Anirban Asim Kundu Vs ACIT (ITAT Kolkata)
The CIT(A) cannot set aside and remand an assessment merely because it was passed ex parte when the assessment is not a best judgment assessment under Section 144; the first appellate authority must adjudicate the appeal on merits.
Summary: The assessee challenged the order of the CIT(A)-22, Kolkata dated 10 March 2026 for AY 2016-17. The CIT(A) had held that the Assessing Officer had jurisdiction after the case was transferred from Mumbai to Kolkata, but, observing that the assessment had been passed ex parte under section 144, set aside the assessment and remanded the matter to the Assessing Officer for a fresh assessment. Before the ITAT, the assessee contended that the assessment had actually been framed under section 147 read with section 144C and was not a best-judgment assessment under section 144. Therefore, according to the assessee, the proviso to section 251(1)(a) permitting such remand was not applicable. The ITAT accepted the substance of this contention. It observed that the CIT(A) had not decided the appeal on merits and had merely set aside the assessment before the Assessing Officer, which could be done only where the assessment was a best-judgment assessment under section 144. Since that was not the case, the Tribunal set aside the CIT(A)’s order and restored the appeal to the CIT(A) for disposal of the assessee’s grounds on merits by a speaking order, after providing reasonable opportunity of hearing. The Tribunal allowed Grounds 3 and 4, dismissed Ground 6 concerning the alleged section 127 transfer on the ground that an order under section 127 was not mentioned as an appealable order before the Tribunal under section 253, and partly allowed the remaining grounds for statistical purposes.
Core Issue: The principal issue before the Tribunal was whether the CIT(A) had the power under Section 251 to set aside an assessment and remand the matter to the Assessing Officer without deciding the grounds of appeal on merits, particularly when the assessment had been framed under Section 147 read with Section 144C(3) and was not a best judgment assessment under Section 144. A connected issue was whether the assessee could challenge the transfer of jurisdiction under Section 127 before the ITAT.
Facts: The assessee filed the return of income for AY 2016-17 on 24 April 2023, declaring total income of ₹92,250. During the relevant year, the Assessing Officer noted that the assessee had purchased an immovable property valued at ₹1,11,30,250 and bonds worth ₹40 lakh. The assessment was framed under Section 147 read with Section 144C(3), determining the total income at ₹16,22,500 after making an addition of ₹15,30,250 in respect of the alleged unexplained investment/gift under Section 56(2)(vii). The assessee challenged the assessment before the CIT(A), raising objections regarding jurisdiction as well as the merits of the addition. The CIT(A), observing that the assessment had been passed ex parte and that adequate opportunity had not been provided, set aside the assessment and remanded the matter to the Assessing Officer for fresh assessment without adjudicating the grounds raised by the assessee.
AO/CIT(A) Finding: The Assessing Officer completed the reassessment and made an addition of ₹15,30,250. The CIT(A) upheld the jurisdiction of the Kolkata Assessing Officer on the basis that jurisdiction had been transferred from Mumbai to Kolkata according to departmental records. However, instead of deciding the assessee’s objections and grounds on merits, the CIT(A) treated the assessment as an ex parte assessment and set it aside for fresh adjudication by the Assessing Officer after granting adequate opportunity of hearing.
ITAT Finding: The Tribunal held that the CIT(A) had erred in merely setting aside the assessment and remanding the matter to the Assessing Officer without adjudicating the appeal on merits. The power of the first appellate authority to set aside an assessment in the relevant statutory framework was confined to cases involving a best judgment assessment under Section 144. Since the assessment in the present case had been framed under Section 147 read with Section 144C(3) and was not a best judgment assessment under Section 144, the CIT(A) could not simply remand the matter. The Tribunal therefore set aside the appellate order and restored the appeal to the CIT(A) with a direction to adjudicate all the grounds raised by the assessee on merits through a speaking order after providing reasonable opportunity to both sides and following Rule 46A wherever applicable. However, the Tribunal held that an order transferring jurisdiction under Section 127 is not an appealable order before the ITAT under Section 253, and therefore the specific ground challenging the transfer order was dismissed.
