The Commissioner (Appeals) can validly set aside an ex-parte reassessment and remand it for fresh adjudication.

ORDER

1. This appeal in ITA No.2386/Del/2026 for assessment year 2018-19 has arisen from the appellate order dated 14.01.2026 passed by the learned CIT(A), NFAC, Delhi(DIN & Order No. ITBA/NFAC/S/250/2025-26/ 1084789353(1)) under Section 250 of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) , which appeal in turn, has arisen from the reassessment order dated 11.03.2023 passed by the AO under Section 147 read with Section 144B of the Act(DIN ITBA/AST/S/147/2022-23/1050661326(1)).

2. The brief facts of the case are that the case of the assessee was reopened by the Revenue for framing reassessment within provisions of Section 147 of the Act on the ground that the assessee has taken accommodation entry amounting to Rs. 10,08,759/- with M/s Shree Bankey Bihari Enterprises. The assessee has filed return of income originally u/s 139(1) for the assessment year 2018-19, on 24.09.2018 , declaring income of Rs. 10,50,200/-. Specific information was flagged as per Risk Management Strategy formulated by the CBDT through ITBA software under the head ‘High Risk CRI/VRU’ cases. The AO observed that the assessee has declared purchases to the tune of Rs. 5,33,94,750/- and profit before tax at Rs. 11,66,031/-. The AO observed that the assessee has declared low profit as compared to gross receipts. On perusal of the information, the AO observed that one Mr. Rajesh Mittal was controlling and managing 19 firms along with his associates and bogus bills were issued without delivery of goods. Shri Bankey Bihari Enterprises 06AMCPJ6709R1ZK is one of the firm, and the assessee is beneficiary of bogus entries from the said concern. The Assessing Officer issued show cause notice under Section 148A(b) of the Act on 08.03.2022 to the assessee to file the reply, but the assessee did not file any response. The AO observed that the assessee has no proper explanation wrt to aforesaid bogus transactions , and hence there are reasons to believe that income to the tune of Rs. 10,08,759/- has escaped assessment. The Assessing Officer initiated proceedings under Section 147 after taking approval of the competent authority. Notice under Section 148 of the Act dated 29.03.2022 was issued by the AO through e-filing/ITBA to the assessee , but the assessee did not file any return of income in response to notice u/s 148. Thereafter, notice under Section 142(1) was issued on 31.08.2022 by the Assessing Officer which was also not replied to by the assessee. Again a reminder letter dated 29.09.2022 was issued by the AO, which was also not replied by the assessee. Thereafter, second and third reminders were issued by the AO on 01.12.2022 and 05.01.2023, which were again not replied by the assessee. AU-1 format was issued on 13.01.2023, which was also not replied by the assessee. Thereafter, the Assessing Officer issued show cause notice dated 19.01.2023, which was part replied by the assessee and was also considered vague by the AO. Clarification letter dated 23.01.2023 was issued by the AO , which again remained un-complied with by the assessee. Reminder of the Clarification was also issued by the AO on 31.01.2023, which was also not replied by the assessee. Thereafter, a final show cause notice dated 07.02.2023 was issued by the AO, which again remained un-complied with by the assessee. During reassessment proceedings, the assessee has earlier submitted part reply in which the assessee contended that the assessee made purchase of Rs. 10,08,759/- during the financial year 2017-18 through an agent. The agent has provided material along with copy of tax-invoice , bills, and payments have been made through banking channel to a specified bank account provided by the Agent. It was submitted that GST department informed that Shri Bankey Bihari Enterprises is bogus /fake entity wrt above purchase, and the assessee reversed the input credit with interest and penalties. The assessee claimed that it had made no bogus purchases and also there are no low profits declared by it. The AO asked assessee to submit details of reversal of input tax credits along with copy of revised GST return, to which the assessee did not reply before the AO. Even SCN issued by the AO as to why additions be not made to the income of the assessee to the tune of Rs. 10,08,759/- towards bogus purchases remained unexplained , unverified and unaccounted for want of reversed Input tax credit. Since , replies were not received, the AO disallowed the claim of purchases made by the assessee to the tune of Rs. 10,08,759/- from Shri Bankey Bihari Enterprises , and added the same to income of the assessee u/s. 69 of the 1961 Act, vide reassessment order dated 11.03.2023 passed by the AO u/s 147 r.w.s. 144B of the 1961 Act. It is pertinent to mention that assessment was framed under faceless assessment scheme.

