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Judgment
PER SUDHIR KUMAR, JUDICIAL MEMBER:
This appeal by the assessee is directed against the order dated 08-10-2025 of the National Faceless Appeal Centre Delhi [hereinafter referred to as [“Ld. NFAC”], arising out the Assessment Order passed dated 28-09-2022 under section 143(3) of the Income Tax Act, 1961 (in short “the Act” Act.
The assessee has raised the following grounds of appeal:-
1.On the facts and in the circumstances of the case and in law, the order passed by the Ld. AO under section 143(3) r.w.s.144B of the Act is illegal invalid and void ab initio and liable to be quashed
2.The Ld. AO has erred in law and on facts by making addition of Rs.22,71,17,369/- being amount paid to entity and treated as deemed dividend u/s 2(22) (e) of the Income Tax Act, 1961 and CIT(Appeal) also has erred in confirming the same
3.The Ld. AO has grossly erred in applying the provisions of section 2(22)(e) of the Income Tax Act even though there was no relation between the assessee and the entity to whom advances were given as provided u/s 2(22)(e) and CIT(Appeal) also has erred in confirming the same
4.The The CIT(A) erred on facts and in law in passing an impugned order instead of the facts that the assessee had already informed the fact of the addition being rectified by the Ld. JAO and withdrawal request by the assessee before the CIT(A).
5.The AO has erred in law and on facts and circumstances of the case by charging interest under section 243A 234B and 234C of the ACT. CIT(A) also erred in confirming the same.
6.The above grounds and sub grounds of appeal are manually exclusive and without prejudice to each other.
7.The Appellant craves for leave to add, amend vary omit or substitute any of the aforesaid grounds of appeal at any time before or at the time of hearing of this appeal.
The brief facts of the case are that the assessee is a company incorporated under companies Act. During the year under consideration Assessee company was engaged in the business activity of farming and trading in agriculture goods. The assessee filed its return of income on 01-12-2020 for Assessment Year 2020-21 declaring a total income of Rs.11,44,83,780/-which included agriculture income of Rs.8,69,14,390/-. The return was duly processed under section 143(1) of the Act. The case of assessee was selected for scrutiny under CASS for complete scrutiny. The assessee company complied the notices and filed the reply. The Assessing Officer completed the assessment proceedings after making the addition of Rs.2,271.17 lakhs by invoking the section 2(22) of the Act.
Against the order of the Assessing Officer, the assessee preferred the appeal before the Ld. NFAC who vide its order dated 08-10-2025 dismissed the appeal of the assessee. Being, aggrieved the order of the Ld. NFAC the assessee is in appeal before the Tribunal.
The Ld. AR of the assessee submitted that during the pendency of appeal, a rectification application under section 154 of the Act was moved by the assessee which was allowed by the Ld. DCIT, Circle Rohtak vide order dated 06-03-2023 and entire demand of Rs.2,271.17 lakhs were deleted. Consequently, the assessee company submitted the request for withdrawal of the pending appeal before the Ld. CIT(A), which was not accepted. The Ld. CIT(A) dismissed the appeal on merits without appreciating the fact that the addition has been rectified by the Ld. DCIT Rohtak.
Ld. DR relied the order of the Ld. CIT(A). It is evident of the order of the Ld. DCIT Rohtak Circle Rohtak allowing the rectification observed as under:
3.The definition of the term dividend has been provided in the Section 2(22) (e) and its taxability has been provided in the Section 56(1) wherein it has been mentioned that the income from dividends would be chargeable to income tax under the head Income from other sources. The contention of the assessee that the chargeability of tax is in the hands of recipient of dividend is found to be correct and thus this is an error apparent form the record and thus the apparent error of addition of loans and advances is being rectified and demand notice and computation of income are attached with this order.
In the instant case the Ld. CIT(A) adjudicated the appeal on merits although the addition has been deleted in the rectification proceedings before passing the order. The Ld. CIT(A) should have allowed the withdrawal application of the assessee instead to decide the appeal on merits. Since the additions have been deleted on the rectification application, therefore, the order of the Ld. CIT(A) is set aside and the appeal of the assessee before the Ld.CIT(A) stands dismissed as being withdrawn by the assessee.
In the result, the appeal of the assessee is allowed.