NFAC lacks jurisdiction under sections 143(3)/254/144B to pass orders after assessment proceedings conclude

Delhi HC held that NFAC lacked jurisdiction to pass orders under sections 143(3)/254/144B after assessment proceedings had concluded. The court found that once JAO passed an order giving effect to ITAT directions, the assessment proceedings were complete. Revenue failed to file counter-affidavit despite multiple opportunities. The court ruled that concluded assessments cannot be reopened except through specific statutory provisions like section 147, and NFAC's subsequent proceedings were without jurisdiction.

---

---

Issues:
1. Jurisdiction of the National Faceless Assessment Centre (NFAC) under the Income Tax Act.
2. Disallowance under Section 14A of the Income Tax Act.
3. Disallowance of fines and penalties in income tax assessment.

Jurisdiction of NFAC:
The petitioner challenged an order passed by NFAC under Sections 143(3)/254/144B of the Income Tax Act, contending it lacked jurisdiction. The petitioner had initially filed a revised income tax return for AY 2013-14, which was scrutinized, leading to additions by the Assessing Officer (AO). The Commissioner of Income Tax (Appeals) partly allowed the appeal, reducing the disallowance under Section 14A. The Income Tax Appellate Tribunal (ITAT) remanded certain issues to the AO, directing specific considerations. Despite the JAO passing an order to comply with ITAT's directions, NFAC proceeded to issue another order, disregarding the previous directives, resulting in a jurisdictional issue.

Disallowance under Section 14A:
The AO had disallowed expenses under Section 14A of the Act, which was partly reversed by the CIT(A) and further modified by the ITAT. The ITAT directed the AO to restrict disallowance to the extent of exempt income. Subsequently, the JAO passed an order to implement ITAT's directions, limiting the disallowance. However, NFAC issued an order reiterating a higher disallowance amount, disregarding ITAT's directives, leading to a dispute over the correct disallowance under Section 14A.

Disallowance of Fines and Penalties:
The issue of disallowance related to fines and penalties in the assessment was not specifically addressed by the AO or challenged by the Assessee. Despite the JAO's order to give effect to ITAT's directives, NFAC proceeded to pass an order reiterating the disallowance of fines and penalties, creating a discrepancy in the assessment process. The NFAC's actions in issuing an order that contradicted the JAO's directions raised concerns over the proper assessment procedures and jurisdictional boundaries.

In conclusion, the High Court set aside the impugned order issued by NFAC, emphasizing that concluded assessments cannot be reopened without specific provisions such as Section 147 of the Act. The court highlighted the lack of jurisdiction in NFAC's actions post the JAO's order, ultimately allowing the petitioner's challenge. The detailed analysis of the jurisdictional issues, disallowance under Section 14A, and the handling of fines and penalties in the income tax assessment underscored the importance of adherence to legal procedures and directives in tax assessments.

---