Order directs reconsideration of all appeal grounds; s.250(6) directory, s.251(1)(a) permits full disposal where assessment made u/s 143(3)

ITAT held the CIT(A) erred in issuing a part order addressing only jurisdictional issues and leaving the assessee's merit grounds undecided. Noting s.250(6) is directory and s.251(1)(a) permits confirmation, reduction, enhancement or annulment, the tribunal found that where assessment was made u/s 143(3) the CIT(A) could not defer deciding merits pending finality on annulment. ITAT directed the CIT(A) to consider all grounds in the appeal and pass a single consolidated order disposing of the appeal accordingly; the appeal was disposed with these directions.

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ISSUES PRESENTED AND CONSIDERED

1. Whether a notice under section 148/assessment proceedings under section 147 of the Income-tax Act, initiated in the context of the faceless assessment scheme (section 144B and associated CBDT notifications), is valid when issued by the jurisdictional Assessing Officer (JAO) as opposed to the National Faceless Assessment Centre (NFAC).

2. Whether the appellate authority (Commissioner (Appeals)) was obliged to decide, in a single consolidated order, all points raised in an appeal against an assessment order - including merits - after deciding jurisdictional objections against the assessee, having regard to sections 250 and 251 of the Income-tax Act and directions of the High Court.

ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of reassessment notice issued by Jurisdictional AO under the Faceless Scheme

Legal framework: Reassessment is governed by sections 147/148 of the Income-tax Act; faceless assessment procedures are provided by section 144B and by CBDT notifications that create the NFAC and prescribe allocation and procedural modalities. Statutory powers under section 120 (concurrent powers) and section 127 (transfer of cases) are relevant to conferral and exercise of jurisdiction.

Precedent treatment: High Courts are divided. Earlier decisions of some High Courts (Telangana, Karnataka, Bombay, Guwahati) held notices issued by the jurisdictional AO to be unlawful under the faceless scheme. Subsequent High Court decisions (Delhi, Calcutta, Gujarat, Madras) have upheld the validity of actions by the jurisdictional AO in certain circumstances, and have emphasised that the CBDT notification confers concurrent jurisdiction and that faceless procedures do not entirely divest the jurisdictional AO of power to initiate reassessment. The Tribunal record refers to these conflicting authorities and to the Insight Instruction and Notification No. 64/2020 (concurrent jurisdiction to NFAC authorities).

Interpretation and reasoning: The Court examined the statutory scheme and the content of relevant notifications and instructions. It recorded that section 144B is procedural and does not extinguish the statutory bases for forming an opinion under section 148; section 120 permits the Board to confer concurrent jurisdiction; the faceless scheme contemplates concurrent roles and data visibility to jurisdictional AO; and Explanation 1 and 2 to section 148 and other statutory provisions provide alternative bases for reassessment initiation beyond random NFAC allocation. The Tribunal accepted the reasoning of decisions upholding the jurisdictional AO's power, noting that some earlier contrary High Court decisions may not have considered Notification No. 64/2020 and related materials.

Ratio versus obiter: The Tribunal treated the analysis affirming that a jurisdictional AO may initiate reassessment under the faceless regime as central to its decision on the jurisdictional ground decided by the Commissioner (Appeals). That holding is treated as ratio in so far as it supports upholding the jurisdictional AO's competence; references to other cases are used for support and are explanatory.

Conclusion: The Commissioner (Appeals)'s dismissal of the jurisdictional ground (i.e., holding that the jurisdictional AO could lawfully issue notice under section 148 even within the faceless scheme) is consistent with the statutory scheme and with High Court decisions that recognise concurrent jurisdiction; the jurisdictional AO's issuance of notice was not per se invalid under the faceless procedure.

Issue 2: Duty of Commissioner (Appeals) to decide all grounds in a single consolidated order after disposing jurisdictional objection adverse to assessee

Legal framework: Section 250(6) requires the Commissioner (Appeals) to state points for determination, decision thereon and reasons; section 250(7) requires communication of the order; section 251(1)(a) empowers the Commissioner (Appeals) in appeals against assessment orders to confirm, reduce, enhance or annul the assessment (and, in case of assessments under section 144, to set aside and remit). The appellate provisions contemplate a single final order disposing the appeal.

Precedent treatment: The High Court had earlier directed the appellate authority to decide jurisdictional issues first but also observed that if jurisdictional issues were decided in favour of the assessee, merits might become unnecessary; conversely, if jurisdictional issues were decided against the assessee, the appellate authority might be required to decide merits. The Tribunal relied on that High Court direction and the statutory language emphasizing a single order addressing all points.

Interpretation and reasoning: The Tribunal analysed the High Court's order and statutory provisions. It observed that the High Court's direction implicitly contemplated that where jurisdictional objections are decided against the assessee, the appellate authority ought not to leave merits undecided; the scheme of sections 250 and 251 indicates that the Commissioner (Appeals) must pass one consolidated order addressing all points raised in the appeal. The Tribunal held that issuing a "part order" that decides only jurisdictional issues and leaves merits undetermined was inconsistent with the statutory mandate and with the High Court's direction, especially when jurisdiction was decided adversely to the assessee and merits therefore remained live and determinative of the assessment outcome.

Ratio versus obiter: The finding that the Commissioner (Appeals) must pass one consolidated order addressing all points (including merits) where jurisdictional objections are decided against the assessee is treated as the operative ratio in the Tribunal's disposition directing reconsideration and issuance of a consolidated order. Observations about timing, administrative difficulty and statutory purpose are explanatory and constitute reasoning supporting the ratio.

Conclusions and remedial direction: The Tribunal concluded that the Commissioner (Appeals) erred in passing only a part order on jurisdictional issues and omitting to decide the merits after rejecting the jurisdictional plea. The Tribunal directed the Commissioner (Appeals) to consider all grounds raised in the appeal and to pass one consolidated order disposing of the appeal in accordance with sections 250 and 251 and the High Court's directions. The Tribunal declined to decide the merits itself and allowed the assessee liberty to raise grounds in any appeal filed against the consolidated order that the Commissioner (Appeals) will pass pursuant to the Tribunal's direction.

Cross-references and procedural outcome

Where the High Court had directed the appellate authority to decide jurisdictional issues first, the Tribunal construed that direction as not precluding the appellate authority from deciding merits where jurisdictional issues are decided against the appellant; consequently the Commissioner (Appeals) was directed to pass a holistic order. The Tribunal did not adjudicate substantive assessment additions or disallowances (such as additions under section 68, disallowance under section 43B, disallowances of various expenses, tax-audit and penalty matters), leaving those issues to be addressed by the Commissioner (Appeals) in the consolidated order (or in subsequent appellate proceedings arising therefrom).

Disposition

The appeal was disposed of by directing the Commissioner (Appeals) to decide all grounds raised in the appeal and to pass a consolidated order on both jurisdictional and merits issues; the Tribunal did not rule on the merits and granted the assessee liberty to raise grounds in future appeals against the consolidated order.

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