CIT(A) empowered to remand best judgment cases back to AO for fresh assessment

CIT(A) empowered to remand the best judgment cases back to the Assessing Officer for making a fresh assessment.

Union Budget 2024-25 has proposed to empower the CIT(Appeals) to set aside and remand the best judgment cases back to the Assessing Officer for making a fresh assessment.

Currently, CIT(A) do not have powers to set aside or remand the case back to the Assessing Officer (AO). Before 01.06.2001, section 251(1)(a) provided that CIT-A may set aside the assessment and refer the case back to the Assessing Officer for making a fresh assessment in accordance with the directions given by the Commissioner (Appeals) and after making such further inquiry as may be necessary, the Assessing Officer shall thereupon proceed to make such fresh assessment and determine, where necessary, the amount of tax payable on the basis of such fresh assessment. However the power of remand was omitted by the Finance Act, 2001 wef 01.06.2001.

The existing provisions of section 251 of the Act specify the powers of the Joint Commissioner (Appeals) or the Commissioner (Appeals). Further, sub-section (1) of the said section provides that Commissioner (Appeals) shall have, inter-alia, the following powers in disposing of an appeal:

(a) He may confirm, reduce, enhance or annul the assessment, in the case of an appeal against an order of assessment.

(b) He may confirm, cancel, or vary to enhance or reduce, the penalty order, in the case of an appeal against an order imposing a penalty.

Further, sub-section (4) of section 250 of the Act prescribes that Commissioner (Appeals) may seek the report from the Assessing Officer after making further inquiry, before disposing any appeal.

The memorandum explaining the provisions of Finance Bill 2024 has stated that it was observed that in the best judgement cases, taxpayers remain non-responsive to the letters or notices issued by the Faceless Assessing Officer. However, they directly file the appeal to Commissioner (Appeals) against the relevant assessment order which has created huge pendency of appeals and disputed tax demands at the Commissioner (Appeals) stage.

Therefore, it has been proposed that the cases where assessment order was passed as best judgement case under section 144 of the Act, Commissioner (Appeals) shall be empowered to set aside the assessment and refer the case back to the Assessing Officer for making a fresh assessment. Further, it is proposed to make consequential amendment in section 153(3) of the Act in order to provide the time limit for disposal of cases which are set aside by the Commissioner (Appeals).

This amendment will take effect from the 1st day of October, 2024. It will be applicable to appellate orders passed by the Commissioner (Appeals) on or after 01.10.2024.

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