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Facts
M/s Abir Knits Pvt. Ltd. faced additions totaling over Rs. 35 crores for unsecured loans and bogus purchases under Sections 68, 69C, and 115BBE, with the AO rejecting books under Section 145(3) and completing a best judgment assessment under Section 144 due to non-compliance. The CIT(A) set aside this assessment, remitting it to the AO for a fresh decision after providing the assessee a reasonable opportunity of being heard, citing the principles of natural justice and powers under Section 251(1)(a). The Revenue appealed this decision to the ITAT.
Held
The ITAT upheld the CIT(A)'s order, agreeing that granting the assessee another opportunity was necessary for a fair adjudication, especially given that the original assessment was a best judgment assessment under Section 144. The Tribunal confirmed the direction to the Assessing Officer to reframe the assessment in accordance with law after granting reasonable opportunity, ensuring all issues, including unsecured loans and bogus purchases, are properly considered.
Key Issues
Whether the CIT(A) was correct in setting aside an assessment made under Section 144 and remitting it back to the AO for fresh assessment to provide the assessee a proper opportunity of being heard.
Sections Cited
133A, 143(2), 142(1), 145(3), 68, 69C, 115BBE, 271AAC, 144, 251(1)(a)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, CHANDIGARH BENCH “A”, CHANDIGARH
Before: SHRI. RAJPAL YADAV, VP & SHRI. KRINWANT SAHAY, AM
िनधा�रती की ओर से/Assessee by : None राज� की ओर से/ Revenue by : Shri Manav Bansal, CIT, DR सुनवाई की तारीख/Date of Hearing : 04/09/2025 उदघोषणा की तारीख/Date of Pronouncement : 11/09/2025 आदेश/Order
PER KRINWANT SAHAY, AM:
This is an appeal filed by the Revenue against the order of the Ld. CIT(A)-5, Ludhiana dt. 18/01/2025 pertaining to Assessment Year 2018- 19.
In the present appeal sole ground raised
by the assessee is as under: “
1. Whether upon facts and circumstances of the case, the Ld. CIT(A) has erred in setting side the order to the file of AO for fresh assessment without giving any reason and without going into the merits of the assessment order.?
Briefly the facts of the case are that the assessee, M/s Abir Knits Private Limited, is engaged in the business of manufacturing and trading of knitted cloth. For the Assessment Year 2018–19, the assessee filed its return of income on 01.12.2018 declaring an income of Rs.8,31,200/-. A survey under section 133A of the Income Tax Act, 1961 was conducted at its premises on 23.01.2018, during which various documents were found and impounded. Based on this, the case was selected for compulsory scrutiny. Thereafter, Notices under sections 143(2) and 142(1) were issued along with detailed questionnaires. Although partial replies were filed electronically, the assessee failed to produce complete books of accounts.
The AO noted that the assessee had received unsecured loans of Rs.1,70,00,000/- from M/s Freak Buildcon Pvt. Ltd., a struck-off company, whose director admitted being only a salaried dummy director, thereby failing to establish identity, genuineness, and creditworthiness. Similarly, a loan of Rs. 5,00,000/- lakh from Shri Rakesh Dutt, having limited means, was held to be unexplained. Further, purchases of over Rs.35,28,49,836/- from concerns like M/s Triveni Knits Pvt. Ltd., M/s Palta Hosiery Mills, and M/s Royal Dresses were found to be bogus, as enquiries revealed non-existent suppliers, absence of stock registers, transport proofs, and movement of goods. The AO held that the assessee’s transactions were sham, rejected the books under section 145(3), and made additions under sections 68 and 69C read with section 115BBE, also initiating penalty proceedings under section 271AAC.
Against the order of the AO the assessee went in appeal before the Ld. CIT(A). Finding of Ld. CIT(A) given in the impugned order in para 5.1 read as under:
“5.1 It is observed that no proper compliance was made during the assessment proceedings and therefore the assessment order was passed u/s 144 of the Act in my view, although the appellant has made non compliance during assessment proceedings as per principles of natural justice, one more opportunity of being heard needs to be granted. Under these facts and circumstances, and to meet the ends of justice, in my considered view, it would be appropriate if the impugned Assessment order is set side to the file of AO so that submissions of the appellant can be considered by the AO and a speaking order can be passed based of facts. Therefore, I set aside the impugned assessment order to the file of AO for making a fresh assessment by invoking amended provisions of Section 251(1)(a) which are reproduced as below: 251 (1) In disposing of an appeal, the Commissioner (Appeal) 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;] AO is directed to make a fresh assessment order after affording reasonable opportunity of being heard to the appellant /assessee. All the grounds accordingly stand diposed.”
Against the order of the Ld. CIT(A) the assessee preferred an appeal before the Tribunal.
During the course of hearing none appeared on behalf of the assessee.
Per contra, the Ld. DR relied on the order of the Ld. CIT(A).
We have carefully considered the material on record and the submissions advanced by the Ld. DR. It is seen that the assessment in the present case was completed by the Assessing Officer under section 144 of the Act after noting non-compliance on the part of the assessee. The Ld. CIT(A), while appreciating that there was non-compliance, also considered that the principles of natural justice required that one more opportunity should be granted to the assessee so that its submissions could be properly examined by the Assessing Officer. In doing so, the Ld. CIT(A) rightly invoked the amended proviso to section 251(1)(a), which specifically empowers the first appellate authority, in cases arising out of best judgment assessments under section 144, to set aside such assessment and remit the matter to the file of the Assessing Officer for a fresh decision. We find merit in the reasoning of the Ld. CIT(A). The approach ensures that the issues raised in the assessment, particularly with respect to unsecured loans and alleged bogus purchases, are adjudicated afresh after granting the assessee an adequate opportunity of being heard. Accordingly, we uphold the findings of the Ld. CIT(A) and confirm the direction to the Assessing Officer to reframe the assessment in accordance with law after granting reasonable opportunity to the assessee.
In the result, appeal of the Revenue is dismissed.
Order pronounced in the open Court on 11/09/2025.