In light of the powers of the Commissioner of Income-tax (Appeals) [CIT(A)], discuss the following: (i) Whether the CIT(A) can set aside the best…

CA Final · Integrated Business Solutions (Multidisciplinary Case Study) · MTP · May 2026
In light of the powers of the Commissioner of Income-tax (Appeals) [CIT(A)], discuss the following: (i) Whether the CIT(A) can set aside the best judgement assessment made and refer it back to the AO for fresh assessment? (ii) Whether the CIT(A) can enhance the assessment by including the unexplained credits not considered by the AO? If yes, what procedural requirement must be fulfilled before making such an enhancement? (iii) If instead, the appeal was against a penalty order, what powers would the CIT(A) have under the appellate provisions?

Suggested Answer and Working Notes:

(i) Under section 251 (1) , in an appeal against an order of assessment made under section 144, the CIT(A) is empowered to set aside the assessment and refer the case back to the AO for making a fresh assessment. (ii) The CIT(A) can enhance the assessment by including any income that was not considered by the AO, even if the issue was not raised in the appeal. However, before doing so, he must provide the assessee a reasonable opportunity of being heard against the proposed enhancement. (iii) In case the appeal was against a penalty order, CIT(A) may confirm, cancel, enhance, or reduce the penalty.
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