The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) has ruled that the CIT(A) has discretion to set aside an assessment and send the case back for a fresh assessment.

However, the CIT(A) must first decide the taxpayer's basic legal objections on whether the reassessment itself was valid.

Under Section 251(1)(a) of the Income Tax Act, the CIT(A) has the power to set aside an assessment made under Section 144. The ITAT observed that exercising this power does not remove the CIT(A)'s obligation to decide substantive legal grounds challenging the reassessment.

A bench of Vice President Saktijit Dey and Accountant Member Makarand Vasant Mahadeokar was hearing an appeal filed through Blossom Nandi, stated to be the legal representative of deceased assessee Santanu Amalendu Nundy.

One of the key objections was that the reassessment notice under Section 148 was issued in Nundy's name even though he had died before the notice was issued. The notice was issued on March 20, 2024, while Nundy died on January 7, 2022.

The ITAT observed, “In our considered view, the jurisdictional grounds raised by the assessee go to the very root of the reassessment proceedings and require specific adjudication before the additions on merits are examined. The power conferred upon the learned CIT(A) by the proviso to section 251(1)(a) of the Act to set aside an assessment made under section 144 of the Act is discretionary. The exercise of such power does not dispense with the obligation to adjudicate the substantive legal grounds raised in the appeal. A challenge to the very assumption of jurisdiction cannot be rejected merely by describing it as technical or procedural.”

The dispute arose from the sale of an immovable property at Anjuna, Goa. The property stood jointly in the names of Nundy and Nandi and was sold under a December 24, 2019 sale deed for ₹84.73 lakh.

The Assessing Officer relied on WhatsApp messages, a statement recorded under Section 131A and other material found during a search. It alleged that an additional ₹36.31 lakh had been received in cash over and above the consideration recorded in the sale deed.

The Assessing Officer treated Nundy as a 50% co-owner and added ₹33.18 lakh towards his alleged share of long-term capital gains. It also added ₹18.15 lakh as unexplained money on a substantive basis, with another ₹18.15 lakh added on a protective basis in relation to the alleged cash consideration.

Before the CIT(A), the assessee challenged the validity of the reassessment, including the notice issued in Nundy's name. The CIT(A) rejected the jurisdictional and procedural objections after treating them as technical in nature.

Since the assessment had been completed under Section 144, the CIT(A) set aside the assessment and restored the issues on merits to the Assessing Officer for a fresh assessment. The appeal was consequently treated as allowed for statistical purposes.

The ITAT disagreed with this approach. It observed that the CIT(A) had not recorded independent and specific findings on the legal grounds raised by the assessee. Instead, it had made a general reference to the assessment order while rejecting the objections.

The bench also pointed out that if the jurisdictional challenge is ultimately found sustainable, the question of undertaking a fresh assessment on merits may not survive. Directing a fresh assessment before deciding those foundational legal objections could therefore lead to “avoidable and potentially futile proceedings.”

The ITAT set aside the CIT(A)'s order and restored the entire appeal to it for fresh adjudication. It directed the CIT(A) to first decide all jurisdictional and legal grounds through a reasoned and speaking order.

If the reassessment is held valid, the CIT(A) will then have to adjudicate the grounds relating to the additions on merits after considering the evidence and contentions of both sides.

The ITAT did not decide whether the reassessment itself was valid. It left all contentions open for consideration by the CIT(A), including the validity of the reassessment and the merits of the additions.

For Assessee: Shashank Mehta

For Revenue: Yogesh Kamat, CIT-DR

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Case Title :  Blossom Nandi [Legal Representative of deceased assessee Santanu Nundy] v. Income Tax Officer, Ward 31(1)(1)Case Number :  ITA No. 2552/Mum/2026CITATION :  2026 LLBiz ITAT(MUM) 265
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