CIT(A) Empowered to Remand Best Judgment Assessments (Sec 144) Under New Finance Act 2024 Amendment

CIT(A) Empowered to Remand Best Judgment Assessments (Sec 144) Under New Finance Act 2024 Amendment

Issue

Whether the Commissioner of Income Tax (Appeals) [CIT(A)] has the statutory power to set aside an ex-parte Best Judgment Assessment order passed under Section 144 and remand the case back to the Assessing Officer (AO) for fresh adjudication, in light of the newly inserted proviso to Section 251(1)(a) by the Finance Act, 2024.

Facts

• The Assessment: For the Assessment Year 2012-13, the AO passed a Best Judgment Assessment order under Section 144 because the assessee (Deep Trading Co.) failed to comply with notices.

• The Addition: The AO made a substantial addition of Rs. 11.12 Crores treating cash deposits in bank accounts as unexplained money.

• CIT(A)’s Action: The CIT(A), NFAC, allowed the assessee’s appeal by setting aside the assessment order and restoring the matter to the file of the AO for fresh adjudication.

• Revenue’s Grievance: The Revenue appealed to the ITAT, arguing that:

  • The AO had given ample opportunities (3-4 times) which were ignored.

  • The CIT(A) should have decided the case on merits rather than remanding it.

  • The remand was based “merely by provoking” the new provision of Section 251(1)(a).

Decision

• The Income Tax Appellate Tribunal (ITAT) dismissed the Revenue’s appeal.

• Statutory Change: The Tribunal relied on the amendment introduced by the Finance Act, 2024 (effective from 01.10.2024).

• New Power of Remand: The amended Section 251(1)(a) specifically includes a proviso stating that if an appeal is against an order under Section 144 (Best Judgment Assessment), the CIT(A) “may set aside the assessment and refer the case back to the Assessing Officer for making a fresh assessment.”

• Validity of Order: Since the CIT(A) exercised powers explicitly granted by the statute post-amendment, the Tribunal held that the CIT(A)’s action was in accordance with the law. Consequently, the Revenue’s objection was not maintainable.

Key Takeaways

• Restoration of Remand Power: Historically, the power of the CIT(A) to remand cases to the AO was withdrawn by the Finance Act, 2001. However, the Finance Act, 2024 has explicitly restored this power specifically for Best Judgment Assessments (Section 144).

• Scope of Section 251(1)(a): The CIT(A) can now legally set aside an ex-parte order and send it back to the AO for a fresh look, giving the assessee a second chance to present evidence that was missed earlier.

• Impact on Litigation: This amendment aims to reduce the burden on the ITAT. Previously, only the ITAT could remand such cases; now, the First Appellate Authority can correct ex-parte injustices immediately.

• Effective Date: This specific power is applicable for orders passed by CIT(A) on or after 01.10.2024.

IN THE INCOME TAX APPELLATE TRIBUNAL
CHANDIGARH BENCH, ‘A’, CHANDIGARH
Income Tax Officer,
Room No. 228, First Floor,
Aaykar Bhawan, Rishi Nagar,
Ludhiana
Vs.
Deep Trading Co.,
B 34-5503,
22 Footi Road,
Haibowal Kalan,
Ludhiana