VENKATA RAMANA VUPPALA,SURYAPET vs. ITO, WARD-1, SURYAPET

PER RAVISH SOOD, JM: The present appeal filed by the assessee is directed against the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi (for short, “CIT(A)”), dated 04/09/2025, which in turn arises from the order passed by the Assessing Officer (for short, “AO”) under section 147 r.w.s 144 of the Income Tax Act, 1961 (for short, “the Act”), dated 14/03/2024. The assessee has assailed the impugned order of the CIT(A) on the following grounds of appeal:

1) The order of the learned CIT (A) is erroneous to the extent it is prejudicial to the appellant herein. 2) The learned CIT (A) ought to have decided Ground No.2 i.e. the Income Tax Officer, Ward-1, Suryapet who has issued notice u/s 148A(b), order passed u/s 148A(d) and the notice issued u/s 148 of the I.T.Act are not valid. 3) The learned CIT (A) ought to have held the assessment to be invalid instead of setting aside the matter to the file of the Assessing Officer. nd 4) Any other ground/grounds that may be urged at the time of hearing.

“5.1 The submission of the appellant, the grounds of appeal and the annexures submitted with the Form No. 35 are perused carefully. The facts brought about by the AO in the assessment order and the discussions made therein are carefully perused and the grounds of appeal of the Appellant as reproduced above in para 03 are adjudicated as under: 5.2 Briefly stated facts of the case are that the assessee has not filed his return of income for the year under consideration, the assessee's case was opened for assessment u/s 147 base on the information that the assessee has made cash deposits of Rs.61,56,250/- in the bank accounts held with Axis bank and Andhra bank in various branches/ various accounts. The assessee remained non responsive during the assessment proceedings. Consequently, the AO concluded the assessment u/s 144 of the Act with addition of Rs.61,56,250/- as unexplained income u/s 69A of the Act. 5.3 Aggrieved with the above said addition, the appellant is in appeal raising grounds as mentioned at par 3 the appellant was cultivating the land on behalf of the Hindu family and he was depositing the amounts in his bank account. The agricultural income derived related to the Hindu family and does not relate to the individual. Such receipt from agriculture is deposited in the bank account in so far as purchase and sale of borewell spares are concerned, the total sales amounted only to Rs.41,53,600/- and the profit is less than the taxable minimum and, therefore, the appellant did not file any return of income voluntarily. Notices issued by the AO were not received by the appellant either physically or through electronic mode. The Assessing officer, i.e. Income-Tax Officer, Ward-1, Suryapet passed an order u/s 148A(d) of the I.T. Act on 29.3.2023 and issued a notice u/s 148 of the I.T. Act. The said notices were also not served on the appellant either physically or through electronic mode. Therefore, the appellant could not file the return of income, the appellant commenced business of supply of Borewell spare parts and effected turnover of Rs.41,53,600/-. He also effected purchases from various persons of Rs.34,93,717/-. The bank account would indicate that the sales effected are deposited into the bank account and the amounts were remitted to the suppliers. The names of the suppliers are apparently seen from the bank account. In so far as business activity is concerned the appellant maintained proper books of account. The appellant introduced capital of Rs.5 lakhs being the savings from agricultural income derived by the Hindu family.” The appellant furnished before me the copy of banks statement, financial statements of his business and certain other documents which require further verification and examination at the AO's end. 5.4 Considering the submissions of the Appellant, I note that the appeal filed by the appellant before me is against the order u/s. 144 of the Act and the appellant could not avail the opportunities of hearing during the assessment proceedings resulting all material facts could not be submitted and therefore the same have not been considered by the AO. Upon a careful examination of the submissions made by the appellant, I am of the considered view that the issues raised therein require further inquiry and verification, and therefore in the interest of substantial justice and to ensure fair play, it is most appropriate to provide the appellant with an additional opportunity to present his case before the Assessing Officer (AO). This would enable the AO to thoroughly verify the appellant's submissions and conduct the necessary inquiries to gather all relevant material for an accurate determination of the appellant's income. 5.5 Proviso to Section 251(1)(a) of the Income Tax Act wef 01/10/2024 provides that in the case of appeal against an order of assessment made under section 144, the Commissioner (Appeals) is empowered to set aside the order of assessment and refer the matter back to the Assessing officer for making a fresh assessment. 5.6 In view of the power conferred under proviso to Section 251(1)(a) of the Act, I hereby set aside the assessment and refer the case back to the Assessing Officer for making a fresh assessment, after giving reasonable opportunity of being heard to the appellant. The appellant is directed to file necessary documents for substantiating its case and not seek unnecessary adjournment, so as to facilitate disposal of the case, in accordance with the statutory provisions and the timelines prescribed under Section 153(3) of the Act. 6. In result, the appeal is allowed for statistical purpose.”

