Faceless Reassessment Disguised as Best Judgment Under Section 144 Can Be Remitted by CIT(A) for Fresh Determination

ORDER

1. This appeal in ITA No.2697/Del/2026 is filed by the Revenue being aggrieved by the appellate order passed by learned CIT(A) dated 27^th January, 2026(DIN & Order No. ITBA/NFAC/S/250/2025-26/1085168403(1)) u/s 250 of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’), which, in turn, has arisen from the re-assessment order dated 24^th February, 2025 passed by the Assessing Officer under Section 147 read with Section 144B of the 1961 Act.

2. The brief facts of the case are that the assessee has not filed return of income u/s 139(1) of the 1961 Act. The case of the assessee was selected by Revenue for framing reassessment based on the information on insight portal under Risk Management System-Non-filing of Return-PAN Cases and wherein, it was observed by the AO that the assessee has made payments as under:-

2.2 The Assessing Officer issued statutory notice to the assessee under Section 148 dated 07.03.2024 , for compliance within 90 days. The assessee filed return of income on 12^th August, 2024 declaring income of Rs. 2,43,430/-in response to aforesaid notice issued by the AO u/s 148. Notice u/s 143(2) dated 26.09.2024 was issued by the AO to the assessee which remained uncomplied with by the assessee. Notice under 142(1) of the Act dated 11^th June, 2024 was issued by the AO wherein the assessee made a request for adjournment. Thereafter, several notices dated 6^th August, 2024, 26^th September, 2024 and 22^nd January, 2025 were issued by the AO, and the assessee submitted part response/replies. The assessee in its part replies submitted before the AO submitted that the assessee is dealing in sale and purchase of AMWAY products; Books of accounts are not maintained; Cash proceeds from sale of Amway products are deposited in bank accounts; Credit cards payments are made out of cash sales which stood deposited in bank account as well taking loans and small credits from banks and NBFC;Cash flow statement is not maintained and Bank statements were attached by the assessee. Thus, there was non compliance by the assessee to the notices issued by the AO u/s 142(1) from time to time during reassessment proceedings as complete replies were not filed. Finally, the Assessing Officer issued Show Cause notice dated 31^st January, 2025 showcausing as to why additions to the income of the assessee on account of payments to the tune of Rs. 13,59,188/- made by the assessee towards credit card issued by Standard Chartered Bank and HDFC be not made as well why additions to the income of the assessee towards cash deposits as well credits in the bank account maintained with Yes Bank to the tune of Rs. 17,80,630/- be not made, but there was no response by the assessee to the aforesaid SCN to prove the genuineness of transactions mentioned in SCN. The AO observed that the assessee has failed to furnish complete reply along with relevant documents to various notices issued by the AO 142(1) of the 1961 Act. The onus to prove the genuineness of the aforesaid transactions is on the assessee, and the assessee has completely failed to prove the same. The AO observed that the assessee has completely failed to explain the sources of expenditure/credit cards payments as well sources of cash deposits in the bank account. The Assessing Officer, keeping in view the facts and circumstances of the case and non-compliance by the assessee, made two additions to the income of the assessee, firstly under Section 69C of the Act as para 3.5(i) of the reassessment order to the tune of Rs. 13,59,188/- towards payments made towards standard chartered bank credit card and HDFC Bank credit card, and the second addition was made under Section 69A to the tune of Rs. 17,80,630/- for cash deposits and credits in Yes Bank. The Assessing Officer passed reassessment order dated 24^th February, 2025 under Section 147 read with Section 144B of the Act.

3. Being Aggrieved, the assessee filed first appeal with ld. CIT(A). Learned CIT(A) observed that the assessee has filed written submissions during appellate proceedings. The assessee has contended that he is engaged in trading of Amway Products. The ld. CIT(A) observed that the assesssee has now filed before him, the bank statements and details of credit cards payments. The ld. CIT(A) observed that the assessee has also filed details of loans from HDFC Bank . It was further observed that since all these details had not been filed by the assessee before the AO, and the same are submitted as an additional evidences for the first time before ld. CIT(A), hence the matter was set aside by ld. CIT(A) to the file of the Assessing Officer to decide as per law.

4. The Revenue is now aggrieved by the appellate order passed by learned CIT(A) , because the learned CIT(A) has set aside the matter to the file of the Assessing Officer for fresh determination of the matter instead of ld. CIT(A) not deciding the issues himself , and as per Revenue the reassessment order was not passed u/s 144 and hence the ld. CIT(A) did not have powers within the provisions of Section 251(1)(a) to set aside the matter to the AO for fresh determination and instead ld. CIT(A) ought to have decided the issue on merits in accordance with law. The learned Senior DR submitted before the Bench that the learned CIT(A) could not have set aside the matter back to the file of the Assessing Officer for fresh determination and instead, ought to have decided the issue on merits keeping in view the provisions of Section 251(1)(a), as the reassessment order was never passed u/s 144 but rather it was passed u/s 147 read with Section 144B.

4.2 None appeared on behalf of the assessee when this appeal was called for hearing before the SMC.

5. I have heard ld. Sr. DR 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 fresh determination 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 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 u/s 144. The assessee did not submitted any reply to Show Cause Notice issued by the AO u/s 144 of the 1961 Act. The details are enumerated in the para 2.2 above and are reproduced again even at the cost of repetition. The Assessing Officer issued statutory notice under Section 148 dated 07.03.2024 to comply within 90 days. The assessee filed return of income on 12^th August, 2024 declaring income of Rs. 2,43,430/- in response to the aforesaid notice issued by the AO u/s 148. Thus, return of income u/s 148 was filed by the assessee belatedly beyond time allowed by the AO. Notice u/s 143(2) dated 26.09.2024 was issued by the AO to the assessee , which remained uncomplied with by the assessee. Notice under 142(1) of the Act dated 11^th June, 2024 was issued by the AO to the assessee wherein the assessee made a request for adjournment. Thereafter, several notices dated 6^th August, 2024, 26^th September, 2024 and 22^nd January, 2025 were issued by the AO, to the assessee, and the assessee submitted part response/replies. Finally, the Assessing Officer issued Show Cause notice dated 31^st January, 2025 u/s 144 show causing as to why additions to the tune of Rs. 13,59,188/- made towards credit card issued by Standard Chartered Bank and HDFC be not made to the income of the assessee as well why additions towards cash deposits as well credits in the bank account maintained with Yes Bank to the tune of Rs. 17,80,630/- be not made as income of the assessee, but there was no response by the assessee to the aforesaid SCN issued by the AO to prove the genuineness of transactions mentioned in SCN. These consistent non compliances by the assessee to the notices issued by the AO u/s 142(1) and 144 led AO to pass best judgment reassessment u/s 147 read with Section 144B, wherein the AO made two additions to the income of the assessee, firstly under Section 69C of the Act as para 3.5(i) of the re-assessment order to the tune of Rs. 13,59,188/- towards payments made towards Standard Chartered Bank credit card and HDFC Bank credit card, and the second addition to the income of the assessee was made by the AO under Section 69A to the tune of Rs. 17,80,630/- for cash deposits and credits in Yes Bank. The Assessing Officer passed reassessment order dated 24^th February, 2025 under Section 147 read with Section 144B of the Act. 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 , 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 regime. 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 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 appeal of the Revenue lacks merit and is accordingly, dismissed. I order accordingly.

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