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Judgment
PER SANJAY AWASTHI, ACCOUNTANT MEMBER:
These are a batch of two appeals pertaining to the same assessee for AY 2016-17. In this case, both the appeals arise from order dated 05.02.2026, passed u/s 250 of the Income Tax Act, 1961 (hereafter as “the Act”), by NFAC, Delhi.
In this case, the assessee is a dealer in white goods in Rohtash Nagar, Shahdara, Delhi. The assessee had not filed his return of income initially and thereafter filed the same declaring a total income of Rs.4,98,290/-. It seems that the assessee could upload an audit report only on 29.03.2022, even when the assessment itself was completed on 30.03.2022. It is seen from para 5 page 4 of the impugned order that the Ld. AO passed an ex parte order due to non-submission of relevant documents before the Ld. AO. It is further observed that the case of the assessee was brought to adverse notice on the ground that cash of Rs.4,30,39,500/- was deposited in Jammu & Kashmir Bank. It is a matter of record that before the Ld. AO the assessee did not provide credible evidence and documents to explain the nature of source of such cash deposits. The Ld. AO disbelieved the explanation that the impugned deposits were on account of cash sales and were part of the turnover of business. The Ld. AO made an addition of Rs.60,32,421/- by adopting a rate of 8% of total sales of Rs.7,54,05,267/-.
Thereafter, the assessee approached the Ld. CIT(A) where he filed fresh evidence. However, the Ld. CIT(A) gave the following decision:
“8.Decision on grounds of appeal and reasons thereof:
8.1On careful consideration of the submissions of the appellant, the assessment order, the grounds of appeal, and the facts on record, it is observed that the assessment was completed u/s 147 r.w.s. 144B of the act due to partial compliance by the appellant. However, it is also noted that the issue relating to estimation of income at 8% of the total sales of Rs.7,54,05,267/-, thereby determining the total income at Rs.60,32,421/- for the Financial Year 2015-16, requires proper verification of facts and examination of supporting evidence. 8.2 Hence, in the interest of substantial justice and to ensure fair play. The appellant is accorded another chance to present the case before AO with supporting documents and evidences. Accordingly, in view of the power conferred vide proviso to clause (a) of sub-section 1 of section 251 of the Act applicable w.e.f. 01.10.2024, I hereby set aside the impugned assessment order passed u/s 147 rws 144B of the Act to the file of AO for fresh adjudication after affording reasonable opportunities to the appellant. All important aspects of enquiry should be disclosed to the assessee and comments solicited, before formulating an opinion and passing the assessment order. Appellant is strictly directed to submit the required details and document as called for by the AO. 8.3 Hence, this appeal is restored back to the file of AO to decide the issue on merits after affording reasonable opportunity of hearing to the appellant. The appellant is also directed to comply with notices issued by the Assessing Officer.
9.For statistical purposes, the appeal is Set Aside.”
Needless to say, the Ld. CIT(A) remanded back the matter to the file of Ld. AO on the presumption that the details were not filed before the Ld. AO and documents filed at first appellate stage needed to be verified and investigated.
While the Revenue is aggrieved with this action of Ld. CIT(A), the assessee has filed cross objection challenging the action of Ld. AO and has also challenged the reopening of the case. For the sake of reference, the grounds of Revenue deserve to be extracted as under: -
“1.The Ld. CIT(A) has erred in setting aside the assessment order passed u/s 147 r.w.s. 1488 of the Income-tax Act, 1961 dated 30.03.2022 and ignoring the fact that assessment proceedings was completed after due verification of material on record, within jurisdiction and terms of section 147 r.w.s. 1448 of the Income-tax Act, 1961 on the basis of credible Information regarding substantial cash deposits amounting to Rs. 4,30,39,500/- In the bank account of the assessee.
