NFAC is bound by binding decision of Jurisdictional High Court when AO is situated within territorial and subjective jurisdiction of High court. ITAT urges CBDT to recall all such orders
This decision of the ITAT covered four appeals filed by the assessees, feeling aggrieved by the order passed by the Commissioner of Income Tax (Appeals) National Faceless Appeal Centre (NFAC) Delhi.
The case of the assesses was that the CIT(A) NFAC confirmed the disallowance of the contribution received from employees towards ESI and EPF in complete disregards to the decision of Jurisdictional Honorable Allahabad High Court as the payments had been made before due date specified u/s 139(1) and as such were fully allowable.
The jurisdictional High Court had held that Section 43B applicable to both employee and employer contributions. hence, no disallowance u/s 36(1)(va) if such contribution is paid before due date u/s 139(1) for filing of ITR.
ABCAUS Case Law Citation
ABCAUS 3513 (2021) (06) ITAT
Important case law relied referred:
Sungard Solutions (I) (P.) Ltd. [2019] 105 taxmann.com 67
Sagun Foundry (P) Ltd. vs CIT (2017) 78 Taxmann 47
State Road Transport Corporation (366 ITR 170)
The question before the Tribunal was whether the impugned order was sustainable in the eyes of law, when First Appellate Authority NFAC noted down in the impugned order that there is jurisdictional High Court decision in favour of the assessee, however after noting the binding decision, NFAC dismissed the appeal of the assessee by following the non jurisdictional decision in the matter?
The Tribunal noted that from the reading of the impugned order it was abundantly clear that the NFAC, had relied upon the decision of Non jurisdictional High Court for the purposes of dismissing the appeal of the assessee and have ignored binding decision of the Jurisdictional High Court.
The Tribunal opined that the approach of the NFAC, was not correct and is against the scheme of the notification issued by the CBDT for creating the centralised NFAC and also against the settled principle of precedent.
The Tribunal observed that CBDT has introduced Faceless Appeal Scheme vide Notification No. 76 & 77 of 2020. As per the said notification it is abundantly clear that, before passing Final appellate order in appeal, it passes through various stages of scrutiny.
As provided in the Notification, firs, a draft order is proposed by Assessment Unit, than it is sent to review unit (subject to tax effect) and if review unit suggest some suggestion/s than it is assigned to another AU for concurrence or modification and thereafter final appellate order is passed by NFAC.
The Tribunal pointed out that enough safeguards have been provided by the said notification with a view to achieve its objects of impart consistency, efficiency, transparency and accountability.
The Tribunal also noted that as provided by the said notification, order passed by NFAC, subject to challenge before the income tax tribunal having the jurisdiction over the jurisdictional Assessing Officer and the jurisdiction of the Income Tax Appellate Tribunal was not disputed by the revenue.
The Tribunal further noted that in the instant case, the assessing officer was situated within the jurisdiction of Hon’ble Allahabad High Court.
The Tribunal opined that though, centralized NFAC, had been created by the notification by the CBDT, however it should be ensured ,that whenever any appellate order is passed by NFAC as per notification either by of draft order, or by way of review the draft order or Final Appellate Order, than decision of jurisdictional High Court, having the jurisdiction over the assessing officer should be followed and applied by the NFAC.
The Tribunal stated that merely because there is some conflicting decision of a non-Jurisdictional High Court, the relief should not be refused to the assessee.
The Tribunal expressed disappointment that despite the order passed by NFAC is required to screened at three stages scrutiny by AU, yet no Appellate Unit, had objected to following of non binding decision of the non-jurisdictional High Court, especially when binding Jurisdictional High Court Judgment on the subject was available.
The Tribunal termed the above situation as a serious issue which requires immediate redressal by the Board, as it is resulting in filling of unnecessary litigation by the assessee.
The Tribunal stated that the CBDT is expected to take appropriate remedial measures at the earliest for recalling such kind of orders, by issuing comprehensive guidelines for NFAC and give relief to the honest assessee.
Accordingly, the Tribunal held that NFAC, is bound by the binding decision of the Jurisdictional High Court when the assessing officer is situated within the territorial and subjective jurisdiction of High court.
As a result the Tribunal allowed the appeal in the favour of the assessee.
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