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Facts
The assessee challenged an order of the Ld.CIT(A) that restored the assessment back to the AO. The original assessment was framed under Section 147 read with Section 144 of the Income Tax Act, 1961. The assessee raised several legal issues regarding the validity of the reopening and the jurisdiction of the AO, which were not adjudicated by the Ld.CIT(A).
Held
The Tribunal held that the Ld.CIT(A) ought to have decided the legal issues raised by the assessee regarding the jurisdiction of the AO to reopen the assessment, before restoring the case to the AO for fresh assessment. Failure to do so would lead to an abuse of process. Therefore, the impugned order was set aside and the appeal was restored to the file of the Ld.CIT(A) for deciding the legal issues.
Key Issues
Whether the Ld.CIT(A) erred in restoring the assessment to the AO without adjudicating the legal issues raised by the assessee concerning the validity of the reopening of assessment and the AO's jurisdiction.
Sections Cited
147, 144, 251(1)(a), 148, 148A
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Income Tax Appellate Tribunal, ‘B’ BENCH: CHENNAI
Before: SHRI ABY T. VARKEY & SHRI MANOJ KUMAR AGGARWAL
आदेश / O R D E R
PER ABY T. VARKEY, JM:
1. This is an appeal preferred by the assessee against the order of the Learned Commissioner of Income Tax (Appeals)/NFAC, (hereinafter referred to as “the Ld.CIT(A)”), Delhi, dated 19.11.2024 for the Assessment Year (hereinafter referred to as "AY”) 2016-17.
2. At the outset, the Ld.AR of the assessee brought to our notice that the Ld.CIT(A) has restored the assessment back to the file of the AO by taking note that the assessment has been framed u/s.147 r.w.s. 144 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act‘) by exercising his power u/s.251(1)(a) of the Act. According to the Ld.AR, the assessee has raised the following legal issue before the First Appellate Authority [Ld.CIT(A)] which has not been decided by the Ld.CIT(A):
1. The learned assessing officer erred in re-opening the assessment under section 148 of the income tax after 01-04-2021, who ought to have issued notice under amended section 148A of the income tax act without resorting to reopening under section 148 of income tax act, a repealed section effective 31.03.2021.
The learned assessing officer without justifying the appellants objection as to the validity of the notice issued u/s.148 of the act dated March 31, 2021, has proceeded to justify the reopening under section 148 through various case laws which are no longer valid in view of the amended section 148A.
And that additional grounds raised before him, even though, has been reproduced by the Ld.CIT(A) at Page No.9 of his impugned order, but not adjudicated; the additional legal grounds reads as under:
1) In the order of seriatim of arrangement of section 147, sub clause (b) to Explanation 2, empowers the assessing officer to assess the income where no assessment has been made. In as much the income has been assessed, the learned assessing officer ought to have reopened the assessment rather than proceeded to assess the income, which is bad in law for the reason that there cannot be two surviving assessment orders. Hence, the assessment order passed under section becomes non-est.
2) Validity of reopening the assessment. The learned assessing officer ought to have verified the veracity of statement made by the appellant accepting LTCG for a specific value before investigation wing in view of the fact that the appellant has not even completed primary education before proceeding to issue notice under section 148, which best can be termed suspicion and not belief.
3) The learned assessing officer ought to have enquired about the status of assessment of other 3 appellants to believe income has escaped assessment, as they had also received similar one forth share of the sale proceeds.
4) The reason to suspect cannot be the basis for usurping jurisdiction to reopen or to assessment u/s.147 of the Act.
