CIT(A) Cannot Set Aside Section 147 Reassessment Order

CIT(A) Cannot Set Aside Section 147 Reassessment Order as Power Is Restricted to Section 144

Issue

CIT(A) Jurisdiction to Remand Section 147/144B Assessments: Whether the Commissioner (Appeals) has the jurisdiction under Section 251(1)(a) to set aside an assessment order framed under Section 147 read with Section 144B and remit it back to the Assessing Officer for fresh assessment, or whether such power to set aside is strictly restricted to best judgment assessments framed under Section 144.

Facts

Assessment Order Passed: For Assessment Year 2018–19, the assessment was explicitly framed by the Assessing Officer under Section 147 read with Section 144B (Faceless Reassessment).
CIT(A) Action: The assessee filed an appeal, and the CIT(A) set aside the assessment order and remitted the matter back to the file of the Assessing Officer to make a fresh assessment.
Revenue’s Challenge: The Revenue challenged the CIT(A)’s order, arguing that under Section 251(1)(a), the power of the CIT(A) to set aside an assessment and remand it back to the Assessing Officer for fresh assessment is strictly restricted to orders passed under Section 144 (Best Judgment Assessment), and does not extend to reassessments under Section 147 read with Section 144B.

Decision

Power to Set Aside Restricted to Section 144 (In favor of Revenue): Held YES. The CIT(A) is vested with jurisdiction under Section 251(1)(a) to set aside an assessment and refer the case back to the AO for fresh assessment only where a best judgment assessment has been framed under Section 144, and this power cannot be extended to any other assessment. [Para 10]
Section 147/144B Assessment Cannot Be Treated as Section 144 (In favor of Revenue): Held YES. Where an assessment is explicitly stated to be framed under Section 147 read with Section 144B, there can be no justification for treating or considering it as an assessment framed under Section 144. [Para 11]
CIT(A) Exceeded Jurisdiction (In favor of Revenue): Held YES. By setting aside a reassessment order framed under Section 147 read with Section 144B, the CIT(A) exceeded their statutory jurisdiction, rendering the appellate order unsustainable and liable to be set aside. [Para 12]

Key Takeaways

Strict Limits on CIT(A) Remand Powers: Under Section 251(1)(a), the CIT(A) does not possess a general power to set aside assessment orders and remit them back to the AO; that specific power is strictly confined to Section 144 best judgment assessments.
Jurisdictional Boundary for Non-Section 144 Orders: For orders passed under Section 147/144B, the CIT(A) must decide the appeal on merits (confirm, reduce, enhance, or annul the assessment) rather than setting aside the matter for fresh assessment by the Assessing Officer.

IN THE ITAT VISAKHAPATNAM BENCH ‘DIVN’

Income-tax Officer, Ward 1

AL Safa Foods

Ravish Sood, Judicial Member
and MADHUSUDAN SAWDIA, Accountant Member

IT APPEAL No. 829 (Viz) OF 2025
C.O. NO. 6 (Viz) OF 2026
[Assessment year 2018-19]

JULY 3, 2026

GVN Hari, Adv. (Hybrid) for the Appellant. Nilanjan Dey, CIT-DR for the Respondent.

ORDER

Ravish Sood, Judicial Member.- The captioned appeal filed by the Revenue is directed against the order passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi (for short, “CIT(A)”), dated 14/10/2025, which in turn arises from the order passed by the Assessing Officer (for short, “AO”) under section 147 r.w.s 144B of the Income Tax Act, 1961 (for short, “the Act”), dated 07/03/2024. The Revenue has assailed the impugned order of the CIT(A) on the following grounds of appeal:

“1

. The Order of the Ld. CIT(A), NFAC. Delhi is erroneous in law and to the facts of the case.

The Ld. CIT(A) had erred in setting aside the order of the assessment completed u/s.147 r.w.s 144B of the Income Tax Act, in contravention to the provisions of section 251(1)(a) of the Income Tax Act, 1961.

The Ld. CIT(A) failed to appreciate the fact that the assessment was not made u/s.144 of the Act and erroneously set aside the assessment to the AO for fresh assessment.

