Loading judgment…
Facts
The assessee company filed its return of income for AY 1998-99. The assessment was completed, and later a reassessment order was passed. An issue arose regarding the levy of interest under Section 234D, which was challenged by the assessee and allowed by the Ld.CIT(A). However, the NFAC/CIT(A) later adjudicated the appeal again, dismissing it.
Held
The tribunal held that the NFAC/CIT(A) order was bad in law due to non-application of mind and failure to recognize the prior decision of the Ld.CIT(A) which had allowed the deletion of interest. The principle of finality of litigation and res-judicata were also considered.
Key Issues
Whether the NFAC/CIT(A) erred by re-adjudicating an appeal that had already been decided in favor of the assessee, violating principles of finality and res-judicata.
Sections Cited
143(1), 143(3), 147, 263, 80HHC, 234D, 154, 254
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘A’ BENCH: CHENNAI
Before: SHRI ABY T. VARKEY & SHRI AMITABH SHUKLA
आदेश / O R D E R
PER ABY T. VARKEY, JM:
1. This is an appeal preferred by the assessee against the order of the Learned Commissioner of Income Tax (Appeals)/NFAC, (hereinafter referred to as “the Ld.CIT(A)”), Delhi, dated 30.09.2024 for the Assessment Year (hereinafter referred to as "AY”) 1998-99.
Grounds of appeal raised by the assessee are as under:
1. The order passed by the learned National Faceless Appeal Centre ('NFAC') is bad under the law and on facts.
2. The Ld. NFAC has erred in not applying his mind to the facts and circumstances of the case when dismissing the appeal, resulting in an erroneous conclusion that does not align with the evidence presented.
Appeal being treated as infructuous and the learned NFAC failed to appreciate that necessary order has already been passed
The Ld. NFAC erred in dismissing the appeal without due consideration of the order issued for the subject AY undermining the credibility of the proceedings.
The Ld. NFAC has erred in law and in facts by misinterpreting the Appellant's intent where in the Appellant communicated to the Ld. NFAC that the grounds of appeal filed by the appellant have been allowed already in the order dated September 25, 2018.
5. The Ld. NFAC erred in law and on facts in its order, dated September 25, 2024, in not appreciating that for the subject AY the grounds filed by the Appellant have been allowed by the Commissioner of Income-tax (Appeals)-1 Madurai.
6. The Ld. NFAC erred in fact in not recognizing the principle of finality, which asserts that a previous favorable order should be maintained unless there are compelling reasons to justify its reversal.
Consequential Relief
7. The Appellant craves leave to add to or alter, by deletion, substitution or otherwise, any or all of the above grounds of appeal, at any time before or during the hearing of the appeal.
3. At the outset, the Ld.AR of the assessee brought to our notice that the impugned action of the NFAC is bad in law for total non-application of mind and brought to our notice the following facts i.e. assessee M/s.Madura Coats Private Limited ("MCPL" or "the assessee") is a company engaged in the business of manufacturing of threads, zips and accessories in India. And for the relevant assessment year, the assessee had filed its return of income (RoI) on 24.11.1998, declaring a total income of Rs.2,15,42,715/-, which was processed u/s.143(1) of the Act by which net refund was to the tune of Rs.1,42,53,619/-. Later Assessment u/s.143(3) of the income tax Act, 1961 (hereinafter referred to as ‘the Act‘) was completed on 29.03.2001, with a total assessed income of Rs.8,81,98,070/-. Thereafter, a reassessment order u/s.143(3) read with section 147 was passed on 28.03.2006, where the total income was reassessed at Rs.24,90,06,030/- after making various additions/disallowances and a demand payable at Rs.4,85,19,047/-.
Thereafter, an order u/s.263 of the Act revising the re-assessment order dated 28.03.2006, was passed to revise computation u/s.80HHC in the reassessment order. Order giving effect to the order of the CIT(A) in dated March 30, 2007, adhering to the directions/order of the CIT(A), total income of the assessee was computed at Rs.9,27,02,120/-. In this order giving effect interest u/s.234D of the Act amounting to Rs.7,56,130/- for the period June 01, 2003, to March 31, 2004, was levied. The assessee filed a rectification application against such interest levy which was rejected by the AO. The assessee filed an appeal before the Ld.CIT(A) against the order u/s.154 of the Act passed by the AO. The Ld. CIT(A) upheld the levy of interest u/s.234D on the ground that it is a debatable issue. Subsequently, an appeal was filed by the assessee before the ITAT which was dismissed on the ground that the appeal should have been filed against the order giving effect to ITAT and not against the order u/s.154 of the Act. In the order giving effect to the Tribunal order in ITANo.1472/Mds/2008 dated 18.08.2009, the AO had leveled interest u/s.234D of the Act amounting to Rs.7,56,130/- for the period June 01, 2003, to March 31, 2004. Aggrieved by the action of the AO levying interest u/s.234D of the Act, the assessee filed an appeal before the Ld.CIT(A)-1, Madurai, who vide order dated 25.09.2018 was pleased to allow the appeal of the assessee by holding “no interest u/s.234D of the Act ought to have been levied in the order giving effect in the case of company. Therefore, I direct the AO to delete the interest levied u/s.234D of the Act. Hence, this ground is allowed”.
