Income Tax Officer vs Shri Sudhir Kumar

This appeal in ITA No.2719/Del/2026 for assessment year 2020-21 has arisen from the appellate order dated 21.01.2026 passed by the learned CIT(A), NFAC, New Delhi(DIN & Order No. ITBA/NFAC/S/250/2025-26/ 1084999809(1)) under Section 250 of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) , which appeal in turn, has arisen from the re-assessment order dated 26.12.2024 passed by the AO , Assessment Unit, Income Tax Department , under Section 147 read with Section 144B of the Act(DIN : ITBA/AST/S/147/2024-25/1071592665(1)).

The brief facts of the case are that based on the information available in insight portal , the case has been identified and flagged by the Directorate of Income-tax (System), CBDT in accordance with the Risk Management Strategy formulated by CBDT , and the case of the assessee was reopened by the Revenue by invoking provisions of Section 147 of the Act for the reasons as were mentioned in paragraph No.3.2.1 of the re-assessment order, as under:-

Aggrieved, the assessee filed first appeal before the learned CIT(A). The assessee participated in the appellate proceedings, and submitted its response wherein it was submitted before ld. CIT(A) that the aforesaid purchases made by the assessee to the tune of Rs. 11,27,621/- from V K Industries and Shri Banke Bihari Industries are genuine and duly supported by GST invoices. These GST bills were shown in GSTR 2B form filed with GST Authorities. The assessee submitted that proprietor of the above 2 concern are Shri Ajay JIndal and Shri Amit Gupta respectively. The assessee submitted that the averment made by the AO that Shri Saurabh Gupta and Ashok Khari are related to these parties is false. The assessee submitted that payments for purchases were made through bank transfer. It was submitted that there is no evidence produced by the Assessing Officer which can show that these purchases were bogus or any cash was received back by the assessee. The learned CIT(A), after considering the reply of the assessee, observed that the reassessment in the instant case was completed u/s 147 read with Section 144 as per the best judgment of the AO. The AO had completed the reassessment u/s 144 as the assessee failed to respond to the notices issued by the AO , and to submit necessary details. The ld. CIT(A) observed that the assessee is contending that the AO passed reassessment order without providing sufficient opportunity of being heard to the assessee. The ld. CIT(A) observed that the assessee has explained before him, the reasons for said non compliances before the AO. The ld. CIT(A) observed that the assessee has submitted copy of e-way bill which are the crucial evidence to resolve the dispute between rival parties. Thus, keeping in view the principle of natural justice, the learned CIT(A) after invoking powers vested in him u/s 251(1)(a) set aside the matter back to the file of the Assessing Officer for making a fresh assessment after affording adequate opportunity of being heard to the assessee.

The Revenue is aggrieved by the decision of learned CIT(A) to set aside the matter back to the file of the AO for fresh assessment instead of adjudicating the appeal on merits, and has now filed the appeal with the Tribunal. The main bone of contention of the Revenue is that the learned CIT(A) has wrongly assumed power under Section 251(1)(a) of the Act and set aside the matter back to the file of the Assessing Officer but rather, the learned CIT(A) should have decided the appeal on merits. The learned Senior DR submitted that the appellate order of learned CIT(A) be set aside and the matter be restored to the file of the learned CIT(A) for deciding the appeal on merits in accordance with law.

