ITAT Upholds CIT(A)’s Power to Remand Ex-Parte Assessment for Fresh Adjudication

ITAT Upholds CIT(A)’s Power to Remand Ex-Parte Assessment for Fresh Adjudication

The Issue

The Revenue challenged the order of the CIT (Appeals), who had “set aside” an ex-parte assessment order to the file of the Assessing Officer (AO) for fresh adjudication on merits. The Revenue contended that the CIT(A) did not have the jurisdiction to remand the matter.

The Facts

• The Original Order: The AO had passed an ex-parte assessment order under Section 144 read with Section 147 of the Income Tax Act, 1961. This means the assessment was completed based on the “best judgment” of the AO because the assessee failed to comply with notices or provide information.

• The First Appeal: The assessee appealed to the CIT(A). Recognizing that the original order was passed without the assessee’s participation (ex-parte), the CIT(A) exercised powers under Section 251(1)(a) to send the case back (set aside/remand) to the AO.

• Revenue’s Grievance: The Department appealed to the ITAT, likely relying on the fact that the power of the CIT(A) to “set aside” assessments was generally removed by the Finance Act, 2001.

The Decision

The ITAT Chandigarh Bench (Vice President Raj Pal Yadav) dismissed the Revenue’s appeal, confirming the procedural validity of the CIT(A)’s action:

1. Remand Power in Ex-Parte Cases: The Tribunal held that the CIT(A) is empowered to set aside an issue to the AO for fresh adjudication, especially when the original order was passed ex-parte.

2. Jurisdictional Authority: The Court noted that exercising power under Section 251(1)(a) to ensure a case is decided on its merits (rather than a summary best-judgment) is well within the first appellate authority’s jurisdiction.

3. October 2024 Amendment Context: It is important to note that the Finance (No. 2) Act, 2024 explicitly restored the power of the CIT(A) to set aside and remand best judgment assessments (Section 144) back to the AO for fresh assessment (effective from October 1, 2024). This judgment aligns with that legislative intent to reduce the backlog of appeals where no proper inquiry was conducted at the assessment stage.

4. Outcome: The appeal by the Revenue was found to be “devoid of any merit” and was dismissed. The matter will now be decided afresh by the AO. In favour of assessee.

Key Takeaways for Taxpayers

• Relief from Ex-Parte Orders: If an assessment was passed against you because you couldn’t respond to notices (due to technical issues or lack of notice), the CIT(A) now has the clear authority to send your case back for a fair hearing.

• Fresh Opportunity: A “set aside” order is a second chance. You must ensure all documentary evidence and bank reconciliations are provided to the AO during the remanded proceedings to avoid another adverse order.

• Procedural Update: While the general power to remand was restricted for many years, the 2024 amendment specifically targeted Section 144 cases to ensure that “non-responsive” taxpayers can get their day in court at the AO level rather than clogging the appellate system.