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Facts
The assessee, Bandekar Brothers Pvt. Ltd., engaged in mining and iron ore exports, filed its return for AY 2018-19. An assessment under section 143(3) resulted in a disallowance of ₹1,93,93,491/- under section 14A r.w.r. 8D(2) and the total income was assessed higher under normal provisions and deemed income u/s 115JB. The assessee's first appeal to the National Faceless Appeal Centre (NFAC) was dismissed, with the NFAC failing to conclusively adjudicate the validity of the section 14A disallowance and completely omitting the issue of its computation without reducing non-exempt income investments.
Held
The Tribunal held that the NFAC failed to properly adjudicate the first issue regarding the validity of the disallowance under section 14A and entirely omitted the third issue concerning the computation of disallowance without reducing non-exempt income investments, thereby contravening section 250(6) of the Income-tax Act. Citing judicial precedents, the Tribunal ruled that it lacks jurisdiction to decide grounds not previously adjudicated by the first appellate authority. Consequently, the Tribunal set aside the NFAC's order concerning these non-adjudicated issues and remitted the matter back to the NFAC for fresh adjudication in accordance with law.
Key Issues
Whether the first appellate authority's order is invalid under Section 250(6) of the Income-tax Act due to improper or non-adjudication of key issues, specifically the validity of Section 14A disallowance and its computation concerning non-exempt income investments, necessitating a remand to the first appellate authority.
Sections Cited
Income-tax Act, 1961: 253(1), Income-tax Act, 1961: 250, Income-tax Act, 1961: 250(6), Income-tax Act, 1961: 143(3), Income-tax Act, 1961: 143(3A), Income-tax Act, 1961: 143(3B), Income-tax Act, 1961: 14A, Income-tax Act, 1961: 115JB, Income Tax Rules, 1962: 8D(2)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, PANAJI BENCH, GOA
Before: HON’BLE SHRI PAVAN KUMAR GADALE & SHRI G. D. PADMAHSHALI
ORDER PER G. D. PADMAHSHALI; This appeal of the assessee is instituted u/s 253(1) of the Income-tax Act, 1961 [‘the Act’] which challenges DIN & Order No 1065635819(1) dt. 13/06/2024 passed by National Faceless Appeal Centre, Delhi [‘Ld. CIT(A)/NFAC’] u/s 250 of the Act which in turn originated from order of assessment dt. 08/03/2021 passed u/s 143(3) of the Act for the assessment year 2018-19 [‘AY’]. ITAT-Panaji Page 1 of 9
Bandekar Brothers Pvt. Ltd. Vs NFeAC ITA No.: 199/PAN/2024 AY: 2018-19 The primary grievance in present appeal twirls 2. around dismissal of first appeal without adjudicating two of three issues raised in Form No 35 thus in contravention of s/s (6) of 250 of the Act.
As we note that, the assessee is an incorporated 3. company engaged in the business of mining & exports of iron ore. For the year under consideration the assessee company filed its return of income on 25/09/2018 declaring total income of ₹1,94,08,356/. The case of the assessee company was selected for scrutiny and consequential assessment was completed u/s 143(3) r.w.s. 143(3A) r.w.s. 143(3B) of the Act wherein a solitary disallowance of ₹1,93,93,491/- u/s 14A r.w.r. 8D(2) of Income Tax Rules, 1962 [‘the rules’] was made and total income was assessed higher of income under normal provisions and deemed income u/s 115JB of the Act.
ITAT-Panaji Page 2 of 9
Bandekar Brothers Pvt. Ltd. Vs NFeAC ITA No.: 199/PAN/2024 AY: 2018-19 Aggrieved by assessment the assessee filed an 4. appeal before Ld. NFAC on 05/04/2021, which came to be dismissed thus brining no relief to the assessee. Aggrieved by the impugned order the assessee came in present appeal on three grounds correspondingly agitating three issues viz; (i) validity of disallowance u/s 14A of the Act (ii) validity of 14A disallowance added while computing deemed income u/s 115JB and (iii) without prejudice to former issues, validity of disallowance computed without reducing average investment which did not yield exempt income.
Without touching merits, we have heard rival 5. party’s submissions on limited issue of non- adjudication of grounds/issues and subject to rule 18 of ITAT-Rules, 1963 perused material placed on record and considered facts in the light of settled position of law.
