjudicate de novo on merits. CIT(A) wrongly invoked section 251(1) proviso which applies only to ex parte assessments u/s 144, whereas this case was a regular scrutiny with assessee’s participation. Relying on Bombay HC ruling in Pr.CIT v. Premkumar Arjundas Luthra (HUF) (297 CTR 614), Tribunal reiterated that once appeal is filed, CIT(A) must dispose on merits & cannot dismiss or remand unless statute specifically permits.
Accordingly, ITAT allowed Revenue’s appeal, quashed CIT(A)’s remand order & directed NFAC to decide the assessee’s appeal afresh on merits, giving opportunity but without remanding to AO.
FULL TEXT OF THE ORDER OF ITAT PUNE
This appeal filed by the Revenue(Income Tax Officer, Ward- 8(1), Pune), against the order of ld. Commissioner of Income Tax(Appeal)[NFAC] passed under section 154 r.w.s 250 of the Act, 1961 dated 28.03.2025 emanating from the Order passed under section 250 r.w.s. 254 of the Income Tax Act, 1961 dated 23.12.2024. The Revenue has raised the following grounds of appeal :
“1. On the facts and circumstances of the case and in law, the Id. CIT(A) has erred in disposing rectification application by holding that it is not a matter of rectification without taking into consideration the fact that as per the newly inserted proviso to sub- of section 251 by the Finance Act, 2024 an order of assessment made under section 144 may set aside by Ld. CIT(A) and refer the case back to the Assessing Officer for making a fresh assessment. However, in the present case the assessment order was passed u/s 147r.w.s. 144B of the Act which is not an ex-parte order.
2. The appellant craves leave to add to, amend, alter any of the above grounds of appeal.”
2. At the outset of hearing, no one appeared on behalf of the assessee. No written submission was filed. Earlier, on 10.07.2025 and 14.08.2025 no one appeared on behalf of the assessee and the case was adjourned.
Submission of ld.DR :
3. Ld. DR for the Revenue filed a paper book. Ld.DR explained the case and facts to the Bench.
Findings and Analysis :
4. We have heard ld.DR for the Revenue and perused the records. In the case of Assessee i.e. Shamsundar Kaliram Agarwal, Assessment Order for A.Y.2018-19 was passed u/s.143(3) r.w.s 144B of the Income Tax Act, 1961 on 20.04.2021 assessing the Total Income at Rs.50,80,52,140/-. The Returned income in this case was Rs.2,93,350/-. Aggrieved by the Assessment Order, the Assessee filed appeal before ld.CIT(A).
5. Ld. CIT(A)[NFAC] passed an order for A.Y.2018-19 u/s.250 of the Act, on 29.05.2023, directing the Assessing Officer to recompute the total income considering the peak credit in the accounts. Aggrieved by the order of ld.CIT(A)[NFAC], Revenue filed appeal before this Tribunal.
6. ITAT in ITA No.853/PUN/2023 for A.Y.2018-19 heard the appeal on 14.03.2024 wherein both Assessee as well as Revenue was represented by their respective Authorised Representatives. The ITAT in ITA No.853/PUN/2023 pronounced the order on 14.03.2024. The relevant paragraph no.6 of the ITAT order in ITA No.853/PUN/2023 is reproduced here as under :
“6, Per contra in the instant case, we find that the Ld. NFAC after considering the issue at length failed to adjudicate the issue conclusively in terms of section 250(6) of the Act but directed the Ld. AO for recomputing the total income in accordance with direction it appended therein. This directions to the Ld. AO in our considered view have effect of setting aside the original assessment therefore has suffered from clause (a) of s/s (1) of section 251 r.w.s. 250(6) of the Act. For the reasons without offering our comments on the merits of the case, we deem it fit to quash the directions by setting-aside the impugned order under challenge and remand the matter back to the file of Ld. NFAC for de-nova adjudication after according not more than three opportunities to the respondent assessee and pass a speaking order in terms of section 250(6) of the Act, ergo ordered accordingly. Thus, the grounds of the Revenue stands allowed.”
6.1 Thus, the ITAT in ITA No.853/PUN/2023 set-aside the order of ld.CIT(A)[NFAC] to ld.CIT(A)[NFAC] for denovo adjudication.