3. Aggrieved, the assessee filed first appeal with ld. CIT(A). The assessee denied to have made bogus purchases, and instead claimed that the said purchases were genuine supported by bills , lorry numbers for movement of goods and payments were made through banking channel. The assessee submitted purchase bills and account statement . It was submitted that the goods were purchased through an agent Shri Pushpender to whom commission was also paid. It was submitted that it is quite possible that Shri Pushpender might have introduced fake bills. It was submitted that once sale is held to be genuine, then 100% purchases could not be disallowed. The assessee relied upon judicial precedents to support its contentions. The ld. CIT(A) observed that the assessment order has been passed ex-parte under Section 144 basically for non-compliance by the assessee to various notices issued by the AO under Section 142(1) of the Act. Thus, the AO did not had the opportunity to verify the details and documentary evidences in support of the assessee. The ld. CIT(A) observed that the assessee in its grounds of appeal has raised contention that the AO has not provided sufficient and reasonable opportunity of being heard during the course of reassessment proceedings and passed an ex-parte order. During the appellate proceedings, the assessee has filed bank statements which need verification. The ld. CIT(A) referred to provisions of Section 251(1)(a) read with newly inserted proviso introduced by Finance Act, 2024 wef 01.10.2024 , and observed that reassessment has been finalized u/s 144, and in exercise of power u/s 251(1)(a) read with proviso , the ld. CIT(A) was pleased to set aside the assessment to the file of the AO for making fresh denovo reassessment after affording an opportunity of being heard to the assessee.

4. The Revenue is aggrieved by the decision of learned CIT(A) to set aside the matter back to the file of the AO for fresh reassessment instead of adjudicating the appeal on merits, and has now filed the second appeal with the Tribunal. The main bone of contention of the Revenue is that the learned CIT(A) has wrongly assumed power under Section 251(1)(a) of the Act and set aside the matter back to the file of the Assessing Officer for framing denovo reassessment but rather, the learned CIT(A) should have decided the appeal on merits. It was submitted that the reassessment order passed by the AO was u/s 147 read with Section 144B, and was not passed u/s 144. Thus, the ld. CIT(A) did not have power to set aside the matter to AO for framing denovo reassessment , rather ld. CIT(A) ought to have adjudicated the appeal on merits. The learned Senior DR submitted that the appellate order passed by learned CIT(A) be set aside and the matter be restored to the file of the learned CIT(A) for deciding the appeal on merits in accordance with law.

