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Facts
The assessee's income tax assessment was reopened under Section 147 based on information regarding bogus accommodation entries, leading to additions under Sections 69C and 68. The assessee challenged this before the CIT(A), who, finding procedural lapses and new evidence, set aside the assessment for de-novo consideration by the AO, exercising powers under Section 144, as enabled by the Finance Act, 2024.
Held
The Tribunal found the Department's grievance, concerning the CIT(A) mistakenly referencing Section 144 instead of Section 147 for the original assessment, to be academic. It upheld the CIT(A)'s decision to set aside the assessment for de-novo consideration by the AO, emphasizing that the remand ensures proper adjudication and principles of natural justice without causing prejudice to the Revenue.
Key Issues
The key issue was whether the CIT(A) validly set aside the assessment for de-novo consideration by the AO, given a dispute over whether the original assessment was under Section 144 (ex-parte) or Section 147 read with Section 144B, and if such a remand prejudiced the Revenue.
Sections Cited
251(1)(a), 144, 147, 144B, 139(1), 132, 142(1), 69C, 68
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “A” BENCH, AHMEDABAD
Before: DR. BRR KUMAR & SHRI SIDDHARTHA NAUTIYAL
(Assessment Year: 2017-18) Income Tax Officer, Vs. 7NR Retail Ltd., Ward-3(1)(1), 9/G, Vardan Exclusive, Nr. Ahmedabad Lakhudi Talav, Navrangpura, Ahmedabad-380009 [PAN No.AAACZ6298A] (Appellant) .. (Respondent) Appellant by : Shri B.P. Srivastava, Sr. DR Respondent by: Shri Aseem L Thakkar, AR 06.08.2025 Date of Hearing Date of Pronouncement 25.08.2025 O R D E R
PER SIDDHARTHA NAUTIYAL - JUDICIAL MEMBER:
This appeal has been filed by the Department against the order passed by the Ld. Commissioner of Income Tax (Appeals), (in short “Ld. CIT(A)”), National Faceless Appeal Centre (in short “NFAC”), Delhi vide order dated 20.01.2025 passed for A.Y. 2017-18.
The Department has raised the following grounds of appeal:
“(a) The Ld. CIT(A) has erred in law and on facts in setting aside the order to the file of AO for fresh assessment u/s. 251(1)(a) of the IT Act holding that the assessment order was passed ex-parte u/s 144 of the Act by ignoring the fact that during the assessment proceedings, the assessee has filed various replies in response to statutory notices issued and the order was passed u/s. 147 r.w.s. 144B of IT Act which is clearly mentioned in para 12 of the assessment order. (b) The Ld. CIT(A) has erred in law and on facts in not deciding the appeal on merits of the case. (c) The appellant craves leave to add, alter and / or to amend all or any the ground before the final hearing of the appeal.”
ITO vs. 7NR Retail Ltd. Asst.Year –2017-18 - 2– 3. The brief facts of the case are that assessee filed its return of income under section 139(1) of the Act, declaring total income of ₹26,35,294/-. However, based on information from a search conducted under section 132 in the case of Jignesh Shah and Sanjay Shah Group, a group which was involved in providing bogus accommodation entries, the AO reopened the assessment under section 147 of the Act. In response, the assessee re-filed its return and submitted all details and supporting documents as required under notice issued under section 142(1) of the Act. The assessee submitted that its purchases and sales were genuine and he had proper documentation in support of the same, including bills and ledger accounts etc. However, the Assessing Officer rejected the submissions and proceeded to make additions on an ad hoc basis by treating 25% of the purchases as unexplained under section 69C of the Act, and thereby made an addition of ₹30,02,500, and further added a sum of ₹14,85,600/- by estimating additional gross profit on the alleged bogus sales under section 68 of the Act.
The assessee challenged the reassessment order before CIT(Appeals) and raised various grounds including illegal reopening of the case without proper evidence, denial of opportunity to cross-examine third-party witnesses, failure to supply materials relied-upon by the assessee, and additions having been made without rejecting audited books of accounts. The assessee submitted that the entire assessment was based on presumptions and that the Ld. Assessing Officer failed to follow the principles of natural justice. After reviewing the case records, Form 35, and additional evidences submitted by the assessee, the CIT(Appeals) noted that the assessee was not in a position to respond to earlier notices and had submitted relevant material ITO vs. 7NR Retail Ltd. Asst.Year –2017-18 - 3– during the appellate proceedings before him. Considering the newly restored powers granted by the Finance Act, 2024 which allowed the CIT(Appeals) to set aside best judgment assessment under section 144 of the Act, CIT(Appeals) exercised this power and set aside the assessment to the file of the Assessing Officer for de-novo consideration. The case was accordingly referred back to the Assessing Officer for conducting a fresh assessment.
The Department is in appeal before us against the order passed by CIT(Appeals). The only grievance of the Department is that in the order passed by CIT(Appeals), he has mentioned that assessment order was passed u/s 144 of the Act whereas in fact the order was passed u/s 147 of the Act. On going through the case records. we find that although the assessment order was passed under section 147 and not section 144 of the Act, the grievance raised by the Department is purely academic in nature. The CIT(A)’s order does not cause any prejudice to the interest of the Revenue, as the assessment has only been set aside for fresh consideration. It is also evident from the order that the CIT(A) has restored the matter back to the AO on the basis that the documentary evidence and submissions furnished by the assessee were not properly examined or appreciated by the AO at the assessment stage. Therefore, the intent and effect of the CIT(A)’s direction is to ensure proper adjudication after affording due opportunity, which is in line with the principles of natural justice. The appeal filed by the Department, in substance, does not challenge the merit or rationale of the CIT(A)'s decision to remand the matter for de-novo assessment. In view of the above discussion, and considering that no prejudice is caused to the Revenue due to the remand of the case to the file of AO, we hold that the appeal filed by the Department is infructuous and order of CIT(A) does not require any interference.
In the result, the appeal filed by the Department is dismissed. This Order pronounced in Open Court on 25/08/2025