According to Ld.AR, the Ld.CIT(A) erred in restoring the assessment back to the file of the AO for framing of fresh assessment, because the assessee is challenging the very jurisdiction of the AO to usurp the power to reopen the assessment in the first place and reminded us that if the assessee doesn’t challenge the impugned action of the Ld.CIT(A) [of restoring the assessment back to the AO] then it would be construed as if assessee has waived his objection regarding the validity of reopening the assessment by issue of notice u/s.148 of the Act dated 01.04.2021 and other legal issues. Therefore, according to the Ld.AR, when the legal issue challenging the jurisdiction of the AO has been raised by the assessee, then the Ld.CIT(A) ought to have decided the same and if assessee fails in its attempt, then the Ld.CIT(A) would have been justified in restoring the assessment back to the file of the AO. Hence, he pleaded that impugned action of the Ld.CIT(A) be set aside and the Ld.CIT(A) be directed to decide the legal issue.
Per contra, the Ld.DR supported the action of the Ld.CIT(A) and doesn’t want us to interfere with the discretionary power vested with the Ld.CIT(A) in restoring the assessment back to the file of the AO.
Having heard both parties, we note that the assessee an individual had filed his return of income (RoI) for AY 2016-17 admitting total income at Rs.9,85,980/-. The AO took note of the event of transfer of immovable property by assessee along with his brothers and receiving as his share Rs.2,25,00,000/- out of total sale consideration. The AO further noted that the assessee has admitted capital gains of Rs.7,71,421/- on sale of property but agreed before the I&CI authorities that total capital gains was to the tune of Rs.1,25,70,815/- which fact according to the AO shows that the assessee has understated his income to the tune of Rs.1,17,99,394/- in his RoI; and it tantamounts to escapement of income and therefore, he issued notice u/s.148 of the Act expressing his desire to re-open the assessment. The AO notes that the assessee didn’t respond to his statutory notices which prompted him to pass the best judgment assessment u/s.144 of the Act wherein he reworked the Long Term Capital Gains (LTCG) at Rs.1,51,28,579/- and assessed the total income of the assessee at Rs.1,61,14,560/- in place of Rs.9,85,980/- shown in the ITR filed by the assessee. On appeal, the Ld.CIT(A) has noted that the AO has passed an ex parte order and therefore, he exercised his powers as per proviso to section 251(1)(a) of the Act and restored the assessment back to the file of the AO for passing fresh assessment. This impugned action of the Ld.CIT(A) has been assailed before us on the ground that despite the assessee having raised several legal issues (supra) before him, he has ignored the same and simply restored the assessment back to the file of the AO for framing fresh assessment, which is erroneous. According to the Ld.AR, when legal issues are raised by the assessee before the First Appellate Authority [Ld.CIT(A)] which challenges in the first place the jurisdiction of the AO to reopen the assessment and which issue if answered in favour of the assessee would go to the root of the jurisdiction/power of the AO to have validly issued notice of reopening u/s.148 of the Act, then, the legal issue should be decided first by the Ld.CIT(A) and the omission to do so would protract litigation. We find considerable force in the submission of the Ld.AR and note that the assessee had raised inter alia legal issues, which challenges the jurisdiction of the AO to reopen the assessment itself and if assessee succeeds on the legal issue, then the question of reassessment itself doesn’t arise. Therefore, we are of the view that the Ld.CIT(A) ought to have answered the legal issues raised by the assessee rather than restoring the assessment back to the file of the AO for passing fresh assessment, and instead, if the impugned action of the Ld.CIT(A) is upheld, it would tantamounts to abuse of process of the Law, because, if the AO didn’t had the power to reopen the assessment, then again asking the AO to frame assessment would be an exercise in futility. Therefore, in the interest of justice and fair play, the Ld.CIT(A) ought to have decided the legal issue at the first place and if the assessee fails in its pursuit of challenging the legal issue, then, the Ld.CIT(A) may restore the assessment back to the file of the AO for de novo assessment.
(AY 2016-17) Panchatcharam 7. In the light of the above discussion, we set aside the impugned order of the Ld.CIT(A) and restore the appeal back to his file for deciding the legal issue raised by the assessee and if the assessee fails on the legal issue, then the Ld.CIT(A) may restore the assessment back to the file of the AO for fresh assessment in accordance to law.
In the result, appeal filed by the assessee is dismissed.
Order pronounced on the 09th day of July, 2025, in Chennai.