Revenue Authority Challenge to CIT(A) Remand Power Dismissed: ITAT Upholds New Section 251(1)(a) Authority

Revenue Authority Challenge to CIT(A) Remand Power Dismissed: ITAT Upholds New Section 251(1)(a) Authority

The Issue

The Revenue (Income Tax Department) appealed against an order by the CIT(Appeals), NFAC, which had set aside a “Best Judgment Assessment” and remanded the case back to the Assessing Officer (AO) for fresh adjudication.

The Revenue argued that:

• The AO had already given the assessee 4 to 5 opportunities to reply, which were ignored.

• The CIT(A) should have decided the case on its merits rather than “merely” invoking the newly inserted provision of Section 251(1)(a).

• Significant additions were at stake: ₹1,65,28,500 (Unexplained Money u/s 69A) and ₹14,92,57,500 (Unexplained Expenditure u/s 69C).

The Facts

The original assessment was passed ex-parte under Section 144 (Best Judgment Assessment) because the assessee failed to comply with notices. Upon appeal, the CIT(A) used the power restored by the Finance (No. 2) Act, 2024, to send the matter back to the AO for a proper hearing and fresh assessment.

The Decision

The ITAT Chandigarh Bench (represented by Shri Krinwant Sahay, AM) dismissed the Revenue’s appeal, affirming the legal validity of the CIT(A)’s remand:

1. Restoration of Remand Powers: For many years, the CIT(A) did not have the power to “set aside” an assessment. However, the law was amended in 2024. The Tribunal noted that the action of the CIT(A) in remanding the case is now “very much in conformity to the legal provision” under Section 251(1)(a).

2. Applicability to Section 144: The Tribunal specifically highlighted that since the assessment was passed under Section 144 (Best Judgment due to non-compliance), the CIT(A) was within their rights to order a fresh adjudication to ensure the tax demand is based on facts rather than just default.

3. Judicial Precedence: While the Revenue cited a 2018 Gujarat High Court case (Ashokji Chanduji Thakor), the Tribunal found the current statutory language of Section 251 (post-2024 amendment) to be the overriding authority.

4. Outcome: The appeal filed by the Revenue was dismissed. The CIT(A)’s order to remand the case to the AO stands. In favour of assessee (procedurally).

Key Takeaways for Taxpayers

• The “Second Chance” Provision: If you have received a high-pitched tax demand via an ex-parte Section 144 order, the CIT(A) now has the explicit power to wipe the slate clean and send the case back to the AO for a fresh hearing.

• Section 115BBE Risks: High-value additions under sections like 69A or 69C trigger a flat tax rate of 60% (plus surcharge). Getting a remand allows you to present bank statements and purchase invoices to prove the source of funds and avoid these punitive rates.

• Cooperation is Mandatory: While the CIT(A) can give you a second chance, the ITAT and AO will expect total compliance during the remanded proceedings. Failure to provide details a second time will likely result in the original additions being confirmed.