ITAT-Panaji Page 3 of 9
Bandekar Brothers Pvt. Ltd. Vs NFeAC ITA No.: 199/PAN/2024 AY: 2018-19 From the rival party’s submission in first place & 6. the perusal of impugned order it prima-facie revealed us that, in the return of income the appellant claimed to have incurred no expenditure in earning exempt income. Neither the appellant’s explanation nor it’s submission inspired to the Ld. AO, who in turn invoked the provisions and computed ₹1,93,93,491/- amount to be disallowed u/s 14A r.w.r. 8D(2) of the rules. In consequence thereof the Ld. AO added aforestated disallowances to assess the total income of the appellant for the year under consideration, and framed the assessment accordingly. Aggrieved appellant filed an appeal before Ld. NFAC with as many as sixteen grounds which alleged three such precisely were; (i) disallowance u/s 14A was unwarranted (ii) such disallowance cannot be added to deemed income and (iii) disallowance computed without reducing non-exempt income investments. ITAT-Panaji Page 4 of 9
Bandekar Brothers Pvt. Ltd. Vs NFeAC ITA No.: 199/PAN/2024 AY: 2018-19 We note that, while dealing with the appellant’s 7. appeal, the Ld. NFAC vide para 5.5 dealt with the first issue of validity of disallowance u/s 14A r.w.r. 8D (Supra), however shortly culminated said issue with much less conclusive decision thereon but reproducing ratio from catena of judicial precedents. Whereas vide para 5.6 to 5.7 Ld. NFAC dealt with second issue as to whether or not disallowance u/s 14A r.w.r. 8D(supra) would effectively be considered for computing deemed income u/s 115JB of the Act. Holding affirmatively for its inclusion, the Ld. NFAC inversely upheld the validity of disallowance u/s 14A of the Ac thus the assessment framed by the Ld. AO.
Insofar as the third issue relating to appellant’s 8. alternative plea to consider only exempt income yielded average investment for the purpose computation of disallowance, as solidified by rival ITAT-Panaji Page 5 of 9
Bandekar Brothers Pvt. Ltd. Vs NFeAC ITA No.: 199/PAN/2024 AY: 2018-19 parties, there is hardly any findings in the body of impugned order. The Ground No 15 of Form No. 35 as raised by the appellant and reproduced by the Ld. NFAC in the impugned order at page 5 numbered as sub-ground (j), admittedly remained unadjudicated. It is not oblivious to also note that, for solitary addition and three issues, the appellant raised overlapping sixteen grounds, creating sheer confusion which occasioned inadvertency in adjudication. As solidified by the rival party’s that, non-adjudication of first and third ground/issue has failed to settle the rights & liabilities of both the parties conclusively.
The appellant however requested to proceed 9. present adjudication and coaxed to decide the matter in whole sum including issue or part thereof which was omitted in first appeal. The request however witnessed strong objection from respondent Revenue.
ITAT-Panaji Page 6 of 9
Bandekar Brothers Pvt. Ltd. Vs NFeAC ITA No.: 199/PAN/2024 AY: 2018-19 10. The vehement arguments of Ld. DR Uniyal could evoke our concurrence that, decision/adjudication of first issue on the validity of disallowance is to form foundation for resultant addition in computing the deemed income u/s 115JB of the Act. The Ld. Uniyal’s submission also inspired the bench to the effect that, as what & which investments to be included for computing the disallowance u/s 14A (supra) finally would be relevant only when validity of disallowance reaches conclusiveness beforehand. Therefore, adjudication of second issue without adjudication of first issue, is like constructing building without laying down the foundation. Therefore such adjudication has suffered from the mandate of 250(6) of the Act.
Au contraire, the question as to whether the Tribunal can adjudicate any ground which did not pass through first appellate forum finds negatively ITAT-Panaji Page 7 of 9
Bandekar Brothers Pvt. Ltd. Vs NFeAC ITA No.: 199/PAN/2024 AY: 2018-19 answered by the Hon’ble Delhi High Court in ‘Divine Infracon Pvt Ltd. Vs PCIT’ [2025, 171 taxmann.com 92 (Del)], wherein Hon’ble Lordship have categorically held that, the ground which is not adjudicated by first appellate authority or ground not originating from first appellate order cannot be the subject matter of adjudication in second appeal. The Tribunal therefore duty bound to remit the matter to first appellate authority where ground raised therein did not give rise to rights & liabilities to the rival parties.
Following former judicial precedents(supra) the Ld. Co-ordinate bench in ‘M/s Jinabakul Forge Pvt. Ltd. Vs DCIT’ [ITA No 310/PAN/2024] and ‘Maga Ram Choudhary Vs ITO’ [004/PAN/2025] while dealing with similar facts & circumstances remanded the case back to the file of Ld. NFAC/CIT(A) for adjudicating misplaced ground.
ITAT-Panaji Page 8 of 9
Bandekar Brothers Pvt. Ltd. Vs NFeAC ITA No.: 199/PAN/2024 AY: 2018-19 13. In view therefore, without multiplying the authority on the issue, it is necessary to hold in the present case that, Tribunal has much less jurisdiction to adjudicate ground challenged before it unless it is adjudicated first appellate. Since the impugned order by non-adjudication of former two issues [(i) & (iii)] is suffered from s/s 250(6) of the Act, we therefore set- aside the same for its remand to the file of Ld. NFAC with a bullet direction to adjudicate them a fresh in accordance with law.
The appeal is partly allowed for statistical purpose. In terms of rule 34 of ITAT Rules, 1963 the order pronounced in the open court on date mentioned hereinbefore.
-S/d- -S/d- PAVAN KUMAR GADALE G. D. PADMAHSHALI JUDICIAL MEMBER ACCOUNTANT MEMBER Panaji/Dt: 26th November, 2025. Copy of the Order forwarded to :
1. 1. The Appellant.
2. The Respondent.