2021 (6) TMI 506 - AT - Income Tax

Appellate order as passed by National Faceless Appeal Centre - NFAC - appeal against an order passed by the National Faceless Appeal Centre - allowability of claim under section 43B - adjustments u/s 143(1)(a) by disallowing the contribution received from employees towards ESI and EPF - claim denied due to conflicting decision of a non-Jurisdictional High Court - Correct ITAT Jurisdiction over the jurisdictional Assessing Office - NFAC chooses to dismiss the appeal of the assesse by following the non jurisdictional decision - HELD THAT:- Though, centralized NFAC, had been created by the notification by the Central Board Of Direct Taxes 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.

Merely because there is some conflicting decision of a non-Jurisdictional High Court, the relief should not be refused to the assessee. As per the Notification Clause C an appeal against an order passed by the National Faceless Appeal Centre under the said Scheme shall lie before the Income-tax Appellate Tribunal having jurisdiction over the jurisdictional Assessing Officer. As per Section 260 A of the Income Tax Act, the appeal against the ITAT, order shall lie to The High Court and the High court had been defined under section 269 High Court" means- (i) In relation to any State, the High Court for that State .

Thus appeal against the tribunal ( Agra in present case )shall lie to the Hon’ble Allahabad High Court and therefore the decision rendered by Hon’ble High court is not only binding on the Tribunal but also on NFAC, ( though sitting in Delhi ) which is deciding the lis pertaining to Agra ITAT Jurisdiction (AllahabadHC Jurisdiction).

The purpose of setting up of the centralized NFAC, is to ensure efficiency, transparency and accountability. We have noted down the various stages of finalization of the final appellate order, however as pointed out by us, despite the binding decision of the jurisdictional High Court and tribunal, the centralizedNFAC have chooses to contemptuously ignore the binding precedent of Jurisdictional High Court and have applied the non-jurisdictional High Court decision to deprive the assessee from the benefit of the judicial High Court decision.

A good intentioned and well thought notification issued by the Board for NFAC, is not yielding the desired result on account of incorrect application of law.As notified by the board in the notification it would be using the artificial intelligence and data analytic for the smooth functioning of NFAC, in our view this should be used in all aspects. Further we expect the Board to take appropriate remedial measures at the earliest forrecalling such kind of orders, by issuing comprehensive guidelines for NFAC and give relief to the honest assessee .

In the light of the above said discussion,Judgments of SC and HCs,We hold that NFAC, is bound by the binding decision of the Jurisdictional Allahabad High Court, as the assessing officer is situated, within the territorial and subjective jurisdiction of High court . Hence, we allow the appeal of the assessee by respectfully following the decision of jurisdictional High Court in the matter of Sagun Foundry (P) Ltd.[2016 (12) TMI 1479 - ALLAHABAD HIGH COURT]