“10. We have heard the learned authorized representatives of both parties, perused the orders of the lower authorities as well as considered the judicial pronouncements that were pressed into service by the Ld.AR. 11. Ostensibly, it is a matter of fact apparent from the record that the assessee company in the course of assessment proceedings had adopted an evasive approach, wherein, it had neither complied with the notice issued u/s 148 of the Act; nor replied/furnished the details as were called for by the AO in the course of the reassessment proceedings. Also, the conduct of the assessee company was no better before the Ld.CIT(A), wherein, it had once again adopted an evasive approach and not participated /filed the requisite details before him. 12. Be that as it may, it is however a matter of fact borne from record that the assessee company in its "Ground of appeal No.2" before the Ld.CIT(A), had specifically assailed the validity of jurisdiction that was assumed by the AO for initiating the reassessment proceedings, on the ground, that the same was beyond the time limit prescribed under the "1st proviso" to section 147 of the Act. For the sake of clarity, the "Ground of appeal No.2" raised by the assessee company before the CIT(A) is being culled out as under: "2. Initiating the reassessment proceedings beyond the time-limit prescribed under the first proviso to section 147 of the Act. 13. Admittedly, the legislature in all its wisdom had vide the Finance (No.2) Act 2024 w.e.f. 01.10.2024 inserted the "Proviso" to section 251(1)(a) of the Act, as per which the CIT(A) has been vested with the power to set-aside the assessment and refer the case back to the AO for making afresh the assessment, in a case, where the appeal filed before him is against the order of assessment made u/s 144 of the Act. For the sake of clarity, section 251(1) is culled out as under: "251. (1) In disposing of an appeal, the Commissioner (Appeals) shall have the following powers - (a) In an appeal against an order of assessment, he may confirm, reduce, enhance or annul the assessment. Provided that where such appeal is against an order of assessment made under section 144, he may set aside the assessment and refer the case back to the Assessing Officer for making a fresh assessment." (emphasis supplied by us) 14. We are of the firm conviction that though the CIT(A) pursuant to the aforesaid amendment in Section 251 of the Act, now stands vested with the jurisdiction to set- aside and refer back a best judgment assessment order passed u/s 144 of the Act to the file of the AO for framing a fresh assessment, but the same cannot justify the refraining on his part from adjudicating the legal issues based on which the validity of the jurisdiction assumed by the A.O for framing the assessment or reassessment has been assailed before him. Rather, we find that as per Section 251(1) of the Act, the CIT(A) in disposing of an appeal is vested with the power to confirm, reduce, enhance or annul the assessment. We, thus, are of the firm conviction that in case an assessee appellant, based on the facts available on record, has assailed before the CIT(A) the validity of the jurisdiction that was assumed by the A.O for framing the impugned assessment or reassessment, then, if the said claim is found to be in order, the CIT(A) in the exercise of the powers vested with him under sub-section (1) of Section 251 of the Act is obligated to annul the assessment or reassessment rather than adopting an evasive approach, and in the garb of the powers vested with him as per the "Proviso" to Section 251(1) of the Act set aside and refer back the impugned best judgment assessment order passed u/s 144 of the Act for framing of fresh assessment by the AO. To sum up, the CIT(A) is obligated to address and adjudicate the grievance of the assessee appellant, as regards the validity of the jurisdiction assumed by the A.O for initiating the assessment or reassessment proceedings to the extent the same can safely be done based on the facts discernible from the record before him. Our aforesaid conviction can safely be gathered from the "Memorandum Explaining the Provisions in the Finance Bill, 2024", which to the extent relevant to the "Proviso" to Section 251(1) of the Act, reads as under: "4. Considering the huge pendency of appeals and disputed tax demands at the Commissioner (Appeals) stage, it is proposed that the cases where assessment order was passed as best judgement case under section 144 of the Act, Commissioner (Appeals) shall be empowered to set aside the assessment and refer the case back to the Assessing Officer for making a fresh assessment.".

