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Facts
The assessee made significant cash deposits and withdrawals. The Assessing Officer (AO) initiated proceedings under Section 147 and made an addition of Rs. 52,20,000/- on account of unexplained cash deposits, also initiating penalty proceedings for non-compliance with notices.
Held
The Tribunal found that the CIT(A) erred in setting aside the assessment without adjudicating the issue of jurisdiction. For the penalty appeal, the Tribunal held that the assessee's non-compliance was consistent and lacked justification, upholding the penalty.
Key Issues
Whether the CIT(A) was justified in setting aside the assessment without adjudicating the validity of jurisdiction. Whether the penalty for non-compliance with notices was rightly imposed.
Sections Cited
147, 144, 144B, 133(6), 69A, 68, 251(1)(a), 148A, 148, 272A(1)(d), 142(1), 272A(d)(1)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, Hyderabad ‘A’ Bench, Hyderabad
The present appeal filed by the assessee is directed against the order passed by the Commissioner of Income Tax (Appeals) [CIT(A)], National Faceless Appeal Centre (NFAC) dated 03.06.2025, which in turn arises from the order passed by the Assessing Officer (“the AO”) u/s 147 r.w.s 144 r.w.s.144B of the Income Tax Act, 1961 (for short “Act”) dated 21.12.2023 for the A.Y.2018-19. The assessee has assailed the impugned order on the following grounds of appeal before us:
Succinctly stated, the AO, based on information that the assessee had made cash deposits of Rs. 1.08 crores in his current account with Andhra Bank (now Union Bank of India) and made withdrawals of Rs. 93.24 lacs from the said bank account, initiated proceedings u/s 147 of the Act.
During the course of the assessment proceedings, the AO issued notice u/s 133(6) of the Act dated 21.08.2023 and 27.09.2023 to Andhra Bank. In response, the copy of the bank statement of the assessee was made available by the bank, which revealed that the assessee had, during the subject year, made cash deposits of Rs. 54,00,000/- in his bank account and also carried out cash withdrawals of Rs. 46.62 lakhs. The AO, in the absence of any plausible explanation regarding the source of the cash deposits of Rs. 54 lsacs (supra), held the same as having been sourced out of the unexplained money of the assessee u/s 69A of the Act. However, the A.O considering the fact that the assessee had disclosed an income of Rs.1.80 lac in his return of income as was originally filed, therefore, confined the addition to an amount of Rs. 52,20,000/- [Rs. 54,00,000 (minus) Rs. 1,80,000].
Accordingly, the AO vide his order passed u/s 147 r.w.s. 144 r.w.s. 144B of the Act dated 21.12.2023, determined the income of the assessee at Rs.53,79,700/-.
Aggrieved, the assessee carried the matter in appeal before the CIT(A). The CIT(A), after deliberating on the facts involved in the case before him, observed that the assessment was framed by the AO u/s 144 of the Act. Accordingly, the CIT(A), in the backdrop of the powers vested with him as per the newly inserted “Proviso” to section 251(1)(a) of the Act, set aside the matter to the file of the AO with a direction to frame a de novo assessment, after taking into account the submissions filed by the assessee. For the sake of clarity, the observations of the CIT(A), are culled out as under:
The assessee, being aggrieved with the CIT(A) order, has carried the matter in appeal before us.
We have heard the learned authorized representatives of both parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial precedents that have been pressed into service by the Ld. AR to drive home his contentions.
Shri SNSR Chinmai, Advocate, the learned authorized representative for the assessee [for short “the Ld.AR”], at the threshold of the hearing of the appeal, submitted that the CIT(A) grossly erred in law and the facts of the case in summarily setting aside the matter to the file of the AO for de novo assessment. Elaborating on his contentions, the Ld.AR submitted that as the assessee had, inter-alia, assailed the validity of jurisdiction that was assumed by the Jurisdictional Assessing Officer (for short, “JAO”) for issuing notice u/s 148A(b) and notice u/s 148 of the Act, therefore, the CIT(A) was obligated to have adjudicated the said issue, instead of summarily setting aside the entire matter to the file of the AO for de novo assessment in the backdrop of the powers vested with him under the “Proviso” to section 251(1)(a) of the Act as has been made available in the statute w.e.f.01.10.2024. Elaborating further on his contention, the Ld.AR submitted that as the adjudication of the “Ground of appeal No.3”, i.e., the validity of the assessment order passed by the “JAO” could safely be adjudicated, looking no further beyond the facts borne on record, therefore, the CIT(A) had grossly erred in refraining from dealing with the said aspect and summarily setting aside the matter to the file of the AO.
Per contra, Shri Gurpreet Singh, learned Departmental Representative (for short “the Ld. DR”) relied on the orders of the lower authorities.
We have given our thoughtful consideration to the contentions advanced by the learned authorized representatives of both parties in the backdrop of the orders of the lower authorities.
Admittedly, it is a matter of fact discernible from the record that the assessee had, inter-alia, vide his “Ground of appeal No.3” that was raised before the CIT(A), specifically assailed the notice issued by the AO u/s 148A and u/s 148 of the Act, on the ground that the jurisdiction to issue the said respective notices was exclusively vested with the AO/NFAC. For the sake of clarity, the “Ground of appeal No.3” raised by the assessee before the CIT(A) is culled out as under :
3. The order of assessment is not in accordance with law as the initial notice u/s 148A, the order u/s 148A and notice u/s 148 were issued by the jurisdictional Assessing Officer instead of NFAC. Therefore, the consequent assessment made is invalid.
11. We find substance in the Ld. AR’s claim that now when the assessee had, inter-alia, assailed the validity of the jurisdiction that was assumed by the AO i.e., “JAO” for framing the impugned assessment vide his order passed u/s 147 r.w.s. 144 r.w.s.144B of the Act dated 21.12.2023, therefore, the CIT(A), despite being vested with the powers to set aside an ex-parte assessment to the file of the AO for de novo adjudication, vide the newly inserted “Proviso” to section 251(1)(a) of the Act, as had been made available on the statute w.e.f. 01.10.2024, ought to have taken a call and adjudicated the said challenge to the validity of the jurisdiction that was assumed by the “JAO”, as the same did not require looking any further beyond the facts borne on record. Although the “Proviso” to section 251(1)(a) of the Act as had been made available on the statute, vide the Finance Act (No.2), 2024, w.e.f.01.10.2024, had vested jurisdiction with the CIT(A) to set aside the order of the assessment made u/s 144 and refer the case back to the AO for making a fresh assessment, but, the said powers cannot overshadow the innate powers which remains vested with him for disposing the appeal, i.e. confirm, reduce, enhance or annul the assessment.
We find that a similar issue had come up before the ITAT, Hyderabad bench in the case of Eyegear Optics India Private Limited Vs. ITO in and 1291/Hyd/2024, wherein, it was held as under: “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.
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.
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.”
As the issue involved in the present appeal remains the same as was there in the aforesaid case i.e Eyegear Optics India Private Limited Vs. ITO (supra), therefore, we respectfully follow the same.
12. We thus, in terms of our aforesaid deliberations, are unable to persuade ourselves to concur with the manner in which the CIT(A) had disposed of the appeal by refraining from adjudicating the validity of the jurisdiction assumed by the AO for framing the assessment, and summarily setting aside the matter to the file of the AO in the garb of the powers vested with him as per the “Proviso” to Section 251(1)(a) of the Act, therefore, set aside the matter to his file for fresh adjudication. Needless to say, the CIT(A) shall, in the course of the set aside proceedings, afford a reasonable opportunity of being heard to the assessee.
As we have set aside the matter to the file of the CIT(A) for fresh adjudication, therefore, we refrain from dealing with other contentions that have been raised by the assessee, which, thus, are left open.
Resultantly, the appeal filed by the assessee is allowed for statistical purposes in terms of our aforesaid observations.
15. The present appeal filed by the assessee is directed against the order passed by the CIT(A), NFAC dated 29.05.2025, which in turn arises from the order passed by the AO u/s 272A(1)(d) of the Act. The assessee has assailed the impugned order on the following grounds before us:
Succinctly stated, as the assessee had failed to effect necessary compliance to the notices issued. u/s 142(1) of the Act dated 18.09.2023 and 21.04.2023, therefore, the AO, while framing the assessment, vide his order passed u/s 147 r.w.s. 144 r.w.s.144B of the Act dated 21.12.2023 had initiated penalty proceedings u/s 272A(1)(d) of the Act.
