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2025 (6) TMI 401 - AT - Income TaxCIT(A) justification in setting aside the assessment order passed u/s 143(3) r/w Section 144C(3) for making a fresh assessment - HELD THAT - Admittedly it is a matter of fact borne from the record that the A.O. in the present case had framed the assessment vide his order passed u/s 143(3) r.w.s.144C(3) of the Act dated 24-05-2024. We find that the legislature in all its wisdom had by the amendment made available in the Statute vide the Finance (No.2) Act 2024 w.e.f 01.10.2024 had inserted a Proviso to Section 251(1)(a) of the Act wherein the CIT(A) has been vested with the power to set aside the assessment and refer the case back to the A.O. for making a fresh assessment where such appeal is against the order made u/s 144 of the Act. Although the Proviso to Section 251(1)(a) vests jurisdiction with the CIT(A) to set aside the assessment and refer the case back to the A.O. for making a fresh assessment but the power to exercise such power is limited only to a case where the order of the assessment is made under Section 144 of the Act. As the Legislature has not extended the aforesaid jurisdiction to set aside the assessment in a case where the same had been framed by the A.O. u/s 143(3) of the Act therefore we find substance in the claim of the revenue that the CIT(A) had exceeded the jurisdiction vested with him as per the Proviso to Section 251(1)(a) of the Act and wrongly set aside the assessment that was framed by the A.O. under Section 143(3) r.w.s 144C(3) of the Act dated 24-05-2024 to his file for making a fresh assessment. We thus find substance in the Ld. DR s claim that as the CIT(A) had traversed beyond the scope of his jurisdiction and set aside the matter to the file of A.O. in the garb of the powers vested with him as per the post-amended Section 251(1) of the Act therefore the same cannot be sustained. We set aside the order of CIT(A) and restore the matter to his file with a direction to re-adjudicate the appeal - Appeal filed by the assessee firm is allowed for statistical purposes
The core legal questions considered in this appeal are:
1. Whether the Commissioner of Income-Tax (Appeals) ("CIT(A)") was justified in setting aside the assessment order passed by the Assessing Officer ("A.O.") under Section 143(3) read with Section 144C(3) of the Income Tax Act, 1961 ("the Act") for making a fresh assessment. 2. Whether the CIT(A) had jurisdiction to set aside the assessment order and refer the matter back to the A.O. under the powers granted by the proviso to Section 251(1)(a) of the Act, as amended by the Finance (No.2) Act, 2024, when the assessment was not made under Section 144 but under Section 143(3) read with 144C(3). Issue-wise Detailed Analysis Issue 1: Legality and propriety of the CIT(A)'s order setting aside the assessment and directing a fresh assessment Relevant legal framework and precedents: The assessment was framed by the A.O. under Section 143(3) read with Section 144C(3) of the Act. Section 143(3) empowers the A.O. to make a regular assessment after scrutiny, while Section 144C(3) relates to assessment orders passed following dispute resolution proceedings under the Dispute Resolution Panel scheme. The CIT(A) invoked the powers under Section 251(1)(a), as amended by the Finance (No.2) Act, 2024, which permits the CIT(A) to set aside an assessment and refer the case back to the A.O. for fresh assessment where the appeal is against an order made under Section 144 of the Act. Court's interpretation and reasoning: The CIT(A) noted that the assessment order was passed ex parte due to the assessee's failure to furnish requisite information regarding cost of acquisition and other relevant documents related to the sale of immovable properties. The CIT(A) relied on the post-amendment proviso to Section 251(1)(a), effective from 1-10-2024, to set aside the order and remit the matter for fresh assessment with a direction to provide the assessee an opportunity of being heard. Key evidence and findings: The A.O. had recharacterized the declared Long Term Capital Gains (LTCG) as Short Term Capital Gains (STCG) amounting to Rs. 2,15,25,000/- due to non-furnishing of documents by the assessee. The CIT(A) observed the assessment was ex parte and thus set aside the assessment order for fresh adjudication. Application of law to facts: The CIT(A) applied the newly inserted proviso to Section 251(1)(a) to justify setting aside the assessment and remitting the matter to the A.O. However, the proviso explicitly limits this power to assessments made under Section 144 only. Treatment of competing arguments: The Revenue contended that the CIT(A) had no