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Facts
The assessee filed its return for AY 2018-19. The AO reopened the case based on information of accommodation entries and issued a notice under Section 148, subsequently making additions under Sections 68 and 69C. The CIT(A) set aside the assessment order for fresh assessment, deeming it an ex-parte order under Section 144, but without adjudicating the jurisdictional issues raised by the assessee regarding the validity of the Section 148 notice.
Held
The Tribunal found that the CIT(A) erred in setting aside the matter for fresh assessment without adjudicating the legal grounds raised by the assessee, particularly concerning the validity of the Section 148 notice and Section 151 sanction. It held that the AO's order was not ex-parte as compliance was made. The matter is thus remanded back to the CIT(A) to adjudicate all legal and factual grounds on merits.
Key Issues
Whether the CIT(A) was correct in setting aside the assessment order as ex-parte under Section 144 without adjudicating the assessee's legal grounds regarding the validity of the Section 148 notice and Section 151 sanction.
Sections Cited
147, 144, 251(1)(a), 148, 151, 144B, 68, 69C, 142(1), 148A(b), 148A(a)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, AHMEDABAD “D” BENCH, AHMEDABAD
Before: SHRI T.R. SENTHIL KUMAR & SHRI NARENDRA PRASAD SINHA
PER NARENDRA PRASAD SINHA, ACCOUNTANT MEMBER:
This appeal filed by the Revenue and the Cross Objection of the assessee are directed against the order of National Faceless Appeal Centre (NFAC), Delhi (in short “the CIT(A)”) dated 31.01.2025 for the Assessment Year (A.Y.) 2018-19 in the proceedings under Section 147 r.w.s. 144 of the Income Tax Act, 1961(hereinafter referred to as ‘the Act’). The assessee has also filed a Cross Objection.
The grounds raised by the Revenue in its appeal and the ground taken by the assessee in the Cross Objection are as under :-
“(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 which is clearly mentioned in Para 2 of the assessment order and the order was not ex-parte and the case does not fall under Section 251(1)(a) of IT Act. (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.”
C.O. No.53/Ahd/2025 - Assessment Year: 2018-19
“1. The Id. CIT(A) erred in law as well as on fact in setting aside assessment order for fresh assessment to Id. AO without deciding jurisdictional issue of validity of notice u/s.148 for want of proper sanction u/s.151 of the Act.”
C.O. No.53/Ahd/2025 Assessment Year: 2018-19 DCIT vs. Phoenix Flexibles Pvt. Ltd. Page 3 of 6 3. The brief facts of the case are that the assessee had filed its return of income for the A.Y. 2018-19 on 30.10.2018 declaring income of Rs.4,46,456/-. subsequently, the Assessing Officer had received an information regarding transaction of the assessee with certain entities which were in the nature of accommodation entries. The Assessing Officer had reopened the case after following due process and notice u/s 148 of the Act was issued on 07.04.2022. In the course of assessment proceedings, the assessee had made compliance and filed its replies. However, the Assessing Officer was not convinced with the explanation of the assessee and passed order under Section 147 r.w.s. 144 r.w.s. 144B of the Act on 11.03.2024 wherein additions of Rs.48,12,068/- u/s 68 of the Act and addition of Rs.9,66,745/- u/s 69C of the Act were made.
The assessee had filed appeal before the First Appellate Authority against the order of the Assessing Officer which was decided by the Ld. CIT(A) vide the impugned order and the matter was set aside to the file of the Assessing Officer for making a fresh reassessment.
Both the Revenue as well as the assessee are aggrieved with the order of the Ld. CIT(A). Shri Sudhakar Verma, the Ld. Sr. DR submitted that the Ld. CIT(A) was not correct in setting aside the matter to the file of the Assessing Officer for fresh assessment. He explained that the assessee had made compliance in the course of assessment proceedings and filed reply to the various statutory notices which was discussed in paragraph no.2 of the Assessment Order. Thus, the order of the Assessing Officer was not an ex-parte order and merely because the Assessing Officer had wrongly quoted Section 144 of the Act in the body of the order, the ld. CIT(A) was not correct in setting aside the matter to C.O. No.53/Ahd/2025 Assessment Year: 2018-19 DCIT vs. Phoenix Flexibles Pvt. Ltd. Page 4 of 6 the file of AO. The Ld. Sr. DR explained that the case did not fall under the provisions of Section 251(1)(a) of the Act.
Per contra, Shri Chetan Agrawal, the Ld. AR of the assessee, submitted that the assessee had raised certain legal grounds against initiation of proceedings under Section 148 of the Act, which was not adjudicated by the Ld. CIT(A). He submitted that there was no proper sanction u/s 151 of the Act and, therefore, the notice issued u/s 148 of the Act was not valid. The Ld. AR submitted that the Ld. CIT(A) was not correct in setting aside the matter to the Assessing Officer for fresh assessment without deciding the jurisdictional issue of validity of notice u/s 148 of the Act.
We have considered the rival submissions. It is found that the Ld. CIT(A) had set aside the matter in view of the provisions of Section 251(1)(a) of the Act which allowed the Ld. CIT(A) to set aside the matter to the Assessing Officer for fresh assessment where the order of assessment was made under Section 144 of the Act. It is found that the Ld. CIT(A) has been guided by the section as mentioned in the first page of the assessment order without examining the contents of the order. In fact, in the grounds taken by the assessee before the Ld. CIT(A), it was nowhere contended that the order of the Assessing Officer was passed ex-parte u/s 144 of the Act. Further, the Assessing Officer at page no.-2 of the assessment order had categorically mentioned that the assessee had made compliance to the notice issued u/s 142(1) of the Act dated 10.10.2023 and the show cause notice dated 24.02.2024. The Assessing Officer had also acknowledged the reply filed by the assessee in the course of assessment proceedings, in his order. Thus, the order of the Assessing Officer, in essence, was not an ex-parte order.
7.1 It is further found that the Assessing Officer had raised the following grounds challenging the validity of reassessment proceedings and issue of notice under Section 148 of the Act: -
“1. The Ld. AO erred in law as well as on fact in issuing notice u/s.148A(b) without providing underlying documents, materials and evidences relied upon in said notice. 2. Ld. AO erred in law as well as on fact in issuing notice u/s.148A(b) without conducting Inquiry u/s.148A (a) of the Act. 3. The Ld. AO erred in law as well as on fact in issuing notice u/s.148 taking approval of PCIT instead of PCCIT resulting into invalid notice.”
7.2 The legal grounds as taken by the assessee was required to be adjudicated by the Ld. CIT(A) before restoring the matter to the file of the Assessing Officer to examine the grounds taken by the assessee on merits of the case. The Ld. CIT(A) was not correct in setting aside the matter without adjudicating the legal grounds taken by the assessee.
In view of the above facts, we are of the considered opinion that the matter requires to be set aside to the file of the Ld. CIT(A) with a direction to adjudicate the legal grounds taken by the assessee as well as the grounds raised on merit, as the order of the Assessing Officer was essentially not an ex-parte order passed u/s 144 of the Act. Accordingly, the matter is set aside to the file of the Ld. CIT(A) to adjudicate all the grounds as taken by the assessee in the appeal filed before him and also adjudicate the matters on merits.
C.O. No.53/Ahd/2025 Assessment Year: 2018-19 DCIT vs. Phoenix Flexibles Pvt. Ltd. Page 6 of 6 9. In the result, appeal of the Revenue is allowed and the Cross Objection filed by the assessee is allowed for statistical purpose.
Order pronounced in the open Court on this 22nd August, 2025.