ATHIMOOLAM CHETTIAR RAVI,MADURAI vs. ACIT, CENTRAL CIRCLE-1,, MADURAI

Similarly, in the case of father-in-law, Shri A.C. Ravi [from whom cash was seized on 15.11.2017], the AO noted that the PCIT passed order u/s.127 of the Act on 12.12.2019 transferring the case from the ITO, NCW-1(7), Madurai, to the DCIT, Central Circle-1, Madurai (the AO) who issued notice u/s.148 of the Act on 11.02.2021, pursuant to which Shri A.C. Ravi filed his RoI on 12.03.2021 admitting total income at Rs.2,05,000/- which was e-verified on 23.11.2021. Pursuant to notice u/s.142(1) of the Act, according to Shri A. C. Ravi, he along with Shri V.S.Rajkumar appeared before the AO on 10.02.2022 and deposed that cash belong to Shri V.S.Rajkumar and pleaded before the AO that no adverse view should be taken against him (Shri A.C.Ravi) in respect of cash seized. But the AO framed assessment u/s.147 r.w.s.144 on 31.03.2022 by adding Rs.28,88,000/- u/s.69A of the Act on protective basis with addition on substantive basis in the case of Shri V.S.Rajkumar.

Aggrieved by the aforesaid action of the AO, both Shri V.S.Rajkumar & Shri A. C. Ravi filed appeals before the Ld.CIT(A) wherein they raised several legal issues as well as contested the addition on merits. However, the Ld.CIT(A) is noted to have restored the assessment back to the file of the AO with certain directions for framing a fresh assessment without considering the legal issues raised before him.

We have heard both the parties and perused the material available on record. The aforesaid facts are not disputed and therefore, not repeated for the sake of brevity. The only grievance of the assessee’s are that the Ld.CIT(A) while adjudicating the appeals preferred by them against the action of the AO has not considered the legal issues raised before him and has merely restored the assessment back to the file of the AO for making fresh assessment. According to the Ld.AR, the legal issue raised before the Ld.CIT(A), if found in favour of the assessee’s would go to the root of the jurisdiction of the AO to have framed the assessment and therefore, the impugned action of the Ld.CIT(A) restoring the assessment back to the file of the AO would defeat the purpose of filing of the legal issue before the Ld.CIT(A) and therefore, prayed that the impugned order of the Ld.CIT(A) be reversed and the Ld.CIT(A) be directed to examine the legal issue raised before him as per sub-section (6) of section 250 of the Act. Per contra, the Ld.DR pointed out that since the order has been passed u/s.144 of the Act [best judgment assessment], the Ld.CIT(A) has invoked the power vested in him by the Finance Act, 2024, wherein, the proviso has been inserted to section 251(1)(a) of the Act which empowered the Ld.CIT(A) to set aside the assessment order passed u/s.144 of the Act and restore it back to the file of the AO for making fresh assessment and therefore, the action of the Ld.CIT(A) can’t be faulted viz., for exercising his discretion in restoring the assessment back to the file of the AO. Therefore, the Ld.CIT-DR, doesn’t want us to interfere with the action of the Ld.CIT(A).

After hearing both the parties, we note that the main plea of the assessee, Shri V.S.Rajkumar is that he has responded to the notices issued by the AO and when called upon by the AO to explain the nature & source of the cash of Rs.28,90,350/- [seized from his father-in-law], he explained that the source of the cash was from his savings for the past four (4) years of his business income and in order to support his statement, he claims to have filed copy of the financials for FY 2016-17 & 2017-18 and physically appeared before the AO on 10.02.2022 along with father-in-law, Shri A.C. Ravi. However, the AO in the assessment order notes that the assessee Shri V.S.Rajkumar didn’t explain the source of cash seized and therefore, relying on the Sworn Statement given by him (Shri V.S.Rajkumar) on 20.11.2017, he treated the same as unexplained money and brought to tax u/s.69A r.w.s.115BBE of the Act substantially in the hands of Shri V.S.Rajkumar; and protectively in the hands of Shri A.C. Ravi by passing order u/s.147 r.w.s.144 of the Act by separate order dated 31.03.2022. After going through the records and especially Annexure IV & V [copy of letter dated 03.02.2022 submitted by Shri V.S.Rajkumar before the AO and copy of P & L a/c, receipts & payments of two financial years], which documents assessee, Shri V.S.Rajkumar have filed physically before the AO, when they were called to be present before him; In the light of the same, we are of the view that even though the AO has termed the assessment order to be passed u/s.144 of the Act but considering the material on record, it can’t be presumed to have been passed u/s.144 of the Act. Therefore, the Ld.CIT(A) erred in exercising his powers as provided under proviso to section 251(1)(a) of the Act and thus, erred in restoring the assessment back to the file of the AO for fresh assessment. Therefore, we set aside the impugned order of the Ld.CIT(A)

and restore the appeal back to the file of the Ld.CIT(A) with a direction to decide the appeal as mandated in sub-section (6) of section 250 of the Act after hearing the assessee to pass a speaking order. Needless to say that the legal issues need to be adjudicated and if necessary, Remand- Report may be called for from the AO incase assessee files any additional evidences in respect of merits of the case. The Ld.CIT(A) is directed to pass speaking order in accordance to law in both the appeals.

In the result, appeals filed by both the assessees are allowed for statistical purposes.