Faceless Reassessment Treated As Best Judgment: ITAT Delhi Confirms CIT(A)’s Remand Powers

1. Background and Context

The Delhi Bench of the Income Tax Appellate Tribunal in the case of ITO Vs Bharat Bhushan examined a significant procedural question arising under the faceless assessment regime – whether the first appellate authority, i.e., the CIT(A), can set aside a reassessment order and remit the matter back to the Assessing Officer when such reassessment has, in substance, been completed as a best judgment assessment under Section 144, even though the order is formally passed under Section 147 read with Section 144B.

The Revenue had challenged the action of the CIT(A) in remanding the proceedings to the Assessing Officer for a fresh decision after admitting additional evidence. The Tribunal ultimately dismissed the Revenue’s appeal and upheld the order of the CIT(A) on the basis of the amended proviso to Section 251(1)(a) inserted by the Finance Act, 2024 with effect from 01.10.2024.

2. Essential Facts of the Case

2.1 Non-filing of original return and risk-based selection

  • The assessee had not filed a return of income under Section 139(1) for the relevant assessment year.

  • Using data on the Insight Portal under the Risk Management System for “Non-filing of Return – PAN Cases,” the Department flagged the case for reassessment.

  • The information available showed the following financial activities:

    • Substantial credit card payments
    • A small amount reported in TDS statements
    • Cash deposits in a savings bank account

These transactions totalled Rs. 25,24,017, indicating potentially taxable activities without a corresponding return of income.

2.2 Specific financial information relied upon

The Assessing Officer extracted the following details from the portal:

  1. Credit card payments – Standard Chartered Bank: Rs. 13,57,841
  2. Credit card payments – HDFC Bank Limited: Rs. 1,347
  3. TDS Statement – Payments to contractors (Section 194C) by ANI Technologies Private Limited: Rs. 229
  4. Cash deposits in a savings account with YES BANK LIMITED (Account No. 024091800008066, Gurgaon branch): Rs. 11,64,600

Total transactions: Rs. 25,24,017.

3. Initiation of Reassessment Proceedings

3.1 Notice under Section 148 and belated return

  1. The Assessing Officer issued a notice under Section 148 dated 07.03.2024, calling upon the assessee to file a return within 90 days.
  2. The assessee eventually filed a return on 12.08.2024, disclosing income of Rs. 2,43,430 in compliance with the Section 148 notice, but beyond the period initially granted.

3.2 Subsequent notices under Sections 143(2) and 142(1)

  • A notice under Section 143(2) dated 26.09.2024 was issued but remained uncomplied with.
  • Several notices under Section 142(1) followed:
    • 11.06.2024 – the assessee sought an adjournment.
    • 06.08.2024, 26.09.2024 and 22.01.2025 – only partial responses were furnished.

In these limited replies, the assessee explained that:

  • He was engaged in sale and purchase of Amway products.
  • He did not maintain books of account or a formal cash flow statement.
  • Cash received from sale of Amway products was deposited into his bank accounts.
  • Credit card payments were said to be funded partly from such cash deposits and partly from loans and small credits obtained from banks and NBFCs.
  • Certain bank statements were uploaded, but the Assessing Officer recorded that the responses were incomplete and did not fully explain the source and nature of the impugned transactions.

4. Show Cause under Section 144 and Best Judgment Reassessment

4.1 Issuance of show cause notice under Section 144

Due to persistent non-compliance and incomplete responses, the Assessing Officer escalated the matter by issuing a show cause notice under Section 144 dated 31.01.2025. In this notice, the assessee was called upon to explain: