Revenue’s Appeal Allowed (Statistically) in ₹33 Cr Cash Credit Case; ITAT Remands to AO
Issue
Procedural Validity: Whether the Commissioner of Income Tax (Appeals) [CIT(A)] was justified in setting aside an ex-parte assessment order and restoring it to the Assessing Officer (AO) by invoking the newly inserted proviso to Section 251(1)(a) of the Income Tax Act, 1961.
Merits: Whether the addition of Rs. 33.07 Crores as unexplained money under Section 69A (read with Section 115BBE) was justified given the assessee’s non-compliance during the original proceedings.
Facts
Assessment Year: 2016-17.
The Transaction: Information received under Section 133(6) from ICICI Bank revealed that the assessee’s proprietorship firm (M/s B.S. Agencies) had total credits of Rs. 33,07,37,215/- which were immediately transferred out via RTGS.
AO’s Action:
Reopened assessment under Section 147.
Issued multiple notices (u/s 148, 142(1), 144) which were ignored by the assessee.
Passed an ex-parte Best Judgment Assessment under Section 144.
Treated the entire credit of Rs. 33.07 Cr as unexplained money (Section 69A), citing a suspicious pattern of transactions and lack of genuine business activity.
CIT(A)’s Action:
The assessee appeared before the CIT(A) and filed written submissions.
Invoked the new proviso to Section 251(1)(a) (effective from 01.10.2024), which empowers the CIT(A) to set aside ex-parte orders.
Remanded the case to the AO for fresh adjudication to provide “substantial justice.”
Revenue’s Appeal: The Department appealed to the ITAT, arguing that the CIT(A) should have decided the case on merits rather than just sending it back, as the AO had already given sufficient opportunities.
Decision
1. Restoration to AO:
The Tribunal (ITAT) acknowledged that the assessment was framed ex-parte due to the assessee’s complete non-compliance. However, upholding the principle of natural justice and the high quantum of addition (Rs. 33 Cr), the Bench agreed that a fresh look was necessary.
2. Independent Remand:
Instead of merely validating the CIT(A)’s order, the ITAT exercised its own power to set aside the CIT(A)’s order and restore the matter directly to the file of the AO for fresh adjudication on merits.
3. Final Opportunity:
The ITAT directed the AO to provide one final opportunity to the assessee to explain the source of the bank credits. The assessee was strictly warned to cooperate; failure to do so would allow the AO to decide based on available records.
4. Verdict:
The Revenue’s appeal was technically allowed for statistical purposes. (This means the Revenue “won” in getting the CIT(A)’s order set aside, but the case is still alive and back with the AO).
Key Takeaways
New Power of CIT(A): The Finance Act 2024 inserted a proviso to Section 251(1)(a) (w.e.f. 01.10.2024), explicitly empowering the CIT(A) to set aside Best Judgment Assessments (Section 144) and refer them back to the AO. This reverses the earlier position where CIT(A) generally could not remand cases for fresh assessment.
Natural Justice vs. Non-Compliance: Even in cases of total non-compliance, Appellate Tribunals often prefer that tax demands (especially large ones like Rs. 33 Cr) be adjudicated on merits rather than technical defaults.
Section 69A Risk: Large credits in bank accounts that are immediately transferred out (layering) are prime targets for Section 69A additions. The burden of proof is entirely on the assessee to prove the “Nature and Source.”
IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH “A”, CHANDIGARH
The ITO, Ward6(1), Ludhiana
V/s
Shri Balpreet Singh 124/4A Jawaddi Khurd,
Ludhiana Punjab-141002
Date of Pronouncement : 06/01/2026
ITA No. 1022/Chd/ 2025
Source :- Judgement