2.The Ld. CIT(A) has failed to appreciate that the assessee had actively participated in the assessment proceedings by filing return of income in response to notice u/s 148, complying with notices Issued u/s 142(1), and furnishing detailed submissions in response to show-cause notice, and therefore the assessment was not ex-parte in nature.
3.The Ld. CIT(A) has erred in ignoring that the assessment was framed under the Faceless Assessment Scheme strictly in accordance with the procedure prescribed under section 1448(1) of the Act, Including Issuance of show-cause notice and consideration of assessee's submissions before passing the final assessment order.
4.The Ld. CIT(A) has erred in law in setting aside the assessment without recording any finding on the merits of the addition made by the Assessing Officer, thereby passing an order which is prejudicial to the interests of Revenue.
5.The Ld. CIT(A) has erred in law and on facts in setting aside the assessment order passed u/s 147 r.w.s. 148 by overriding of power deliberated under provision of section 251(1)(a) of the Act for assessment passed u/s 144 only.
6.The appellant craves leave to add, alter, amend or withdraw any ground of appeal at the time of hearing.”
Before us the Ld. DR argued that the AO’s order was not truly an ex parte order since some compliance was made before him by the assessee and it was only on the basis of non-submission of documents etc. that an adverse view was taken. The Ld. DR took us through the provisions of Section 251(1) of the Act and stated that there was limited opportunity available with the Ld. CIT(A) to remand the matters back to the file of Ld. AO. In this case, on the basis of facts available in the Ld. AO’s order, it is clear that legally there was no option available for any remanding back of the case by the Ld. CIT(A).
The Ld. AR relied on the grounds of cross objection and stated that the assumption of jurisdiction itself was not as per law and the Ld. AO should not have adopted a rate of 8% on the turnover since the assessee did have accounts prepared which were filed, though only a day before the assessment order was passed. The Ld. AR also informed that the matter remanded back to the file of Ld. AO by the Ld. CIT(A) was being persuaded vigorously and the assessee had no objection to presenting the facts before the Ld. AO.
We have considered the rival submissions and have gone through the records before us.
At first the issue of the powers of Ld. CIT(A) in remanding matters back u/s 251(1) of the Act deserve to be discussed.
Special emphasis needs to be placed on the amendment to Section 251(1a) of the Act, vide the Finance Act, 2001 with effect from 01.06.2001, and the same deserves to be highlighted and reproduced as under:
“The portion beginning with the words "or he may set aside" and ending with the words "on the basis of such fresh assessment;" omitted by the Finance Act, 2001, w.e.f. 1-6-2001.”
It is clear from a reading of the Section as it stands now and after comparing it with the language of the section as it stood prior to the amendment, it is clear that the word “set aside” has been deliberately omitted indicating the legislators’ intention to take away such powers from the ld. CIT(A). A look at judicial precedents in this matter supports the view that the interpretation of Section 251(1a) of the Act cannot permit a ld. CIT(A) in using language or giving directions in such a manner that the action is tantamount to setting aside. Thus, the portion extracted (supra) from the ld. CIT(A)’s order makes it clear that instead of a clear-cut quantification of the income at his level he has broadly speaking left the nitty-gritty of income determination to the assessing officer. It is felt that such action is not permissible after the amendment to the Section 251(1) of the Act (supra). Considerable strength is drawn from the case of Arun Kumar Bose vs. ITO reported in [2023] 458 ITR 32 (Calcutta) wherein the Hon'ble Calcutta High Court has held that the ld. CIT(A) cannot set aside or remand back any matter to the ld. AO. The following extracts from the said order are necessary at this stage:
