De Novo Assessment on remand refers to a situation where a higher tax authority, tribunal, or court sets aside an earlier assessment and directs the Assessing Officer (AO) to conduct a fresh assessment from the beginning. “De Novo” means “from the beginning” or “afresh.” This often happens when the original assessment order is found to be defective, lacking sufficient reasoning, or passed without giving the assessee a fair opportunity of being heard. A remand doesn’t automatically validate previous findings; it allows the AO to reassess the matter entirely, applying mind independently, without bias from the earlier order.
According to Section 254(1) of the Income Tax Act, 1961, the Income Tax Appellate Tribunal (ITAT) has the power to pass orders after giving both parties an opportunity of being heard and may remand the case back to the Assessing Officer for a De Novo assessment. The term is not explicitly used in the Act but has been recognized and upheld by various courts. In the case of Mehta T. Bhogilal v. ITO (1984), it was held that when an order is set aside, the new assessment must be conducted with a clean slate and not merely as a continuation of the previous order. The fresh assessment must comply with all procedural requirements, including issuance of notice under Section 143(2) if applicable.
To remember the essentials of De Novo Assessment on Remand, use the mnemonic “FRESH”:
- F – From scratch (fresh assessment)
- R – Remand by ITAT or court
- E – Error in original assessment
- S – Section 254(1) empowers remand
- H – Hearings must be conducted afresh
