The Income Tax Appellate Tribunal, Jaipur Bench, restored a revenue appeal challenging a CIT(A) order that had annulled reassessment proceedings solely based on a High Court judgment later set aside by the Supreme Court. The Tribunal directed fresh adjudication after the jurisdictional High Court reconsiders the matter in light of legislative amendments.
Background & Facts
The Genesis of the Reassessment
The assessee, Ashok Kumar Pasari, had claimed a deduction of Rs. 6,50,000 under Section 80GGC of the Income Tax Act, 1961 for a donation made to a political party. The Assessing Officer, in the assessment framed for AY 2019-20, denied the deduction, holding the donation to be a bogus accommodation entry. The deduction denial formed the basis of the assessment order.
The Writ Challenge and High Court Order
The assessee challenged the issuance of the notice under Section 148 before the Rajasthan High Court in Writ Petition No. 17037/2023, contending that the notice was issued by the Jurisdictional Assessing Officer (JAO) rather than the Faceless Assessing Officer (FAO) as required by the Faceless Reassessment Scheme, 2022. The High Court, vide order dated 01.09.2025, accepted the assessee's contention and quashed the notice under Section 148.
The CIT(A)'s Order
The National Faceless Appeal Centre (NFAC), Delhi, acting as the CIT(A), allowed the assessee's appeal and dismissed the Revenue's appeal as infructuous, relying solely on the High Court's order quashing the notice. The CIT(A) did not adjudicate the merits of the reassessment or the deduction claim.
The Supreme Court's Intervention
During the hearing before the ITAT, the Revenue brought to the Tribunal's notice that the Hon'ble Supreme Court, in ITO v. Tej Partap Singh and others (Civil Appeal No. 4716 of 2026, dated 10.04.2026), had set aside the High Court's order and remitted the matter for fresh consideration. The Supreme Court directed the High Court to decide the writ petitions afresh, considering the subsequent amendment to Section 148 by the Finance Act, 2026. The Supreme Court's order also granted liberty to the assessees to amend their writ petitions and to the Revenue to file written submissions within specified timelines.
Procedural History
AY 2019-20: Assessment framed denying deduction under Section 80GGC; Rs. 6,50,000 disallowed.
01.09.2025: Rajasthan High Court quashed Section 148 notice in Writ Petition No. 17037/2023.
07.11.2025: CIT(A) allowed assessee's appeal, dismissed Revenue's appeal as infructuous.
10.04.2026: Supreme Court set aside High Court order in Civil Appeal No. 4716 of 2026, remitted for fresh consideration.
14.07.2026: Revenue's appeal heard before ITAT Jaipur Bench.
16.07.2026: ITAT pronounced order restoring appeal for fresh adjudication.
Relief Sought
The Revenue sought adjudication of its appeal on merits, challenging the CIT(A)'s order annulling reassessment proceedings without examining the merits or the incriminating material unearthed during search operations in the RUPPs group case. The Revenue also sought restoration of the reassessment order for consideration of the deduction claim on merits.
The Legal Issue
The central question was whether the CIT(A) erred in annulling the reassessment proceedings solely on the basis of a High Court order quashing the notice under Section 148, without adjudicating the merits of the reassessment or the deduction claim, and without considering that the High Court's order had been set aside by the Supreme Court.
Arguments Presented
For the Appellant/Petitioner
The Revenue contended that the CIT(A) exceeded jurisdiction under Section 250 by annulling the reassessment proceedings instead of adjudicating the grounds of appeal on merits. It argued that the appellate jurisdiction under the Income Tax Act is distinct from writ jurisdiction and that the CIT(A) failed to examine the validity of the reassessment proceedings independent of the writ proceedings. The Revenue also emphasized that the reassessment was initiated after due compliance with Section 148A, including issuance of show-cause notice, consideration of the assessee's reply, and passing of a reasoned order.
The Revenue further argued that the CIT(A) ignored the detailed findings of the Assessing Officer based on incriminating material, including search-based evidence and statements recorded, which showed the assessee as a beneficiary of accommodation entries. It also contended that the Faceless Reassessment Scheme, 2022 is a procedural mechanism and does not divest the Assessing Officer of inherent jurisdiction under Sections 147 and 148.
For the Respondent/State
No appearance was made on behalf of the assessee before the ITAT. The Tribunal, however, noted the Supreme Court's order setting aside the High Court's judgment and proceeded to restore the appeal for fresh adjudication.
The Court's Analysis
The ITAT examined the Revenue's grounds of appeal and noted that the CIT(A) had decided the issue solely based on the High Court's order quashing the notice under Section 148. The Tribunal observed that the High Court's order had been set aside by the Supreme Court in ITO v. Tej Partap Singh and others, and that the Supreme Court had directed the High Court to pass orders afresh, considering the subsequent amendment to Section 148.
The ITAT held that the CIT(A) had not adjudicated the merits of the reassessment or the deduction claim, and that the appellate order was perverse and non-speaking. The Tribunal noted the following from the Supreme Court's order:
"Since the High Courts have primarily quashed the reassessment notices on the ground that the JAOS lacked competence to initiate such proceedings, and the very foundation of that view now stands altered by the amending legislation, the impugned judgments in favor of the assessees are set aside on this limited ground. The matters are accordingly remitted to the respective High Courts for fresh consideration."
The ITAT concluded that, in light of the Supreme Court's order, the CIT(A) ought not to have annulled the reassessment proceedings solely based on the High Court's order. The Tribunal held that the CIT(A) should have adjudicated the appeal on merits or awaited the outcome of the High Court's fresh consideration.
The Verdict
The ITAT allowed the Revenue's appeal for statistical purposes and restored the matter to the file of the CIT(A) for fresh adjudication after the jurisdictional High Court passes orders afresh, as directed by the Supreme Court. The Tribunal directed the CIT(A) to decide the appeal on merits, considering the Supreme Court's order and the subsequent legislative amendments.
What This Means For Similar Cases
Writ Orders Do Not Oust Appellate Jurisdiction
Practitioners must note that the annulment of reassessment proceedings solely based on a writ order quashing a notice under Section 148 is impermissible. Appellate authorities must adjudicate appeals on merits or await the outcome of writ proceedings, especially when the writ order is subject to appeal before a higher court.
Action Point: Always argue that appellate jurisdiction under the Income Tax Act is distinct from writ jurisdiction.
Action Point: Highlight that writ orders quashing notices do not ipso facto annul reassessment proceedings if the order is under challenge.
Compliance with Section 148A Is Non-Negotiable
The judgment underscores that reassessment proceedings initiated after due compliance with Section 148A - including issuance of show-cause notice, consideration of reply, and passing of reasoned order - cannot be annulled merely on alleged procedural irregularities. The Tribunal emphasized that the Faceless Reassessment Scheme is procedural and does not divest the Assessing Officer of jurisdiction.
Action Point: Ensure meticulous compliance with Section 148A in reassessment proceedings.
Action Point: Argue that procedural compliance under the Faceless Scheme does not vitiate the reassessment if statutory conditions are met.
Merits Must Prevail Over Procedural Technicalities
The ITAT's order highlights that appellate authorities cannot annul reassessment proceedings solely on procedural grounds without examining the merits of the case. The Tribunal directed fresh adjudication on merits, emphasizing that the CIT(A) must consider the incriminating material and the assessee's eligibility for deduction under Section 80GGC.
Action Point: Always present substantive evidence and legal arguments on merits, even if procedural irregularities are alleged.
Action Point: Argue that dismissal of appeals as infructuous without merits adjudication is impermissible.
