Facts of the Case

The assessee, Suresh Jat, did not file a return of income for Assessment Year 2016-17 despite having taxable income. Based on analysis of financial transactions reflected in the Income-tax Department database, reassessment proceedings were initiated. Notices under Section 148A(b) dated 21.02.2023 and subsequently under Section 148 dated 28.03.2023 were issued and served through the portal and one notice by speed post. Due to non-compliance, the Assessing Officer completed reassessment ex parte under Sections 147 read with 144/144B on 24.02.2024, determining total income at ₹9,84,35,092. This included addition of ₹9,80,10,563 as unexplained money under Section 69A read with Section 115BBE on account of cash deposits in bank accounts with Axis Bank, State Bank of India and Bank of Baroda, addition of ₹4,19,451 as interest income from Shri Om Prakash Gupta, and ₹5,078 as commission/brokerage income from HDFC Bank. The CIT(A), by order dated 15.07.2025, dismissed the appeal and confirmed the additions, holding that no details were furnished either before the Assessing Officer or during appellate proceedings. Aggrieved, the assessee filed a second appeal before the Tribunal.

Issues Involved

Whether the ex parte reassessment under Sections 147/144 without adjudication on merits was sustainable, whether the CIT(A) was justified in refusing to set aside the assessment merely because it was passed under Section 144, whether principles of natural justice were violated, and whether the matter required remand for determination of real income on merits.

Petitioner’s Arguments

The assessee contended that the assessment order was ex parte and therefore ought to have been set aside by the CIT(A) under Section 251. It was argued that notices were not effectively received as they were allegedly sent to the email of a former counsel. The assessee submitted that voluminous paper books were now filed before the Tribunal and factual verification was required, warranting remand to the Assessing Officer for fresh adjudication on merits.

Respondent’s Arguments

The Revenue argued that notices were duly served through the portal and one notice was also sent by speed post. It was contended that the assessee failed to furnish any explanation at any stage and that dismissal of the first appeal was in accordance with law. The Revenue submitted that merely because an order is passed under Section 144, it does not mandate remand by the CIT(A), and that the assessee remained non-compliant throughout.

Court Order / Findings

The ITAT Indore held that the mere fact that the assessment was completed under Section 144 does not create an automatic right of remand, and that the proviso to Section 251(1)(a) uses the word “may”, conferring discretion on the CIT(A). The Tribunal rejected the contention that every assessment under Section 144 must be set aside as a matter of right. However, the Tribunal observed that in the ultimate analysis, neither the Assessing Officer nor the CIT(A) computed the real income of the assessee on merits, and the assessment was framed solely on account of non-compliance. Considering the magnitude of additions and in order to meet the ends of justice, the Tribunal held that real income must be assessed on merits. Accordingly, the Tribunal set aside the impugned appellate order and remanded the matter to the file of the Assessing Officer for de novo adjudication. The Tribunal imposed a cost of ₹5,000 on the assessee, payable to the Department, as a condition precedent, and directed the Assessing Officer to pass a reasoned and speaking order after granting proper opportunity.

Important Clarification

The Tribunal clarified that while non-compliance cannot be encouraged and remand is not automatic in every ex parte case, assessment must ultimately result in determination of real income on merits. Discretionary powers of the CIT(A) under Section 251 cannot be converted into a mandatory rule, and remand may be ordered by the Tribunal where justice so demands, subject to conditions.

Final Outcome

The appeal filed by the assessee was allowed for statistical purposes, the impugned order of the CIT(A) was set aside, and the matter was remanded to the file of the Assessing Officer for de novo adjudication on merits after payment of cost of ₹5,000 and after providing due opportunity of hearing to the assessee.

Link to Download Order- https://www.mytaxexpert.co.in/uploads/1769159318_SURESHJATBADNAWARVS.THEINCOMETAXOFFICERDHARDHAR.pdf

 

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