Although the "Proviso" to Section 251(1) is an enabling proviso that further vests jurisdiction with the CIT(A) to set-aside a best judgment assessment order, but, the same cannot be construed in a manner that the same, inter alia, takes away his power to annul an assessment or reassessment which is framed de hors valid assumption of jurisdiction by the A.O. As a word of caution, if a best judgment assessment or reassessment framed u/s 144 of the Act, despite an invalid assumption of jurisdiction by the A.O is set aside and referred back to his file by the CIT(A) for framing of a fresh assessment, then, impliedly the lack of jurisdiction by the A.O will be given a go by and the challenge of the assessee-appellant to the validity of the assumption of jurisdiction would stand frustrated. We are of the firm conviction that the purpose of insertion of the "Proviso" to Section 251(1) by the legislature vide the Finance (No.2) Act, 2024 w.e.f 01.10.2024 can by no means be stretched to the extent of using it for validating an assessment or reassessment framed de hors valid assumption of jurisdiction by the A.O. 15. Adverting to the facts pertaining to the challenge thrown by the assessee company, qua the validity of the jurisdiction assumed by the AO for initiation of the reassessment proceedings, on the ground that the same was beyond the prescribed time limit as contemplated under the "1st Proviso" to section 147 of the Act, we are of the view that the Ld.CIT(A) ought to have adjudicated the same instead of adopting an evasive approach in the guise of exercise of the extended jurisdiction vested with him vide the "Proviso" to section 251(1)(a) of the Act as made available on the statute by the Finance (No.2) Act 2024 w.e.f. 01.10.2024. We find substance in the Ld. AR's contention that in case the lack of jurisdiction on the part of the A.O for framing the assessment is not addressed by the CIT(A), but, in the garb of the powers vested with him as per the "Proviso" to Section 251(1) of the Act the matter is referred back to the file of the AO for fresh adjudication, then, it would afford a second inning to the A.O who would simply give effect to the directions of the CIT(A) and reframe the re- assessment order despite lack of valid assumption of jurisdiction which was the very foundation for initiating the impugned proceedings. 16. Be that as it may, we are of the firm conviction that in the totality of the facts involved in the present appeal before us, the CIT(A) instead of summarily setting aside the matter to the file of the AO for making a fresh assessment, ought to have taken a call as regards the specific ground based on which the validity of the jurisdiction that was assumed by the AO for framing the reassessment was assailed by the assessee- appellant before him. Our aforesaid conviction that it is not obligatory on the part of the CIT(A) to set aside all best judgment assessment orders passed u/s 144 of the Act to the file of the AO is further fortified on looking at the language used by the legislature in the "Proviso" to Section 251(1) of the Act, i.e, ".may set aside the assessment and refer the case back to the Assessing Officer for making a fresh assessment." which, thus, does not compulsorily require the CIT(A) to set aside and refer the assessment in every case where it is made u/s 144 of the Act. 17. We thus, in terms of our aforesaid deliberations set aside the order of the CIT(A), and restore the matter to his file with a direction to adjudicate the specific "Ground of appeal No.2" based on which the jurisdiction assumed by the A.O for framing the impugned reassessment order u/s 147 r.w.s 144 of the Act dated 16.12.2019 was assailed by the assessee appellant before him. 18. Before parting, we may herein clarify, that as we have in terms of our aforesaid observations set aside the matter to the file of the CIT(A), therefore, we have refrained from expressing any view, regarding the issues based on which validity of jurisdiction assumed by the AO for initiating the reassessment proceedings, and also the merits of the addition have been assailed by the assessee appellant before us. The Ground of appeal No.3 is allowed for statistical purposes in terms of our aforesaid observations.”

Order pronounced in the open court on 10th July, 2026. Sd/- Sd/- MADHUSUDAN SAWDIA RAVISH SOOD ACCOUNTANT MEMBER JUDICIAL MEMBER Hyderabad Dated: 10th July, 2026. *OKK/SPS Copy to: VENKATA RAMANA VUPPALA, 2-1---360, MASZEED BAZAR, 1 SURYAPET, NALGONDA-508213, TELANGANA

ITO, WARD-1, SURYAPET. 2 O/o. INCOME TAX OFFICER, WARD-1, SURYAPET, TELANGANA

3 THE PCIT, HYDERABAD. 4 THE D.R., ITAT, HYDERABAD BENCH 5 GUARD FILE