CIT(A) Can Set Aside Best Judgment Reassessment and Remand to AO: ITAT Delhi Upholds Order in ITO vs Vijay Kumar Thakral

Overview of the Case

The Income Tax Appellate Tribunal (ITAT), Delhi Bench, delivered a significant ruling in ITO Vs Vijay Kumar Thakral (ITA No. 2386/Del/2026) pertaining to Assessment Year 2018-19. The core issue revolved around whether the Commissioner of Income Tax (Appeals) [CIT(A)], National Faceless Appeal Centre (NFAC), had acted within its jurisdictional authority when it set aside a reassessment order and directed the Assessing Officer (AO) to undertake a fresh de novo reassessment — rather than adjudicating the appeal on merits. The Tribunal ultimately ruled in favour of the assessee, dismissing the Revenue's appeal and affirming the CIT(A)'s exercise of powers under Section 251(1)(a) read with the newly inserted proviso introduced by the Finance Act, 2024.

Background: How the Case Was Reopened

The assessee's income tax file for Assessment Year 2018-19 was reopened by the Revenue under Section 147 of the Income-tax Act, 1961. The trigger for reopening was specific intelligence flagged through the CBDT's Risk Management Strategy via the ITBA software, classifying the case under the 'High Risk CRI/VRU' category.

The information available with the department indicated that a certain individual, Rajesh Mittal, along with his associates, was operating and controlling 19 firms — all allegedly engaged in issuing bogus purchase bills without any actual supply of goods. One such entity, M/s Shree Bankey Bihari Enterprises (GSTIN: 06AMCPJ6709R1ZK), was identified as a firm from which the assessee had allegedly received accommodation entries worth Rs. 10,08,759/-. The assessee had originally filed a return of income on 24.09.2018 under Section 139(1) for Assessment Year 2018-19, declaring total income of Rs. 10,50,200/-. The AO further observed that the assessee had declared purchases amounting to Rs. 5,33,94,750/- and profit before tax of Rs. 11,66,031/-, which appeared disproportionately low relative to the gross receipts.

Chronology of Notices and Non-Compliance

What is particularly striking about this case is the sustained and repeated non-compliance by the assessee at every stage of the reassessment proceedings. The sequence of events unfolded as follows:

  1. 08.03.2022 – Show cause notice issued under Section 148A(b) — no reply received from the assessee.
  2. 29.03.2022 – Notice under Section 148 issued — assessee failed to file any return of income in response.
  3. 31.08.2022 – Notice under Section 142(1) issued — no reply.
  4. 29.09.2022 – First reminder issued — no reply.
  5. 01.12.2022 – Second reminder issued — no reply.
  6. 05.01.2023 – Third reminder issued — no reply.
  7. 13.01.2023 – AU-1 format communication issued — no reply.
  8. 19.01.2023 – Show cause notice issued — only a partial and vague reply received.
  9. 23.01.2023 – Clarification letter issued — no reply.
  10. 31.01.2023 – Reminder to clarification letter — no reply.
  11. 07.02.2023 – Final show cause notice issued — no reply.

The assessee's only partial submission during the reassessment proceedings indicated that purchases of Rs. 10,08,759/- were made during Financial Year 2017-18 through an agent, who had arranged the invoices and bills. Payments, the assessee claimed, were routed through banking channels to a bank account specified by the agent. The assessee further stated that upon being notified by the GST department that M/s Shree Bankey Bihari Enterprises was a bogus/fake entity, it had reversed the input tax credit along with applicable interest and penalties.