“■ Section 251 deals with the powers of the Commissioner (Appeals). Sub-section (1) states that in disposing of an appeal the Commissioner (Appeals) shall have the powers as enumerated in clauses (a), (aa), (b), (c). Insofar as the case on hand, clause (a) of section 251(1) should be relevant, which states in an appeal against the order of assessment the Commissioner (Appeals) may confirm, reduce, enhance or annul the assessment. On a reading of the Finance Act, 2001 (Circular No. 14 of 2001) the Commissioner of Appeals had no power to remand the matter back to the Assessing Officer for fresh assessment in accordance with the direction given by the Commissioner (Appeals) after making such further enquiry as may be necessary. Though such power was conferred on the Commissioner (Appeals), the said provision stood omitted by the Finance Act, 2001. In the explanatory notes on the provisions relating to direct taxes, the powers of the Commissioner (Appeals) has been dealt with. [Para 3]
■ In the light of the above statutory embargo, the Commissioner could not have remanded the matter back to the Assessing Officer after having decided the case in favour of the assessee in its entirety. [Para 4]
■ The revenue points out that in the findings recorded by the Commissioner (Appeals), the expression 'prima facie' has been used which shows that the Commissioner (Appeals) had wanted a fresh exercise to be done by the Assessing Officer and, therefore, it would have been well open to the Commissioner (Appeals) to call for a remand report and thereafter to enquiry into the matter and proceed to take decision. Therefore, it is the submission that the case should be remanded back to Commissioner (Appeals) to undertake such an exercise. [Para 5]
■ Though in the order passed by the Commissioner (Appeals), the word 'prima facie' has been used, from a cumulative reading of an order passed by the Commissioner (Appeals) it is found that the case has been discussed on merits and thereafter a finding has been recorded that the Assessing Officer was not justified in making the addition and there was a positive direction to delete the addition. If such is the finding, mere use of the word 'prima facie' could not make prima facie view as the Commissioner (Appeals) has discussed the matter elaborately taking into the consideration the factual position. Before the Tribunal, the assessee had specifically raised the ground that the Commissioner (Appeals) exceeded the limits of powers statutorily bestowed as per section 251(1)(a) and grossly erred in law in restoring the case to the Assessing Officer for action in terms of the order dated 23-11-2011 passed by the Commissioner (Appeals). Though, such a specific ground raised by the appellant before the Tribunal and noted by the Tribunal in the impugned order, this aspect has not been dealt with by the Tribunal. Thus, not only the Commissioner (Appeals) committed an error of law by remanding the matter to the Assessing Officer for a fresh consideration after having held in favour of the assessee, the Tribunal also did not deal with the said issue. In the light of the statutory embargo, the order of remand passed by the Commissioner (Appeals) is not tenable in law and consequently, the same is required to be set aside as well as the order passed by the Tribunal. [Para 6] ………..
Furthermore, in another case before the Hon'ble Kerala High Court in the case of CIT vs. P. Prem Kumar reported in [2018] 404 ITR 275 (Kerala) it has been held as under:
“The Scope of Appeal & The Powers of Appellate Authority
■ Section 251 spells out the powers of the Commissioner (Appeals). [Para 29]
■ The provision empowers the appellate authority, in an appeal against an order of assessment, to confirm, reduce, enhance, or annul the assessment. Under the amended section 251, the Appellate Commissioner may confirm, reduce, enhance, or annul the assessment, but he could not refer the case back to the Assessing Officer for making a fresh assessment; nor can he direct the Officer to decide in accordance with his directions. [Para 47]”
It is clear that in this case, the Ld. CIT(A) could not have remitted the matter back to the file of Ld. AO. However, it is evident that the facts have not been thrashed out at lower levels and, therefore, we are constrained to set aside the order of Ld. CIT(A) with the finding that the remanding back was done without the authority of law and therefore to this extent the Revenue succeeds on its grounds of appeal. However, as mentioned earlier, the facts still need to be put in perspective and thus, we remand this matter back to the file of Ld. AO for an examination on the basis of material available with the assessee, some of which was filed before the Ld. CIT(A) as new evidence. We would also direct the Ld. AO to address any jurisdictional issue that the assessee may have and consider that before passing a speaking order.
In the result, the appeal of the Revenue is allowed and the cross objection of the assessee is partly allowed for statistical purposes.