The Ld. CIT(A) ought to have call for a remand report from the AO on the additional information furnished by the assessee during appellate proceedings and decide the case on merits.

The appellant craves leave to add or delete or amend or substitute any ground of appeal before and/or at the time of hearing of appeal.

For these and other grounds that may be urged at the time of appeal hearing, it is prayed that all these above additions be restored.”

Also, the assessee firm is before us as a cross objector, wherein the assessee firm has supported the order passed by the CIT(A) on the following grounds of appeal:

“The learned Commissioner of Income Tax (Appeals) is justified in setting aside the assessment order passed in the case of the appellant on 15.03.2024 u/s 147 r.w.s 144B of the Act and in directing the assessing officer to do the assessment afresh.

For any other ground of cross-objection that may be raised at the time of hearing.”

2. Succinctly stated, the AO based on information that the assessee firm during the subject year had carried out substantial financial transactions, viz., (i) cash deposits (including through bearer cheques) in current account: Rs.22.65 lakhs; and (ii) cash withdrawals (including through bearer cheques) in current account: Rs.1708.26 lakhs, but had not filed its return of income for the subject year, initiated proceedings under section 147 of the Act. Thereafter, the AO issued notice under section 148 of the Act, dated 30/04/2022, calling upon the assessee firm to file its return of income for the subject year. In response, the assessee firm filed its return of income on 10/01/2024, declaring a loss of Rs. (-) 1,80,270/-.

3. During the course of the assessment proceedings, the AO observed that the assessee firm, during the subject year, had made cash purchases of Rs.5,51,62,151/- in violation of the provisions of section 40A(3) of the Act. Accordingly, the AO, vide his order passed under section 147 r.w.s 144B of the Act, dated 07/03/2024, after making an addition/disallowance of Rs.5,51,62,151/-, determined the income of the assessee firm at Rs.5,49,81,881/-.

4. Aggrieved, the assessee firm carried the matter in appeal before the CIT(A).

5. As is discernible from the record, we find that the assessee firm in the course of the proceedings before the CIT(A) had come forth with multi facet contentions, viz. , (i) that the AO had failed to take cognizance of the written submissions that were filed in the course of the assessment proceedings as they were not received in legible format in the income tax portal; (ii) that as the cash purchases made by the assessee firm in the course of its business of buying and selling of buffalo meat were below Rs.20,000/-, no disallowance under Section 40A(3) r.w. Rule 6DD(e)(ii) was called for in its case; and (iii) that the assessee firm had filed before the CIT(A) additional evidence, i.e. , cash book running into 90 pages to impress upon him that the respective cash purchase transactions aggregating to Rs.5,51,62,151/- were below Rs. 20,000/-on every single occasion.

6. We find that the CIT(A) taking cognizance of the aforesaid contentions of the assessee firm and being well conversant with the fact that the impugned order of assessment in the case of the assessee firm was passed under section 147 r.w.s 144B of the Act, set aside and restored the matter back to the file of the AO for making a fresh assessment for the reason that issue under dispute was not examined by him in the course of the assessment proceedings. For the sake of clarity, we deem it apposite to cull out the observations of the CIT(A), as under:

“6.1. The grounds of appeal, statement of facts, assessment order u/s. 147 r.w.s. 144B of the Act and written submission of the appellant have been carefully considered.

6.2. On perusal of the assessment order, the AO clearly stated vide para no.3.3. in page no.5 that on examination of the submission made by the appellant on 28.02.2024, the finding of the AO is reproduced here under:

“.it has been found that there is nothing to download as the content of the file is shown as “0” byte. Considering the facts and circumstances, a letter was issued to the assessee stating the fact of the case and it was asked to resubmit the explanation in legible format. In reply, again assessee made a submission on 02.03.2024 but in the case also, it has been found that the contents of the submission is void i.e. having noting as legible documents. The case is time barred one and therefore, indefinite opportunity cannot be possible in the instant case. Further it is obvious that cash payment for purchase in this case was done as per earlier submission of the assessee. Considering the whole situation as stated above, the case is considered adversely against the assessee as there is nothing to do otherwise. In such circumstances, there is no other way but to disallow the expense as stated above”.