Cases Relied Upon: The Tribunal principally relied upon the statutory scheme of Sections 251 and 253 of the Income-tax Act and the limitations on the appellate powers of the CIT(A). The decision turned primarily on the interpretation of the proviso to Section 251(1)(a), which permits setting aside in the context of a best judgment assessment under Section 144.
Outcome: The assessee’s appeal was partly allowed for statistical purposes. The order of the CIT(A) was set aside, and the matter was restored to the CIT(A) for fresh disposal of the assessee’s grounds on merits by a speaking order after granting adequate opportunity of hearing. The challenge to the jurisdiction-transfer order under Section 127 was dismissed as not maintainable before the ITAT.
FULL TEXT OF THE ORDER OF ITAT KOLKATA
This appeal filed by the assessee is against the order of the Commissioner of Income Tax (Appeals)-22, Kolkata [hereinafter referred to as Ld. ‘CIT(A)’] passed u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) for AY 2016-17 dated 10.03.2026.
2. The assessee is in appeal before the Tribunal raising the following grounds of appeal:
“1. For that the order dated March 10, 2026 passed by the CIT(A) is erroneous on facts and/or in law.
2. For that the CIT(A) erred in deciding the appeal without granting the assessee any opportunity of hearing and the said order dated March 10, 2026 is illegal, invalid, bad in law as the said order was passed in gross violation of the principles of natural justice.
3. For that further and in any event and without prejudice to the aforesaid the CIT(A) erred in setting aside the assessment order and referred the matter back to the Assessing Officer on the ground that the said assessment order was passed under section 144 of the Act and the purported findings in this regard are arbitrary, unreasonable and perverse.
4. For that the CIT(A) failed to appreciate that the said assessment order was passed under section 147 read with section 144C and not under section 144 of the Act and the CIT(A) did not have any authority in law to remand the matter before the Assessing Officer and the said order is illegal, invalid, bad in law and perverse.
5. For that further and in any event and without prejudice to the aforesaid the CIT(A) in holding that the Assessing Officer at Kolkata had the jurisdiction to assess and the said purported findings are arbitrary, unreasonable and perverse.
6. For that the CIT(A) failed to consider that before the alleged transfer of jurisdiction from the Assessing Officer at Mumbai to Assessing Officer at Kolkata, no notice under section 127 of the Act was served on the assessee, which is sine-qua-non for transferring the jurisdiction from one Assessing Officer to another under section 127 of the Income Tax Act, 1961 (in short “the Act”) and without granting any opportunity of hearing and the said alleged transfer of jurisdiction is illegal, invalid and bad in law.
7. For that further and in any event and without prejudice to the aforesaid, the CIT(A) failed to consider/deal with the grounds of appeals urged by the assessee before him in respect of jurisdiction of the Assessing Officer as well as on merits of the case and the said order dated March 10, 2026 is arbitrary, unreasonable and perverse.
8. For that the CIT(A) should have dealt with the appeal filed by the assessee on merits without setting aside the assessment order and sent it back to the Assessing Officer and the said order dated March 10, 2026 is illegal, invalid, bad in law and is liable to be set aside.
9. For that further and in any event and without prejudice to the aforesaid, the CIT(A) was not right in not dealing with the application for additional ground filed by the assessee before deciding the appeal filed by the assessee.
The appellant craves leave to add to, alter, amend and/or modify the grounds taken herein.”
3. Brief facts of the case are that the assessee had filed the return of income for AY 2016-17 on 24.04.2023 declaring the total income at ₹92,250/-. The Assessing Officer (hereinafter referred to as Ld. ‘AO’) noted that the assessee had purchased an immovable property worth ₹1,11,30,250/- and bonds worth ₹40,00,000/- during FY 2015-16. Consequently, the Ld. AO framed the assessment u/s 147 r.w.s. 144C(3) of the Act determining the total income at ₹16,22,500/- by making an addition of ₹15,30,250/- as unexplained investment in the immovable property treated as a gift u/s 56(2)(vii) of the Act. Aggrieved with the assessment order, the assessee filed an appeal before the Ld. CIT(A), who observed that the assessment order was passed ex parte without granting a fair opportunity of hearing, thus violating the principles of natural justice. Therefore, the Ld. CIT(A) referred the case back to the file of the Ld. AO for making a fresh assessment after affording adequate opportunity of being heard to the assessee. Accordingly, the Ld. CIT(A) modified the action of the Ld. AO and partly allowed the appeal of the assessee vide his findings as under:
“Discussions and Findings:-
I have duly examined the material hand including the impugned order and submissions of the Appellant as placed with facts and reasoning.
The appellant’s objection regarding the jurisdiction of the case cannot be accepted, as it is seen from the system records that the jurisdiction was transferred from Mumbai to Circle 1(1), Kolkata. Therefore, the AO had the jurisdiction to pass the order. Accordingly, the action of the AO is upheld.
However, it is observed that the order was passed ex parte under section 144 of the Income-tax Act, 1961. The principles of natural justice demand that there should be a fair determination of a question by a quasi-judicial authority. It is a settled position of law that the principles of natural justice and fair play require that the affected party be granted sufficient opportunity of being heard to contest his case.
Therefore, without delving into merits of the case, in the interest of justice, I Set aside the assessment order and refer the case back to the file of assessing officer for making a fresh assessment. The AO shall pass a speaking order after affording adequate opportunity of being heard to the appellant, who in turn, may also contest his stand forthwith.
In the result the appeal of the appellant is set aside.”
4. Aggrieved with the order of the Ld. CIT(A), the assessee has filed the appeal before the Tribunal.
5. Rival contentions were heard and the submissions made have been examined. It was submitted by the Ld. AR that the assessee is an NRI and the assessment was made u/s 147/144C of the Act. The Ld. CIT(A) referred the provisions of section 251(1)(a) of the Act and the proviso thereof and remanded the matter to the Ld. AO. However, the Ld. AR submitted that it was not a best judgement assessment order u/s 144 of the Act of the Act and the proviso to clause (a) of sub-section (1) of section 251 of the Act was not applicable. He requested that the order of the Ld. CIT(A) may be set aside and the appeal may be restored before him to adjudicate the grounds of appeal raised before him.
6. The Ld. THE LD. DR, though relied upon the order of the Ld. CIT(A), but did not raise any serious objection if the appeal is restored before the Ld. CIT(A).
7. We have considered the submissions made, gone through the facts of the case and perused the record and the order of the Ld. CIT(A). It is evident that the Ld. CIT(A) did not decide the appeal on merits and merely set aside the order before the Ld. AO which can only be set aside if it is a best judgement order passed u/s 144 of the Act and which is not the case here. Hence, after examining the facts of the case and the law, we deem it appropriate to set aside the order of the Ld. CIT(A) and restore the appeal before him for disposal of the grounds of appeal taken by the assessee on merit by passing a speaking order. Needless to say, the assessee shall be given a reasonable opportunity of being heard to make any further submission he wants to make in support of his grounds of appeal and shall not seek unnecessary adjournments and rule 46A of the I.T. Rules, 1962 shall also be followed and an opportunity of being heard may be provided to the Ld. AO as well. Accordingly, Ground Nos. 3 and 4 are allowed. Ground No. 6 is dismissed as the order u/s 127 of the Act is not mentioned as an appealable order before the Tribunal under section 253 of the Act and all other grounds taken by the assessee in the appeal are partly allowed for statistical purposes.
8. In the result, the appeal filed by the assessee is partly allowed for statistical purposes.
Order pronounced in the open Court on 2nd September, 2026.