7. Then, the ld.CIT(A)[NFAC] passed an order dated 23.12.2024, the relevant paragraph of the ld.CIT(A)[NFAC]’s order is reproduced as under :
“The appellant has made various submissions during the course of appellate proceedings, and vide point no. 5 of the same has requested that the matter be remanded back to the Ld. AO in order for proper fact finding in this ex-parte assessment matter as per the powers granted to CIT(Appeals) by Finance Act, 2024.
As per the amendment effective from 01.10.2024, considering the huge pendency of appeals and disputed tax demands at the CIT(A) stage, in cases where assessment order was passed as best judgment case u/s 144 of the Act, the CIT(A) has been empowered to set aside the assessment and refer the case back to the AO for making a fresh assessment, in appellate orders passed by CIT(A) on or after 01.10.2024.
This instant case is where the assessee has not made compliances in assessment nor furnished requisite details before the Ld.A.O. Hence, it is a fit case where assessment needs to be set-aside and case referred back to the AO for making a fresh assessment.
In order to comply with the directions of the Hon’ble ITAT and submissions as made by the appellant (Supra), the assessment order is set aside and case referred back to the AO for making a fresh assessment.
6. As a result, the assessment order is set aside and case referred back to the AO for making a fresh assessment.”
7.1 Thus, ld.CIT(A)[NFAC] vide order dated 23.12.2024 while giving effect to the order of ITAT, set-aside the Assessment Order to the Assessing Officer for Fresh Assessment. Aggrieved by the said order, Revenue filed Rectification Application before the ld.CIT(A)[NFAC]. The ld.CIT(A)[NFAC] rejected Revenue’s Rectification Application vide order dated 28.03.2025. The relevant order of the ld.CIT(A)[NFAC] is scanned and reproduced as under :
8. Aggrieved by the order u/s.154 r.w.s 250 of the Act, Revenue has filed this appeal before this Tribunal.
9. In this case, ITAT vide its order dated 14.03.2024 had set-aside the order of ld.CIT(A)[NFAC] for denovo adjudication. Once ITAT has set-aside the order of ld.CIT(A)[NFAC] to ld.CIT(A)[NFAC], the ld.CIT(A)[NFAC] has to follow the directions of ITAT and ld.CIT(A)[NFAC] do not have any power to set it aside to the Assessing Officer. In this case, ld.CIT(A)[NFAC] has not followed the directions of the ITAT. The ld.CIT(A)[NFAC] has merely set-aside the Assessment Order to the Assessing Officer for Fresh Assessment, whereas ITAT had directed ld.CIT(A)[NFAC] to decide the issues raised by the Assessee afresh. Therefore, as per Section 251 of the Income Tax Act, 1961 ld.CIT(A)[NFAC] has to decide each and every ground raised by the Assessee on merits. The ld.CIT(A)[NFAC] has power to call for information and to issue summons u/s.131 of the Act. However, in this case, ld.CIT(A)[NFAC] has not adjudicated the grounds, but merely directed Assessing Officer to frame Assessment Order Afresh. This is violation of directions issued by ITAT. This is also violation of Section 251 of the Act.
10. Therefore, we are of the opinion that Revenue was right in filing Rectification Application before ld.CIT(A)[NFAC] as the mistake of not following the directions of ITAT was apparent from records. The ld.CIT(A)[NFAC] has erred in invoking the Amended Provision of Section 251 of the Act. The relevant Section 251(1) is reproduced here as under :
“Powers of the [Joint Commissioner (Appeals) or the] Commissioner (Appeals). 251. (1) In disposing of an appeal, the Commissioner (Appeals) shall have the following powers—
(a) in an appeal against an order of assessment, he may confirm, reduce, enhance or annul the assessment :
[Provided that where such appeal is against an order of assessment made under section 144, he may set aside the assessment and refer the case back to the Assessing Officer for making a fresh assessment;]
11. The ld.CIT(A)[NFAC] has erred in referring the Proviso to Section 251(1) of the Act. The Proviso to Section 251(1) is applicable only when Assessment Order is passed u/s.144 of the Act. In the case of the Assessee, Assessment Order was passed u/s.143(3) r.w.s 144B of the Act. In the Assessment Order, it is specifically mentioned that Assessee appeared and filed Balance Sheet, Profit and Loss Account, Computation of Income and submitted that Assessee is engaged in the business of retail sale and purchase of Ayurvedic Products. Thus, it is evident from the Assessment Order that Assessment Order was not passed ex-parte u/s.144 of the Act.