4.2 The ld. Counsel for the assessee supported the appellate order passed by ld. CIT(A).

5. I have heard both the parties and perused the entire material on record. Short controversy in this appeal is that whether keeping in view facts and circumstances of the case, ld. CIT(A) was empowered to set aside the matter back to the file of the ld. AO for framing denovo reassessment instead of deciding the issue on merits in accordance with law. It is pertinent to mention here that reassessment order was passed under faceless assessment regime. I have observed that that during the course of reassessment proceedings , the assessee has not submitted complete replies to the notices issued by the AO from time to time under Section 142(1) of the Act, and only part replies were submitted by the assessee before the AO. The non compliances by the assessee to the notices issued by the AO u/s 142(1) of the 1961 Act, led AO to issue SCN’s u/s 144. The assessee did not submitted complete reply to the first Show Cause Notice’s issued by the AO u/s 144 of the 1961 Act. There was non compliance to the second SCN issued by the AO. The details are enumerated in the para 2.2 above and are reproduced again even at the cost of repetition. The case of the assessee was reopened by the Revenue for framing reassessment within provisions of Section 147 of the Act on the ground that the assessee has taken accommodation entry amounting to Rs. 10,08,759/- with M/s Shree Bankey Bihari Enterprises. The Assessing Officer issued show cause notice under Section 148A(b) of the Act on 08.03.2022 to the assessee to file the reply , but the assessee did not file any response. The Assessing Officer observed that there are reasons to believe that income has escaped assessment, thus, the AO initiated proceedings under Section 147. Notice under Section 148 of the Act dated 29.03.2022 was issued by the AO to the assessee, but the assessee did not file any return of income in response to notice u/s 148. Thereafter, notice under Section 142(1) was issued on 31.08.2022 by the Assessing Officer which was also not replied to by the assessee. Again a reminder letter dated 29.09.2022 was issued by the AO, which was also not replied by the assessee. Thereafter, second and third reminders were issued by the AO on 01.12.2022 and 05.01.2023, which were again not replied by the assessee. AU-1 format was issued on 13.01.2023, which was also not replied by the assessee. Thereafter, the Assessing Officer issued show cause notice dated 19.01.2023, which was part replied by the assessee which was also considered vague by the AO. Clarification letter dated 23.01.2023 was issued by the AO , which again remained un-complied with by the assessee. Reminder of the Clarification was also issued by the AO on 31.01.2023, which was also not replied by the assessee. Thereafter, a final show cause notice dated 07.02.2023 was issued by the AO, which again remained un-complied with by the assessee. The assessee has earlier submitted part reply in which the assessee contended that the assessee made purchase of Rs. 10,08,759/- during the financial year 2017-18 through an agent. The agent has provided material along with copy of tax-invoice , bills , and payments have been made through banking channel to the specified bank account provided by the Agent. It was submitted that GST department informed that Shri Bankey Bihari Enterprises is bogus /fake entity wrt above purchase, and the assessee reversed the input credit with interest and penalties. The assessee claimed that it had made no bogus purchases and also there are no low profits declared by it. The AO asked assessee to submit details of reversal of input tax credits along with copy of revised GST return, to which the assessee did not reply before the AO. Even SCN issued by the AO as to why additions be not made to the income of the assessee to the tune of Rs. 10,08,759/- towards bogus purchases remained unexplained , unverified and unaccounted for want of reversed Input tax credit. Since , replies were not received, the AO disallowed the claim of purchases made by the assessee to the tune of Rs. 10,08,759/-from Shri Bankey Bihari Enterprises and added the same to income of the assessee u/s. 69 of the 1961 Act, vide reassessment order dated 11.03.2023 passed by the AO u/s 147 r.w.s. 144B of the 1961 Act , under faceless assessment scheme. Thus, as per provisions of Section of Section 144 of the 1961 Act, if the notices issued u/s 142(1) remained un-complied with , the AO is mandated to issue SCN u/s 144 to the assessee , and noncompliance by the assessee to such SCN will enable/empowers AO to pass best judgment assessment u/s 144 of the Act. I have observed that Section 144B deal with faceless assessment regime. I have also observed that Section 144B(1) clearly stipulates that notwithstanding anything to the contrary in any other provision of the 1961 Act, the assessment, reassessment or re-computation u/s 143(3) or u/s 144 or Section 147 , as the case may be , with respect to the cases referred to in Section 144B(2) , shall be made in a faceless manner as per the following procedure, namely:-… Thus, Section 144B , inter-alia, covers best judgment reassessment u/s 144 r.w.s. 147 to be made in a faceless manner. Section 144B(2)(iii) refers to service of notice to the assessee through national faceless assessment centre u/s 143(2) or 142(1) , and the assessee to file response to such notice. Section 144B(2)(viii) read with 144B(2)(ix) refers to consequences of failure to submit response to notice issued by the AO u/s 142(1) or 143(2). Such failure will lead to issuance by the AO of SCN u/s 144. Section 144B(2)(xiv) and 144B(2)(xv) provides for consequences of failure by the assessee to file response to SCN issued u/s 144 , which will lead to preparing an income or loss determination proposal based on all relevant material. Further, procedure till passing of assessment or reassessment order is stipulated u/s 144B under faceless assessment scheme. Thus, procedures and manner in which faceless assessment shall be governed is stipulated u/s 144B. Coming back, the reassessment framed by the AO in the instant case is a best judgment re-assessment u/s 144 while governing procedure under faceless regime is stipulated u/s 144B, wherein in the instant case the assessee has remained non-compliant with notices issued by the AO u/s 142(1) as well SCN issued by the AO u/s 144. Reference is drawn to the recent amendment to Section 251(1)(a) wherein proviso was added by Finance Act, 2024 wef 01.10.2024 , which empowers ld. CIT(A) to set aside the assessment and refer the case back to the AO for making a fresh assessment, in the cases where appeal before ld. CIT(A) is against an order of assessment made u/s 144. I hold that ld. CIT(A) has in the instant case rightly set aside the reassessment framed by the AO as the reassessment order was the best judgment assessment u/s 144 as the assessee did not comply with the notices issued by the AO u/s 142(1) as well to the SCN issued by the AO u/s 144 of the 1961 Act, although in the reassessment order it is mentioned that the same is passed u/s 147 r.ws. 144B being passed under faceless regime.Thus, the ld. CIT(A) rightly exercised his powers u/s 251(1)(a) read with newly inserted proviso, by setting aside the reassessment order and remanding matter back to the file of the AO for denovo reassessment . The ld. CIT(A) rightly observed that since the assessee has not complied with various notices issued by the AO, the AO had no opportunity to verify the details and documentary evidences in support of the claim filed by the assessee. During appellate proceedings before ld. CIT(A), the assessee has filed additional evidence by way of bank statements as well the assessee has submitted that the AO passed the reassessment order without complying with principles of natural justice. The ld. CIT(A) set aside the reassessment order and restored the matter back to the file of the AO for denovo reassessment after affording opportunity to the assessee and after verification of facts. Thus, I hold that ld. CIT(A) keeping in view facts and circumstances of the case , rightly exercised his powers u/s 251(1)(a) read with newly inserted proviso, in remanding the matter back to the file of the AO for denovo reassessment. Thus, the appeal of the Revenue lacks merit and is accordingly, dismissed. I order accordingly.

6. In the result, the appeal of the Revenue is dismissed.