I have heard ld. Sr. DR and perused the entire material on record. Short controversy in this appeal is that whether keeping in view facts and circumstances of the case, ld. CIT(A) was empowered to set aside the matter back to the file of the ld. AO for fresh determination instead of deciding the issue on merits in accordance with law. It is pertinent to mention here that reassessment order was passed under faceless assessment regime. I have observed that that during the course of reassessment proceedings , the assessee has not submitted complete replies to the notices issued by the AO from time to time under Section 142(1) of the Act, and only part replies were submitted by the assessee before the AO. The non compliances by the assessee to the notices issued by the AO u/s 142(1) of the 1961 Act, led AO to issue SCN’s u/s 144. The assessee did not submitted complete reply to the first Show Cause Notice issued by the AO u/s 144 of the 1961 Act. There was non compliance to the second SCN issued by the AO. The details are enumerated in the para 2.2 above and are reproduced again even at the cost of repetition. Notice under Section 148 dated 30^th March, 2024 was issued by the Assessing Officer to the assessee after obtaining approval of the appropriate authority. The assessee filed return of income in pursuance to notice issued by the AO u/s 148, declaring income of Rs. 6,70,040/- which was the same income as was declared by the assessee in his original return of income.The Assessing Officer, during the course of reassessment proceedings, issued notice under Section 142(1) of the Act dated 28.08.2024, to which assessee submitted part reply. The Assessing Officer issued further notice under Section 142(1) dated 09.10.2024 along with detailed questionnaire, to which the assessee did not submit any response/reply. The Assessing Officer issued show cause notice dated 09.12.2024, to which the assessee submitted part reply. Another show cause notice dated 17.12.2024 was issued by the Assessing Officer to the assessee, but there was no response/reply by the assessee. The assessee had filed original return of income on 21.11.2020 showing turnover of Rs. 89,26,220/- and income of Rs. 6,70,040/- by availing presumptive scheme of taxation under Section 44AD of the Act. There was an information received by the AO that the assessee was a beneficiary of transactions with Shri Saurabh Gupta and Shri Akash Khari totaling to Rs. 11,11,560/-. The assessee was asked by the AO to explain its dealing in respect of the purchases made from Shri Saurabh Gupta and Shri Akash Khari , but the assessee submitted that he does not know any of these persons. As per the AO, the purchases made by the assessee from Shri Saurabh Gupta and Shri Akash Khari are bogus, and the assessee is beneficiary of these bogus purchases. The AO observed that the assessee has also made payments to the aforesaid persons from his bank accounts , but still the assessee has stated that the assessee does not know these persons. The Assessing Officer, in the absence of satisfactory response/replies from the assessee, made the addition of Rs. 11,27,621/- to the income of the assessee with respect to alleged bogus purchases made by the assessee from Shri Saurabh Gupta( V K Industries) and Shri Akash Khari (Shri Bankey Bihari Industries), although the assessee had denied the transactions with the said parties. The Assessing Officer passed reassessment order dated 26^th December, 2025 under Section 147 read with Section 144B of the Act, under the faceless assessment scheme. Thus, as per provisions of Section of Section 144 of the 1961 Act, if the notices issued u/s 142(1) remained un-complied with , the AO is mandated to issue SCN u/s 144 to the assessee , and noncompliance by the assessee to such SCN will enable/empowers AO to pass best judgment assessment u/s 144 of the Act. I have observed that Section 144B deal with faceless assessment regime. I have also observed that Section 144B(1) clearly stipulates that notwithstanding anything to the contrary in any other provision of the 1961 Act, the assessment, reassessment or re-computation u/s 143(3) or u/s 144 or Section 147 , as the case may be , with respect to the cases referred to in Section 144B(2) , shall be made in a faceless manner as per the following procedure, namely:-………………. . Thus, Section 144B , inter-alia, covers best judgment reassessment u/s 144 r.w.s. 147 to be made in a faceless manner. Section 144B(2)(iii) refers to service of notice to the assessee through national faceless assessment centre u/s 143(2) or 142(1) , and the assessee to file response to such notice. Section 144B(2)(viii) read with 144B(2)(ix) refers to consequences of failure to submit response to notice issued by the AO u/s 142(1) or 143(2). Such failure will lead to issuance by the AO of SCN u/s 144. Section 144B(2)(xiv) and 144B(2)(xv) provides for consequences of failure by the assessee to file response to SCN issued u/s 144 , which will lead to preparing an income or loss determination proposal based on all relevant material. Further, procedure till passing of assessment or reassessment order is stipulated u/s 144B under faceless assessment scheme. Thus, procedures and manner in which faceless assessment shall be governed is stipulated u/s 144B. Coming back, the reassessment framed by the AO in the instant case is a best judgment re-assessment u/s 144 while governing procedure under faceless regime is stipulated u/s 144B, wherein in the instant case the assessee has remained non-compliant with notices issued by the AO u/s 142(1) as well SCN issued by the AO u/s 144. Reference is drawn to the recent amendment to Section 251(1)(a) wherein proviso was added by Finance Act, 2024 wef 01.10.2024 , which empowers ld. CIT(A) to set aside the assessment and refer the case back to the AO for making a fresh assessment, in the cases where appeal before ld. CIT(A) is against an order of assessment made u/s 144. I hold that ld. CIT(A) has in the instant case set aside the reassessment framed by the AO as the reassessment order was the best judgment assessment u/s 144 as the assessee did not comply with the notices issued by the AO u/s 142(1) as well to the SCN issued by the AO u/s 144 of the 1961 Act, although in the reassessment order it is mentioned that the same is passed u/s 147 r.ws. 144B being passed under faceless regime.Thus, the ld. CIT(A) rightly exercised his powers u/s 251(1)(a) read with proviso. During appellate proceedings before ld. CIT(A), the assessee has filed additional evidence by way of E-bill under GST laws as well the assessee has submitted that the AO passed the reassessment order without complying with principles of natural justice. Thus, the appeal of the Revenue lacks merit and is accordingly, dismissed. I order accordingly.

In the result, the appeal of the Revenue is dismissed.