CIT(A) must adjudicate jurisdictional defects in reassessment before remanding under S.251(1)(a) proviso; cannot bypass DIN, limitation, procedural flaws.

ORDER

PER RAVISH SOOD, JM:

The present appeal filed by the assessee is directed against the order passed by the CIT(Appeals), dated 20.02.2025, which in turn arises from the order passed by the AO under Section 147 r.w.s. 144 r.w.s 144B of the Income tax Act, 1961 (for short, “Act”), dated 20.03.2023, for the Assessment Year 2016-17. The assessee has assailed the impugned order of the CIT(Appeals) on the following revised grounds of appeal before us:

“1. The Ld. CIT(A) erred in law and on facts in upholding the reassessment order passed by the Assessing Officer under section 147 r.w.s. 144 and section 144B dated 20.03.2023, without properly appreciating the facts and legal submissions made by the appellant and thereby sustaining an order which is contrary to the provisions of the Income-tax Act, 1961 and the principles of natural justice.

2. The Ld. AO erred in treating Rs. 22,10,000/- as unexplained investment u/s 69 and taxing it u/s 115BBE solely on the basis of information from Kapil Group, without verifying the correct quantum, flow of funds, or the appellant's explanation and supporting records; the Ld. CIT(A) erred in not adjudicating this factual issue on merits and instead remanding the matter, rendering the addition effectively sustained.

3. The Ld. AO erred in fact and in law in observing that TDS was deducted on the alleged investment of Rs. 22,10,000/- by Kapil Group and treating the same as escapement, whereas TDS was deducted only on interest income of Rs. 55,474/- which was duly offered to tax; the Ld. CIT(A) failed to appreciate this patent factual mistake while sustaining the reassessment framework.

4. The Ld. AO erred in issuing notice u/s 148 dated 29.07.2022 without a valid DIN and without adhering to the CBDT DIN circular, thereby vitiating the jurisdiction and rendering the entire reassessment void ab initio; the Ld. CIT(A) failed to consider this serious procedural infirmity and rejected the legal ground.

5. Without prejudice, the Ld. AO erred in invoking Section 149(1)(b) read with CBDT Instruction No. 1/2022 for A.Y. 2016-17 even though the alleged escaped income is only Rs. 22,10,000/-, below the Rs. 50 lakh thresholds prescribed for extended limitation, and the notice is thus time-barred; the Ld. CIT(A) erred in upholding the reopening despite this jurisdictional bar.

6. The learned CIT(A) erred in law in sustaining the reassessment proceedings initiated by the learned Assessing Officer without properly appreciating that, though the reopening for A.Y. 2016-17 may not be time-barred under the erstwhile provisions, the reassessment initiated after 01.04.2021 was required to be examined strictly in accordance with the substituted provisions of sections 147 to 151 introduced by the Finance Act, 2021, including sections 148A and 149, and therefore the notice issued under section 148 and the consequential order passed under section 147 r.w.s. 144 are liable to be held invalid in law.

7. The Ld. AO erred in law and on facts in relying mechanically on third-party information from Kapil Group and "Insight" data without supplying incriminating material, conducting independent verification, or confronting the appellant with the underlying documents, thus violating principles of natural justice; the Ld. CIT(A) erred in treating such information as sufficient basis to uphold reopening and remand back to the Ld. AO for fresh reassessment.

8. The Ld. CIT(A) further erred in dismissing the appellant's legal grounds (including invalid notice, limitation, and non-compliance with CBDT Instruction No. 1/2022) while invoking the new proviso to Section 251(1)(a) to set aside the assessment, effectively sustaining the jurisdictional defects instead of annulling the assessment in toto.

9. The appellant craves leave to add, alter, amend, or withdraw any of