6.3. The appellant stated in the statement of facts that it was engaged in the business of buying and selling of buffalo meet, commenced its business in the F.Y. 2017-18 relevant to A.Y. 2018-19 and closed the business in the immediate next year due to incurred losses. The appellant had complied and made submissions during the assessment proceedings, unfortunately the submissions were not received in a legible format in the Income Tax Portal by the AO and thus addition of Rs.5,51,62,151/- was made towards cash payments u/s. 40A (3) of the Act. Further stated the AO also acknowledged the fact of non-receipt of information through portal for some technical reasons and had taken an advance inference in the absence of available information through submissions are made.

Further, the appellant sated that all the cash purchases are below Rs.20,000/-and the entire cash book in 96 pages was submitted as additional evidence. The nature of business i.e., buffalo meat which was squarely covered under Rule 6DD cases and not covered under the Provisions of Section 40A (3) of the Act. The case of the appellant was getting time-barred and hence the addition of Rs.5,51,62,151/-was made by the AO u/s. 40A(3) of the Act being cash payments.

6.4. During the appeal proceedings, the appellant mentioned in the Form-35 that it had relied on the additional evidence i.e., cash book in 96 pages and contended that all the cash purchases are below Rs.20,000/- and furnished the same. The appellant also filed a copy of letter addressed to AO by stating that the appellant covered under Rule 6DD(e)(ii) and thus cash payments were not covered under the Provisions of Section 40A(3) of the Act. The AO completed the assessment u/s. 147 r.w.s. 144B of the Act dated 07.03.2024 by making addition of Rs.5,51,62,151/- u/s. 40A(3) on the ground that the submission(s) filed by the appellant was not in legible documents or the contents shown as 0 byte. After considering the submission of the appellant and the assessment order u/s. 147 r.w.s. 144B of the Act, the case of the appellant is set aside and restored back to the file of the AO for making a fresh assessment since the issue under dispute was not examined by the AO.

6.5. After careful consideration of the assessment order, appellant submission, additional evidence and contentions of the appellant presented during this appeal proceedings were neither made available nor raised before the Assessing Officer during the course of assessment proceedings, the assessment in the present case is set aside and restored back to the file of AO for making a fresh assessment. Needless to say, the AO shall provide reasonable opportunity being heard to the appellant in accordance with the principles of the natural justice. It is also incumbent upon the appellant to provide all co-operation to the AO for disposal of case.

7. In the result, the appeal filed by the appellant against order u/s. 147 r.w.s. 144B of the Act dated 07.03.2024 for the AY 2018-19 is allowed for statistical purpose.”

6.1. The Revenue, aggrieved with the order of the CIT(A), has carried the matter in appeal before us.

7. We have heard the Learned Authorised Representatives of both parties, perused the orders of the authorities below and the material available on record.

8. Shri Nilanjan Dey, Learned CIT-DR, at the threshold of hearing of the appeal, submitted that the CIT(A), while setting aside the matter to the file of the AO for framing a fresh assessment, had grossly erred in law and facts of the case by exceeding the scope of his jurisdiction. Elaborating on his contention, the Ld. CIT-DR submitted that, though the legislature in all its wisdom vide the Finance (No.2) Act, 2024, w.e.f. 01/10/2024 had made available on the statute the “proviso” to section 251(1)(a) of the Act, as per which the CIT(A) is vested with the jurisdiction to set aside the order of the assessment made under section 144 of the Act and refer the case back to the AO for making a fresh assessment, but under no other circumstances he is vested with any such power to set aside the matter to the file of the AO for framing a fresh assessment. Elaborating on his contention, the Ld. CIT-DR submitted that as the AO in the present case had framed the assessment vide his order passed under section 147 r.w.s 144B of the Act, dated 07/03/2024, which is not a best judgment assessment order passed under section 144 of the Act, the CIT(A) had grossly erred in law and facts of the case in exceeding his jurisdiction and setting aside the matter to the file of the AO for making a fresh assessment for the reason that the issue under dispute was not examined by him while framing the assessment. The Ld. CIT-DR submitted that in the backdrop of the aforesaid facts read in the settled position of law, the CIT(A) order cannot be sustained and is liable to be set aside.

9. Per contra, Shri GVN Hari, Learned Authorized Representative (for short, “Ld. AR”) submitted that though the subject assessment was framed by the AO vide an order passed under section 147 r.w.s 144B of the Act, dated 07/03/2024, but taking cognizance of the fact that the assessee firm had failed to furnish the requisite details in the course of the assessment proceedings, the assessment order so passed was in substance a best judgment assessment order passed under section 144 of the Act. Accordingly, it was submitted that as the assessment order passed by the AO was, in substance, a best judgment assessment order passed under section 144 of the Act, the CIT(A), taking cognizance of the facts in totality, had rightly set aside the matter to the file of the AO for making a fresh assessment.

10. We have given thoughtful consideration to the contentions advanced by the Learned Authorised Representatives of both parties in the backdrop of the orders of the authorities below. As is discernible from the record, it is a matter of fact that the AO in the present case before us had framed the assessment vide his order passed under section 147 r.w.s. 144B of the Act, dated 07/03/2024. Admittedly, the assessment order passed by the AO is not a best judgment assessment under section 144 of the Act which would have vested jurisdiction with the CIT(A) to exrcise the powers vested with him as per the “proviso” to section 251(1)(a) of the Act, wherein he could have validly set aside the assessment and referred the case back to the AO for making a fresh assessment. At this stage, we deem it apposite to observe that the legislature in all its wisdom vide the Finance Act, 2001, w.e.f. 01/06/2001 had divested the CIT(A) of his powers, which he initially enjoyed, to set aside the assessment order as was earlier provided in section 251(1)(a) of the Act. However, the legislature, vide the Finance (No. 2) Act, 2024, w.e.f. 01/10/2024 had made available on the statute the “proviso” to section 251(1)(a) of the Act, wherein the power of the CIT(A) to set aside an assessment and refer the case back to the AO for making a fresh assessment was restored, but the same was limited only to a case where the assessment order had been passed under section 144 of the Act. Accordingly, the CIT(A) pursuant to the insertion of “proviso” to section 251(1)(a) vide the Finance (No. 2) Act, 2024, w.e.f. 01/10/2024 is vested with the jurisdiction to set aside a best judgment assessment order passed under section 144 of the Act and refer the case back to the AO for making a fresh assessment, but the said power cannot be extended to a case other than that where a best judgment assessment has been framed under Section 144 of the Act.

11. Coming to the facts involved in the case before us, we find that the AO had framed the assessment vide his order passed under section 147 r.w.s. 144B of the Act, dated 07/03/2024. Admittedly, as the assessment framed by the AO is not a best judgment assessment under section 144 of the Act, we find substance in the Ld. CIT-DR’s contention that the CIT(A) had clearly exceeded his jurisdiction while setting aside the matter to the file of the AO for making a fresh assessment. We are of the firm conviction that, as the CIT(A) had exceeded the jurisdiction vested with him under section 251(1)(a) of the Act, the order passed by him cannot be sustained and is liable to be set aside.

12. At this stage, we may herein observe that though the Ld. AR had stated that the assessment order passed by AO under section 147 r.w.s. 144 of the Act, dated 07/03/2024, is in substance a best judgment assessment, but we are unable to persuade ourselves to accept the same. We say so, for the reason that as the assessment is explicitly stated to be framed under section 147 r.w.s. 144B of the Act, there can be no justification for considering it as an assessment framed under section 144 of the Act.

13. We thus, in terms of our aforesaid observations, set aside the order passed by the CIT(A) and restore the matter to his file with a direction to re-decide the appeal after considering the specific grounds of appeal based on which the impugned order of assessment passed by the AO under section 147 r.w.s 144B of the Act, dated 07/03/2024, has been assailed before him.

14. In the result, the appeal filed by the Revenue is allowed for statistical purposes in terms of our aforesaid observations and the Cross Objection filed by the assessee is dismissed.