[Opinion] Limitation On the Power to Set Aside Matter for Fresh Determination

Ramesh Chander – [2025] 181 taxmann.com 277 (Article)

1. Introduction

It is not very unusual for an Appeal Court or Authority to set aside the matter back to the lower Court/Authority for fresh trial or determination. It is not the law that the Appeal Courts or Authority enjoy absolute discretion to do so. Under the law as well as because of the court laid down norms such a set aside is possible only in limited circumstances. Even under the Income Tax Act, 1961 these restrictions are equally applicable both in the context of the First Appellate Authority as well as the Appellate Tribunal.

2. Position of Law under the Income Tax Act

2.1 “Section 251 – Powers of the Joint Commissioner (Appeals) or the Commissioner (Appeals)

(1) In disposing of appeal, the Commissioner (Appeals) shall have the following powers:

(a) in an appeal against an order of assessment, he may confirm, reduce, enhance or annul the assessment;

Provided that where such appeal is against an order of assessment made under section 144, he may set aside the assessment and refer the case back to the Assessing Officer for making a fresh assessment;”

It is important to note that proviso enable the Commissioner of Income Tax (Appeals) {for short, hereinafter also referred to as ‘the CIT(A)} to set aside assessment and refer the case back to the Assessing Officer for making a fresh assessment was not there prior to 01-10-2024.

2.2 Relevant Provisions in the Context of the Income Tax Appellate Tribunal are Found Contained u/s 254(1) of the Act Which Read As Under

“The Appellate Tribunal may, after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit.”

3. Analysis

Though bare provisions u/s 254(1) extracted above do not include powers which are specifically conferred on the Commissioner of Income Tax (Appeals) u/s 251(1) but section 254(1) is very widely worded. They are wide enough to include the power to ‘set aside’ an assessment or an appeal for fresh assessment/determination by the Assessing Officer or for fresh decision by the Commissioner of Income Tax (Appeals). It is important to note that power to set aside or remand is an inseparable power of any Appellate Authority be it the Income Tax Appellate Tribunal or for that matter the Commissioner of Income Tax (Appeals). Though the power to set aside is an incidental power but is required to be used very sparingly else very purpose of appeal would get defeated.

3.1 How Powers of CIT(A) to Aside are Different from ITAT

Phraseology as used in the proviso inserted from 01-10-2024 in clause (a) of sub section (1) of section 251″where such appeal is against an order of assessment made under section 144, he may set aside the assessment and refer the case back to the Assessing Officer for making a fresh assessment;” clearly shows that the CIT(A) can set aside the assessment only when the assessment is made u/s 144 of the Income Tax Act, 1961. It is important to bear in mind the use of the word ‘may’ which clearly shows that the CIT(A) is not mandated to always set aside the assessment which had been framed u/s 144 of the Income Tax Act, 1961. Depending upon the facts and circumstances of the case even in a case where assessment is framed u/s 144, the CIT(A) may decide to adjudicate the appeal on the merits of the additions or the disallowances or the issues made subject matter of the appeal before him. Thus, in view of the specific facts of a given case it will always be open for the Assessee to impugn the decision of the CIT(A) who set aside an assessment which had otherwise been framed u/s 144 of the Income Tax Act.

3.3 When Can Order of the CIT(A) to Set Aside an Assessment be Challenged

At the very outset, it is relevant to note that any interpretation to propose that in view of the proviso as brought out on the statute book from 01-10-2024 it is not possible to impugn the order of the CIT(A) in setting aside an assessment which had otherwise been framed u/s 144 of the Act, to be re-done by the Assessing Officer {for short, hereinafter also referred to as ‘AO’} will be an absurd interpretation as such an interpretation will unclothe or disable effectively an Assessee to claim relief in appeal preferred before him especially in cases like where the Appellant is able to show how the jurisdiction by the AO was incorrectly exercised or why on the facts and in the circumstances the additions or disallowance made were not called for in law.

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