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

The solitary grievance of the Revenue in the present appeal is against the power exercised by the Ld. CIT(A) in terms of Section 251(1)(a) of the Act setting aside the assessment order to the file of the AO for framing assessment afresh.

In the facts in the present case, the Ld. CIT(A) had exercised this power with respect to the grievance of the assessee on the treatment of agricultural income returned by him, as income from other sources, by the AO. The Ld. CIT(A) noted that as per the provisions of Section 251(1)(a) of the Act where the order in appeal before him has been made u/s.144 of the Act, he may set aside such assessment and refer the case back to the AO for making assessment afresh. The Ld. CIT(A) found that in the facts of the present case, the order was passed u/s.144 of the Act and accordingly exercised his power of restoration of assessment u/s. 251(1)(a) of the Act. His finding in this regard is contained at para 5.6 to 5.6.1 of his order as under:

(1) In disposing of an appeal, the Commissioner (Appeals)] shall have the following powers-

6.1 As it has been held that the Order passed by the AO was in fact passed u/s. 144 of the Act and wrongly mentioned in the table on first page of the Order as passed u/s. 143(3) of the Act, and in view of the other facts of the case and changes in the Act, it is felt that the consideration of the submissions filed by the appellant, is germane to the correct appreciation of the issue under deliberation, viz., agricultural income. Therefore, the Order passed by the AO u/s. 144 of the Act dated 11/12/20018 is hereby set aside for making fresh assessment, after taking into account the above submissions filed by the appellant, only with respect to this issue of agricultural income and corresponding addition of Rs. 20,75,250/- made to the Total Income of the appellant. Needless to say that the AO should, while conducting the set aside proceedings, give proper opportunities of representation of his case to the appellant and take into account any further submissions which he has to file during the course of the said proceedings. The appellant should comply with the correspondences issued by the AO.”

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 ITA No. 19/Ahd/2025 [ ITO vs. Gopalbhai Umarbhai Bharavad] A.Y. 2016-17 - 4 – which is reproduced in para 5.6 of the order and is reproduced hereunder also for clarity:

Section 144 of the Act reads as under:

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 ITA No. 19/Ahd/2025 [ 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 ITA No. 19/Ahd/2025 [ 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

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.

अपीलाथȸ / The Appellant 2. Ĥ×यथȸ / The Respondent. 3. संबंिधत आयकर आयुƠ / Concerned CIT 4. आयकर आयुƠ(अपील) / The CIT(A)- 5. ǒवभागीय Ĥितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड[ फाईल / Guard file.