CIT(A) Empowered to Remand Ex-Parte Assessments Under New Proviso to Section 251(1)(a); Revenue’s Appeal Dismissed
Issue
Whether the Commissioner of Income Tax (Appeals) [CIT(A)] has the statutory power to set aside an ex-parte assessment order passed under Section 144 and restore the matter to the Assessing Officer (AO) for fresh adjudication, in light of the proviso to Section 251(1)(a) inserted by the Finance Act, 2024 (w.e.f. 01.10.2024).
Facts
Assessment Year: 2015-16.
The Allegation: The AO received information that the assessee had made an investment in shares amounting to Rs. 26,54,06,000 (approx. ₹26.54 Crores). The assessee had not filed a return of income.
Non-Compliance: The AO initiated proceedings under Section 147 (Reassessment). The assessee failed to comply with statutory notices under Section 148 and 142(1).
Ex-Parte Order: Consequently, the AO completed the assessment to the “Best of Judgment” under Section 144, treating the entire investment as Unexplained Investment (Section 69) read with Section 115BBE.
CIT(A)’s Action: The CIT(A) invoked the newly inserted proviso to Section 251(1)(a) (effective from 01.10.2024), set aside the assessment, and restored the matter to the AO for a fresh decision.
Revenue’s Appeal: The Revenue argued that since the AO had already given sufficient opportunities which were ignored, the CIT(A) should have decided the appeal on merits rather than giving the assessee a second chance via remand.
Decision
1. Validity of Remand:
The Tribunal acknowledged that historically, the power of the CIT(A) to “set aside” assessments was curtailed.
However, the Finance Act, 2024 inserted a proviso to Section 251(1)(a) effective from 01.10.2024. This specific provision empowers the CIT(A) to set aside an assessment made under Section 144 (Best Judgment) and refer the case back to the AO for fresh assessment.
2. Legislative Intent:
The Tribunal noted that the intent behind this amendment is to ensure that ex-parte assessments (often involving high demands based on lack of evidence) do not result in irreversible prejudice. The law now explicitly allows a “reset” to ensure the final tax is based on verified merits.
3. Verdict:
The CIT(A)’s action was strictly within the statutory powers conferred by the amended Act.
Held: The Revenue’s appeal was dismissed. The AO must now frame the assessment afresh after giving the assessee a hearing. [In favour of assessee]
Key Takeaways
Restoration of Remand Power: This is a significant procedural shift. For years, CIT(A)s were often forced to decide cases on merits even if the AO’s order was ex-parte. The 2024 amendment (as per this order’s context) restores the CIT(A)’s power to send Section 144 cases back to the AO.
Relief for Non-Filers: Taxpayers who missed notices and faced huge “Best Judgment” demands now have a statutory safety net at the first appellate stage to get a fresh hearing before the AO.
Section 115BBE Risk: Since unexplained investments under Section 69 are taxed at effectively 78% (approx) under Section 115BBE, getting the matter remanded to prove the source of funds is a critical victory for the assessee.
IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH “B”, CHANDIGARH
The ITO
Khanna
Vs
Rohit Gupta
Prop. R.R. Industries , GTB Market
ITA No. 861/Chd/ 2025
Date of Pronouncement : 08/01/2026
Source :- Judgement