Revenue Cannot Appeal Assessment Order Under Income Tax Act, Can Only Seek Revision: Allahabad High Court

The Allahabad High Court has recently held that under the Income Tax Act, 1961, the revenue has no right of appeal against an assessment order, as the assessment order is the stated case of the revenue itself.

It held that where the revenue is aggrieved by an assessment order, its remedy is to seek revision where the assessment order is found to be "erroneous in so far as it is prejudicial to the interest of revenue."

The court held that in an assessment proceeding the Assessing Authority acts as a quasi-judicial authority, raising his own doubts in the interest of the revenue and deciding them on the replies of the assessee, so that the resulting order cannot be appealed against by the revenue.

The bench of Justice Saumitra Dayal Singh and Justice Swarupama Chaturvedi held,

“In a assessment proceeding, the Assessing Authority may act as a quasi-judicial authority without the assistance of any departmental representative. He issues a notice of assessment on the doubts that he entertains (in the interest of the revenue); receives replies and evidence from the assessee, to his own doubts and; thereafter proceeds to deal with his doubts on the strength of replies and explanations furnished by the assessee. The end conclusion becomes the assessment order where he may accept or reject or partly accept or partly reject the replies of the assessee. Thus, the assessment order is the stated case of the revenue itself. It can never have a right to appeal thereagainst.”

The taxpayer, Ankur Mittal, is a trader in food grains who procured rice from farmers in the mandi area at Dadri. According to him, every purchase was evidenced by Form 6R issued under the Mandi laws.

For AY 2017-18, he was assessed by order dated December 16, 2019, passed under Section 147 read with Section 143(3) of the Act, by which the Assessing Authority accepted the purchases made from farmers and unregistered dealers against Forms 6R.

That order was taken in revision. By order dated March 27, 2022, the PCIT, Noida, doubted the material and directed a fresh assessment to be made after obtaining certificates from the Agriculture Produce Marketing Committee (APMC)/'Mandi Samiti' certifying that the Forms 6R relied on by the assessee were genuine. The assessee did not challenge that order.

In the fresh assessment made on March 27, 2023, under Section 143(3) read with Section 263 of the Act, no such certificate was produced by the assessee, and none was called for by the department.

The Assessing Authority again accepted the purchases on the strength of Forms 6R, but made an addition of Rs. 12,12,46,867 on account of cash paid to individual farmers in excess of Rs. 20,000. The Court recorded that no such issue was in existence.

The National Faceless Appeal Centre, by order dated December 23, 2024, set aside the addition as beyond the scope of the proceedings under Section 263. It held that Form 6R had ample evidentiary value and that the cash purchases were covered by Rule 6DD of the Income-tax Rules, 1962, so that Section 40A(3) was not attracted.

The Tribunal dismissed the departmental appeal on December 12, 2025. The revenue did not press the issue relating to the scope of the proceedings before the High Court.

Before the High Court, the revenue urged that the direction of the PCIT had never been given effect to and that, in the absence of any challenge to that direction, the Appellate Authority and the Tribunal had erred in accepting the assessee's case. It was further urged that the powers of the first Appellate Authority being co-extensive and co-terminus with those of the Assessing Authority, it ought itself to have gone into the issue.

On merits, it was urged that the genuineness of Form 6R could not be accepted until certified by the APMC.

The court held that the only course open to the revenue was to seek a fresh revision of the second assessment order dated March 27, 2023. Since that was not done, the revenue could neither appeal against that order nor press the grievance by way of objection in the appeal filed by the assessee. It held that the appellate authority committed no error in confining itself to the ground pressed by the assessee.

On the plea that the powers of the first Appellate Authority are co-extensive and co-terminus with those of the Assessing Authority, the Court referred to Section 250(4) read with Section 251(2) of the Act and held,

“if in such facts, the First Appeal Authority were to exercise its jurisdiction (as suggested by the learned Senior Standing Counsel for the revenue), that course may have been permissible except after strict compliance of Section 250(4) read with Section 251(2) of the Act.”

It held that unless the revenue had pressed the issue before the Commissioner (Appeals), or it had been pointed out to him, or he had himself considered enhancement of the computation proper, the objection could not sustain.

On merits, the Court held that Forms 6R are statutory proof of the transactions performed. It observed that there was no doubt as to the assessee's trading in food grains in the mandi area at Dadri, and that no doubt had been expressed as to the genuineness of the forms relied on by him.

It recorded that counsel for the revenue had not pointed to any provision of law requiring further certification by the 'Mandi Samiti' of a Form 6R issued by it.

“We are hasten to add that such certification may be required where prima facie doubt as to genuineness or reliability of any particular Form 6R arises. For reason of specific doubts clearly expressed, enquiry may arise or be required to be conducted by the APMC/'Mandi Samiti' to establish the genuineness and/or reliability of the doubtful Form 6R.”, it noted.

The court noted that the tribunal had considered the provisions of the Uttar Pradesh Krishi Utpadan Mandi Adhiniyam, 1964, including Section 26, and had concluded that there was no occasion to examine such non-statutory certificates.

It further held that in the absence of the certificates being obtained by the assessee, it was always open to the revenue to have called for them itself, which it failed to do.

Accordingly, there was no proof available against the assessee merely because of the technical non-compliance with the PCIT's order. Noting that the assessee's sales turnover had never been doubted, the Court observed that the second assessment order suffered from patent perversity.

Holding that the appeal gave rise to no question of law, the court dismissed it.