jurisdiction to set aside the assessment as it was framed under Section 143(3) read with 144C(3), not under Section 144. The assessee supported the CIT(A)'s order relying on the amended Section 251(1)(a). Conclusion: While the CIT(A) was correct in emphasizing the need for a fair opportunity to the assessee, the power to set aside and remit the assessment is statutorily confined to orders passed under Section 144 alone and does not extend to assessments under Section 143(3) read with 144C(3). Issue 2: Jurisdictional scope of the proviso to Section 251(1)(a) of the Act post-amendment Relevant legal framework and precedents: Section 251(1)(a) of the Act empowers the CIT(A) to confirm, reduce, enhance, or annul an assessment in appeal. The proviso, inserted by the Finance (No.2) Act, 2024, w.e.f. 01-10-2024, grants an additional power to set aside an assessment and remit it to the A.O. for fresh assessment, but only where the appeal is against an order made under Section 144. Court's interpretation and reasoning: The Tribunal carefully examined the statutory language and noted that the proviso's jurisdictional scope is expressly limited to assessments under Section 144. Since the assessment in the present case was framed under Section 143(3) read with 144C(3), the CIT(A) lacked the statutory authority to set aside the assessment order and remit it. Key evidence and findings: The assessment order clearly stated Section 143(3) r.w.s 144C(3) as the basis for assessment. The CIT(A) had relied on the proviso to Section 251(1)(a) without considering this limitation. Application of law to facts: The Tribunal applied the principle of strict construction of statutory provisions conferring jurisdictional powers and held that the CIT(A)'s power to set aside and remit is not available in cases where the assessment is not under Section 144. Treatment of competing arguments: The Revenue's argument that the CIT(A) exceeded jurisdiction was accepted, while the assessee's reliance on the amended proviso was rejected as misplaced. Conclusion: The CIT(A) exceeded jurisdiction by setting aside the assessment framed under Section 143(3) r.w.s 144C(3) relying on the proviso to Section 251(1)(a), which is confined to Section 144 assessments only. Issue 3: Procedural fairness and opportunity of hearing Relevant legal framework and precedents: Principles of natural justice require that an assessee be given a reasonable opportunity of being heard before adverse orders are passed. The CIT(A) emphasized this in setting aside the ex parte assessment order. Court's interpretation and reasoning: While the Tribunal upheld the importance of procedural fairness, it clarified that the remedy lies in the appellate process and not in the CIT(A)'s power to set aside the assessment under Section 251(1)(a) where jurisdiction is absent. Key evidence and findings: The A.O. passed the assessment order ex parte due to non-furnishing of documents by the assessee. Application of law to facts: The Tribunal directed the CIT(A), upon remand, to afford a reasonable opportunity of hearing to the assessee in adjudicating the appeal. Treatment of competing arguments: The assessee's plea for fresh assessment with opportunity of hearing was acknowledged but the procedural remedy was to be exercised within the appellate jurisdiction and not by setting aside the assessment order without jurisdiction. Conclusion: Procedural fairness must be ensured during appeal proceedings, but the CIT(A) must act within the scope of jurisdiction granted by law. Significant Holdings "Although the 'Proviso' to Section 251(1)(a) vests jurisdiction with the CIT(A) to set aside the assessment and refer the case back to the A.O. for making a fresh assessment, but the power to exercise such power is limited only to a case where the order of the assessment is made under Section 144 of the Act." "As the Legislature has not extended the aforesaid jurisdiction to set aside the assessment in a case where the same had been framed by the A.O. under Section 143(3) of the Act, therefore, we find substance in the claim of the revenue that the CIT(A) had exceeded the jurisdiction vested with him as per the 'Proviso' to Section 251(1)(a) of the Act and wrongly set aside the assessment." "We thus, in terms of our aforesaid observations, find substance in the Ld. DR's claim that as the CIT(A) had traversed beyond the scope of his jurisdiction and set aside the matter to the file of A.O. in the garb of the powers vested with him as per the post-amended Section 251(1) of the Act, therefore, the same cannot be sustained." Core principles established include:
Final determination on the issues:
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