Thereafter, the AO, after culmination of the assessment proceedings, issued notice, calling upon the assessee to explain as to why penalty u/s 272A(1)(d) of the Act may not be imposed upon him for the failure on his part to comply with the aforesaid notices. However, the assessee even failed to comply with the “Show Cause Notices” (for short “SCNs”) that were issued by the AO, calling for his explanation as to why he may not be saddled with the penalty u/s 272A(1)(d) of the Act.
The AO, vide his order passed u/s 272A(a)(d) of the Act dated 16.05.2024, after taking cognizance of the facts relating to addition of Rs.54 lac u/s 69A of the Act, observed that, the assessee had neither in the course of assessment proceedings complied with notices issued u/s 142(1) of the Act nor complied with the SCNs issued in the course of the present penalty proceedings, which were validly served upon him. Accordingly, the AO held a firm conviction that the assessee had no explanation for his non-compliance of the notices issued in the course of assessment proceedings u/s 142(1) of the Act dated 18.09.2023 and 21.04.2023, thus held the assessee as liable for a penalty of Rs. 10,000/- for each default u/s 272A(1)(d) of the Act. Thus, the AO, vide his order passed u/s 272A(1)(d) of the Act dated 16.05.2024, imposed a penalty of Rs. 20,000/-.
Aggrieved, the assessee carried the matter in appeal before the CIT(A), but without success. For the sake of clarity, observations of the CIT(A) are culled out as under:
The assessee, being aggrieved with the order of the CIT(A), has carried the matter in appeal before us. Shri SNSR Chinmai, Advocate, the Ld.AR, at the threshold of the hearing of the appeal, submitted that the failure on the part of the assessee to comply with the notices u/s 142(1) of the Act dated 18.09.2023 and 21.04.2023 was not deliberate, but was due to some compelling circumstances beyond his control. Alternatively, the Ld.AR submitted that there was no justification for the AO to have imposed the penalty u/s 272A(1)(d) of the Act, separately for both the defaults on the part of the assessee to comply with the aforementioned notices, i.e., dated 18.09.2023 and 21.04.2023.
Per contra, Shri Gurpreet Singh, Ld. DR relied upon the orders of the lower authorities.
We have thoughtfully considered the facts involved in the present case in the backdrop of the contentions of the Ld. Authorized Representatives of both parties. We find that the Ld.AR, except for claiming that the failure on the part of the assessee to comply with the notices issued u/s 142(1) of the Act dated 18.09.2023 and 21.04.2023 was not deliberate, but for reasons beyond his control had, however, failed to substantiate his said claim by placing on record any supporting material/ explanation. Rather, we find that the conduct of the assessee even in the course of the penalty proceedings, wherein, he had once again not complied with the SCNs, that were issued by the AO, calling upon him to explain as to why penalty may not be imposed on him u/s 272A(1)(d) of the Act, reveals the consistent lackadaisical approach adopted by him regarding the income tax proceedings. We, thus, find no substance in the Ld. AR’s claim that the AO had wrongly imposed the penalty u/s 272A(1)(d) of the Act.
Apart from that, we are unable to persuade ourselves to subscribe to the Ld. AR’s claim that the AO had erred in separately imposing the penalty for non-compliance by the assessee of both the notices issued by him u/s 142(1) of the Act dated 18.09.2023 and 21.04.2023. We say so, for the reason that Section 272A(d)(1) of the Act in unequivocal terms contemplates, that in case of any failure on the part of the assessee to comply with the notices u/s 142(1) of the Act, he shall pay by way of penalty, a sum of Rs.10,000/- for each such default or failure. We, thus, in terms of our aforesaid observations, find no infirmity in the view taken by the CIT(A), who had rightly sustained the penalty imposed by the AO u/s 272A(1)(d) of the Act, uphold the same.
Resultantly, appeal filed by the assessee is dismissed.
10 सितम्बर, 2025 को खुली अदालत में िुनाया गया आदेश। Order pronounced in the Open Court on 10th September, 2025.