INCOME TAX OFFICER, WARD-3(1)(1), AHMEDABAD., VEJALPUR vs. GOPALBHAI UMARBHAI BHARAVAD, VIRAMGAM

We have heard both the parties and have gone through the orders of the authorities below. We are in agreement with the Ld. DR that the restoration of the assessment to the AO by the Ld.CIT(A) was not in accordance with law. The reason for the same is that the power of restoration u/s 251(1)(a) of the Act is conferred only with respect to assessments which are made u/s.144 of the Act. This is evident from a bare reading of the Section which is reproduced in para 5.6 of the order and is reproduced hereunder also for clarity:

As is evident from a bare reading of section 144 of the Act, the AO is empowered to make assessment to the best of his judgement on the basis of material available with him, where the assessee is non cooperative in furnishing necessary details, having either not furnished his return of income at all or does not respond to notices issued during assessment proceedings.

In the facts of the present case, during assessment proceedings the assessee had not responded to any notices sent to him. This fact is contained in para 2 of the Ld.CIT(A)’s order where he notes that all the notices issued u/s.142(1) of the Act remained uncomplied with by the assessee. Therefore, clearly the assessment in the present case was framed in terms of Section 144(1)(b) of the Act, wherein, the assessee fails to comply with the terms of notice issued u/s.142(1) of the Act. Having said so, Section 144 of the Act further states that in such circumstances where the assessee does not cooperate in the assessment proceedings “the AO shall frame a best judgment assessment on the basis of material which he has gathered after giving a final show notice to the assessee.” As noted above, clearly the purport of Section 144 of the Act is that where there is total non- cooperation of the assessee during assessment proceedings, the AO is at liberty to frame assessment to the best of his judgment on the ITO vs. Gopalbhai Umarbhai Bharavad] A.Y. 2016-17 - 6 – basis of material which is available with him and such order passed is treated to be a valid assessment order.

In the facts of the present case the AO did pass an ex parte order, however, in appellate proceedings, the assessee filed submissions and evidences in support of his claim of the agricultural income returned by him being genuine. The evidences and submissions of the assessee were forwarded to the AO for his report thereon who, in turn, submitted his report on the same, to which the assessee submitted his counter. Therefore, though not during assessment proceedings, however, during appellate proceedings, the assessee was given due opportunity of hearing before the AO who, thereafter applied his mind to the submissions and evidences filed by the assessee submitted his findings on the issue to the Ld. CIT(A) by way of his remand report. In substance, the AO’s assessment order passed originally u/s.144 of the Act stood substituted by his findings on the impugned issue after due application of mind and after giving due opportunity of hearing to the assessee, in the remand report. The order of the AO before the Ld. CIT(A) no longer remained an order passed u/s.144 of the Act after a remand report was sought on the issue from the AO on the submissions and evidences filed by the assessee.

In the light of the same, therefore, the Ld. CIT(A) no longer had any power to restore the issue back to the file of the AO for consideration afresh. The AO had already applied his mind on the ITO vs. Gopalbhai Umarbhai Bharavad] A.Y. 2016-17 - 7 – contention and evidences of the assessee and no purpose would be served by restoring it back again to the AO.

We are, therefore, convinced with the contention of the Ld. DR that the power exercised by the Ld. CIT(A) u/s.251(1)(a) of the Act of restoring the assessment back to the AO was invalidly exercised and was not in accordance with law .The order of the Ld.CIT(A) is, therefore, set aside and the Ld. CIT(A) is directed to pass order afresh on the issue of agricultural income returned by the assessee whether genuine or not, in accordance with law after considering all material before him ,including the remand report of the AO.

The case laws relied upon by the Ld. Counsel for the assessee before us supporting the order of the Ld.CIT(A) merit no consideration since they lay down a totally different proposition of law that once remand report is sought by the Ld. CIT(A), there is no locus standi of the department to file appeal and no grievance remains of the Revenue once a remand report is sought. The facts in the present case is not of the department having filed appeal before us against the order of the Ld. CIT(A) allowing assessee’s appeal following the acceptance of assesses claim by the AO in his remand report. It is in such circumstances that Courts have held that once a remand report is sought by the Ld. CIT(A), the AO, having given his findings on the issue, there can be no grievance of the Revenue remaining. In the facts of the present case, the Revenue is aggrieved by the order of the Ld. CIT(A) in restoring the assessment back to the file of the AO, which is an issue completely different from that in the decisions filed by the Ld. Counsel before us.

In the light of the above, the ground raised by the Revenue is allowed with our directions as above.

In the result, appeal filed by the Revenue is allowed.