4. Even though, the Ld.CIT(A) Madurai decided the appeal in favour of the assessee company (supra), may be due to omission in reporting about the disposal of the appeal in ITBA portal, the Ld.CIT(A)/NFAC has again adjudicated the appeal preferred by the assessee against the giving effect order of the AO [pursuant to the Tribunal order dated 18.08.2009 for AY 1998-99] wherein, the AO levied interest u/s.234D of the Act to the tune of Rs.7,56,130/-. From a perusal of the impugned order of the Ld.CIT(A), it is noted that assessee has duly brought to his notice that the issue raised in the appeal has already been examined & adjudicated in favour of assessee by the Ld.CIT(A), Madurai, by order dated 25.09.2018 against the action of the AO levying of interest u/s.234D of the Act which fact is discernable from the observation and decision of the NFAC reflected at Page Nos.12 & 13 of the impugned order wherein it is noted as under:
In the light of the above submissions, it appears that the appeal no.CIT (A), Madurai-1/10064/2016-17 by the Appellant was manually filed to CIT(Appeais)-1, Madurai. As per the appellant's submission, the appeal has already been disposed on 25.09.2018 vide appeal order no. on the basis of ITAT order vide dated 30.03.2016 allowing the grounds raised by the Appellant-
"the appeal filed by the Company against order giving effect to the order of the Hon'ble Income Tax Appellate Tribunal (ITAT) has been heard before the Commissioner of Income-tax (Appeals)-1, Madurai [CIT(A)]. The CIT(A) has passed an order dated September 25, 2018 wherein the appeal filed by the Company has been allowed.
It is also to be noted that the said decision by the ITAT vide dated 18.08.2009 has already been into effect by the AO vide order dt.18.08.2009 wherein the interest amounting to Rs.7,56,130/- for the period 1st June 2003 to 31st March 2004 was levied.
From the above submissions, it is evident that the Appellant has no intention to press its existing grounds of appeal or to bring any additional evidence, as it states-
"Accordingly, we request your good self to consider the status of the appeal as closed."
This appeal should not exist as 'pending' since the appeal had already been disposed on 25.09.2018 by the CIT(Appeals)-1, Madurai. This may have happened due to non-closure of disposed appeal in the ITBA by either manually or systematically.
Despite asking for submissions in support of its grounds of appeal, the Appellant showed its clear intentions not to pursue the appeal anymore. Hence, no grounds of appeal are relevant at this point, by making the appeal as 'duplicate and superfluous. Therefore, the appeal deserves to be dismissed on the Appellant's consent.
Conclusion:
Taking the submission made by the appellant on 31.03.2021 and 20.09.2024, and other details on record, in view of the above discussions, the present appeal filed by the appellant M/s.Madura Coats Pvt. Limited (PAN:AADCB2923M), against the order u/s.147 r.w.s.254 of the I.T. Act. 1961, dt.18.08.2009 for A.Y.1998-99, becomes infructuous and deserves to be dismissed.
However, in its conclusion, the Ld.CIT(A) has merely noted that the appeal of the assessee has become infructuous and dismissed the appeal.
However, we don’t appreciate the impugned action of the Ld.CIT(A)/NFAC. Non-application of mind of the Ld.CIT(A) is evident from the impugned action of the Ld.CIT(A)/NFAC. Once the assessee asserts that issue regarding levy of interest u/s.234D of the Act of Rs.7,56,136/- has been held in favour of assessee, with a direction to delete the additions of Rs.7,56,130/-, the NFAC/CIT(A) without finding that the assessee’s aforesaid assertion is wrong, couldn’t have dismissed the appeal. Finality of litigation is the policy of the UoI, and when the assessee has placed copy of the order of the Ld.CIT(A)-1, Madurai, dated 25.09.2018, wherein, the very same grounds of appeal has been challenged and the Ld.CIT(A)-Madurai is noted to have allowed the appeal directing deletion of Rs.7,56,130/- by relying on the decision of the Hon’ble Supreme Court in the case of CIT v. Reliance Energy Ltd., reported in [2013] (40 taxmann.com 116) and other judicial precedents cited in that order, therefore, the impugned order of NFAC/CIT(A) dismissing the appeal is bad in law and therefore, needs to be quashed for the reason stated infra.
6. It has to be borne in mind that once the appellate order has been passed by the Ld.CIT(A)-1, Madurai dated 25.09.2018 against the levy of interest by AO u/s.234D of the Act of Rs.7,56,136/-, wherein it has been directed to be deleted, then by operation of doctrine of merger, the AO’s order levying interest u/s.234D of the Act doesn’t exist in the eyes of law since it got merged into the order of Ld CIT(A), Madurai; and thereafter, only order existing in the eyes of law is the appellate order of the Ld.CIT(A)-1, Madurai dated 25.09.2018 allowing the appeal of the (AY 1998-99) M/s. Madura Coats Pvt. Ltd. assessee by deleting the interest levied u/s.234D of the Act to the tune of Rs.7,56,130/-. Therefore, the impugned action of the Ld.CIT(A)/NFAC dated 30.09.2024 is erroneous and hit also by principles of res-judicata, and therefore, we quash the impugned order of the NFAC/CIT(A).
In the result, appeal filed by the assessee is allowed.
Order pronounced on the 23rd day of April, 2025, in Chennai.