Therefore, the Proviso to Section 251(1) is not applicable in the case of Assessee. However, ld.CIT(A)[NFAC] in the order u/s.250 r.w.s. 254 of the Act, while giving effect of the order to the ITAT dated 14.03.2024 has relied on the Proviso to Section 251(1) of the Act, which was not applicable in the facts of the case. Another fact is that once ITAT has set-aside the order u/s.250 for denovo adjudication, the ld.CIT(A)[NFAC] do not have any power to direct the Assessing Officer to frame Fresh Assessment. Therefore, in these facts and circumstances of the case, the ld.CIT(A)[NFAC] has erred, hence, we are of the opinion that Revenue has rightly moved Rectification Application before the ld.CIT(A)[NFAC]. Therefore, we are of the opinion that ld.CIT(A)[NFAC] should have allowed the Rectification Application of the Revenue.
12. In these facts and circumstances of the case, for all the elaborate reasons discussed above, ld.CIT(A)[NFAC] has erred in dismissing the Rectification Application filed by Revenue.
13. In these facts and circumstances of the case, the Grounds of Appeal raised by the Revenue are allowed. We direct the ld.CIT(A)[NFAC] to follow the order of ITAT in ITA No.853/PUN/2023 wherein ITAT has set-aside the order of ld.CIT(A)[NFAC] to ld.CIT(A)[NFAC] for denovo adjudication. Accordingly, we direct ld.CIT(A)[NFAC] to adjudicate the Assessee’s appeal on merits as per Section 250 of the Act, 1961. It will be important to refer the decision of Hon’ble Jurisdictional High Court. In the case of Pr.CIT(Central) Vs. Premkumar Arjundas Luthra (HUF) (Bombay)/[2017] 297 CTR 614 (Bombay) Hon’ble High Court held as under :
Quote, “8.From the aforesaid provisions, it is very clear once an appeal is preferred before the CIT(A), then in disposing of the appeal, he is obliged to make such further inquiry that he thinks fit or direct the Assessing Officer to make further inquiry and report the result of the same to him as found in Section 250(4) of the Act.
Further Section 250(6) of the Act obliges the CIT(A) to dispose of an appeal in writing after stating the points for determination and then render a decision on each of the points which arise for consideration with reasons in support. Section 251(1)(a) and (b) of the Act provide that while disposing of appeal the CIT(A) would have the power to confirm, reduce, enhance or annul an assessment and/or penalty. Besides Explanation to sub-section (2) of Section 251 of the Act also makes it clear that while considering the appeal, the CIT(A) would be entitled to consider and decide any issue arising in the proceedings before him in appeal filed for its consideration, even if the issue is not raised by the appellant in its appeal before the CIT(A). Thus once an assessee files an appeal under Section 246A of the Act, it is not open to him as of right to withdraw or not press the appeal. In fact the CIT(A) is obliged to dispose of the appeal on merits. In fact with effect from 1st June, 2001 the power of the CIT(A) to set aside the order of the Assessing Officer and restore it to the Assessing Officer for passing a fresh order stands withdrawn.
Therefore, it would be noticed that the powers of the CIT(A) is coterminous with that of the Assessing Officer i.e. he can do all that Assessing Officer could do. Therefore just as it is not open to the Assessing Officer to not complete the assessment by allowing the assessee to withdraw its return of income, it is not open to the assessee in appeal to withdraw and/or the CIT(A) to dismiss the appeal on account of non-prosecution of the appeal by the assessee. This is amply clear from the Section 251(1)(a) and (b) and Explanation to Section 251(2) of the Act which requires the CIT(A) to apply his mind to all the issues which arise from the impugned order before him whether or not the same has been raised by the appellant before him. Accordingly, the law does not empower the CIT(A) to dismiss the appeal for non-prosecution as is evident from the provisions of the Act.” Unquote.
13.1 Thus, the Hon’ble Bombay High Court has categorically held that ld.CIT(A) has to decide the appeal on merit and ld.CIT(A) does not have any power to dismiss appeal for non-prosecution.
13.2 Accordingly, ld.CIT(A)[NFAC] is directed to decide the appeal filed by the Assessee against the Assessment Order dated 20.04.2021 on merits.
14. Therefore, grounds of appeal raised by the Revenue are allowed.
15. In the result, appeal of the Revenue is allowed.
Order pronounced in the open Court on 30 September, 2025.
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