Object of assessment proceedings is not to find empirically correct solution on every fact issue – HC

It can never be the object of assessment proceedings to find an empirically, absolutely correct solution on every fact issue – High Court

In a recent judgment, Hon’ble High Court has held that assessment proceedings are summary that must be concluded in a time bound manner. While full consideration must be offered to the fact issues involved in the assessment, it can never be the object of assessment proceedings to find an empirically, absolutely correct solution on every fact issue.

ABCAUS Case Law Citation:
5189 (2026) (07) abacus.in HC

The case of the appellant assessee was selected for scrutiny assessment and the assessment was completed by the Assessing Officer (AO) ex-parte u/s 144 of the Income Tax Act, 1961 (the Act) by inter alia making addition u/s 68 on account of alleged cash deposits in Bank.

The First Appellate Authority set aside the assessment order passed u/s 144 for fresh assessment. The assessee challenged the order of the CIT(A) before the Tribunal on the ground that CIT(A) instead of setting aside the order should have passed an order on merits.

The Tribunal observed that assessee had filed additional evidences by taking recourse to Rule 46A and remand report was received by the CIT(A) and thereby he instead of reaching conclusion on its own has set aside the assessment order for making fresh assessment by the AO.

The Tribunal observed that before the CIT(A) the assessee had explained the reasons for failure to appear in the assessment proceedings explaining that notices were issued on an email address which belongs to an employee working with a sister concern and he had further met an accident and was critically ill during the relevant period when the assessment u/s 144 of the Act was completed.

The Tribunal further observed that as per remand report the Assessing Officer admitted that the one of the impugned bank A/c did not belong to the assessee. With respect to another bank account, the assessee had furnished additional evidences and asserted that these cash deposits were out of cash sales made during the year and assessee had furnished the details of sales of her proprietorship. The AO in the remand report had noted that most of the sales made by the assessee were in cash.

The Tribunal opined that once assessee had taken recourse of Rule 46A of the Income Tax Rules 1962 and Assessing Officer was called upon to file remand report and who after verification filed elaborate remand report which has been duly considered and recorded in the impugned order of the First Appellate Authority, then, there was no reason or justification that the First Appellate Authority should have set aside the assessment order for passing a fresh assessment order thereby giving fresh lease of life in the hands of Assessing Officer.

The Tribunal opined that merely because the assessment is under section 144 of the Act, the power to set aside assessment for fresh assessment, as now introduced, should not be exercised else it will only chock the tax adjudication mechanism.

The Tribunal further observed that in the succeeding year AY, proceeding u/s 148A of the Act were initiated for cash deposits and assessment order showed that the cash deposit in the bank account had been accepted as business receipt and the return of income has been accepted that justified the contention of the assessee that nature of the business of the assessee involves cash sale model and further verification of any of the facts other than those considered at the time of remand report was unnecessary. 

The Tribunal held that in the facts and circumstances the remand report of the Assessing Officer, there was no question of fresh assessment after reverification.

Consequently, the appeal was allowed and the impugned order of CIT(A) was quashed and impugned additions were deleted. Aggrieved by the Tribunal order, the Revenue challenged it before the Hon’ble High Court.

The Hon’ble High Court observed that there was no merit in the revenue’s appeal inasmuch as ground of challenge raised was hyper-technical. Admittedly, while passing the order, the CIT(A) had before it – remand report on the fact issues, as noted by the Tribunal. Those fact issues were found in favour of the assessee in the remand report and, in any case, no adverse fact was reported with respect to deposits made in the Bank. Also, no adverse fact was reported on any amount deposited in excess of the amount disclosed by the assessee.

The Hon’ble High Court stated that by very nature, proceedings of assessment are summary that must be concluded in a time bound manner. While full consideration must be offered to the fact issues involved in the assessment, it can never be the object of assessment proceedings to find an empirically, absolutely correct solution on every fact issue. The core issue that had arisen in this case was substantively examined through remand report. The Tribunal had taken note of the same. No adverse fact was brought before the Tribunal which might have warranted sustenance to the order of the remand made by the first appeal authority. No patent error of law had been shown to exist in the order of the Tribunal as may warrant hyper-technical view pressed by the revenue to be accepted in the present appeal. That appeal may arise on a substantial question of law, only.

Accordingly, the appeal of the Revenue was dismissed.

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