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Facts
The assessee, a non-filer, had undisclosed bank deposits totaling Rs. 7,48,19,576/- for AY 2019-20, leading to an ex-parte assessment order under Section 147. The assessee appealed to the CIT(A), but the appeal was dismissed on technical grounds for non-compliance with Section 249(4)(b) for not paying advance tax.
Held
The Tribunal held that Section 249(4)(b) is applicable only when there is an obligation to pay advance tax. Since the assessee had a net loss in the preceding financial year, there was no obligation to pay advance tax, and thus the CIT(A)'s dismissal on technical grounds was incorrect.
Key Issues
Whether the dismissal of the appeal by the CIT(A) for non-compliance with Section 249(4)(b) was justified when the assessee had no obligation to pay advance tax due to a net loss.
Sections Cited
147, 144, 144B, 69A, 249(4)(b), 156, 208, 209, 250
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, MUMBAI BENCH “D”, MUMBAI
Before: SHRI B.R. BASKARAN & SHRI ANIKESH BANERJEE
Instant appeals by the assessee was filed against the order of the National Faceless Appeal Centre (NFAC), Delhi (*in short, ‘Ld.CIT(A)+, passed under section 250 of the Income-tax Act, 9161 (in short, ‘the Act’), date of order 24-10-2024 for A.Y. 2019-20. The impugned order was emanated from the order of the Assessment Unit, Income tax Department (in short the “Ld. AO”), passed under Mahalaxmi Automobiles section 147 read with section 144 read with section 144B of the Act, date of order 01/12/2003.
The brief facts of the case is that the assessment was completed with an Addition amount of Rs.7,48,19,576/- under section 69A of the Act. The assesseeis non filer during alleged assessment year and deposited in bank account to the tune of Rs.7,48,19,576/- including cash deposit amount of Rs.5,42,56,306 during the impugned assessment year which was remained unverified. So considering this, the Ld.AO added back the entire amount to Rs.7,48,19,576/- with the total income of the assessee and framed the assessment exparte under section 147 read with section 144 read with section 144B of the Act. The assessee challenged the order before the Ld. CIT(A). The Ld.CIT(A) rejected the appeal petition on the technical ground of non compliance of section 249(4)(b) of the Act as the assessee has failed to pay the advance-tax before filing of appeal.
The Ld. CIT(A) conceded that the assessee is a non filer, so section 249(4)(b) of the Act should be complied during filing of appeal. In perusal of Form 35related appeal petition, in serial No.9 has been specifically mentioned that where no return has been filed, the assessee should pay the equal amount of advance-tax for pursuing the appeal petition. The observation of the Ld. CIT(A) on page 4 is reproduced as below:- “Decision- 3.1 I have examined facts of the case as also gone through relevant provisions of Income Tax Act (the Act). In the present case, the appellant failed to file return of income. The impugned order was passed u/s 147 r.w.s144 of the Act, creating demand of Rs. 12,13,97,206/- and the appellant was asked by notice u/s 156 of the Act to deposit the demand but it is noticed that the appellant has not deposited the demand before filing of this appeal. The appellant, at sl. no. 16 of Form-35, has stated to have made payment of appeal fee of Rs. 1,000/- only. At sl. No. 9 of Form-35, the appellant has offered 'Not applicable comments. This sl. No. 9 is reproduced below- Mahalaxmi Automobiles 9 Where no return has been filed by the appellant for the assessment year, Not whether an amount equal to the amount of advance tax as per section applicable 249(4)(b) of the Income-tax Act, 1961 has been paid.
3.2. As per provisions of section 249(4)(b) of the Act, where no return has been filed by the assessee, the asseesseehas to pay an amount equal to the amount of advance tax which was payable by him otherwise appeal shall not be admitted. The provisions of section 249 (4) of the Act are reproduced as under-“
The Ld.DR in argument placed that the assessee had not complied with the specific section for payment of advance-tax. Even the Proviso of the alleged section was not complied by the assessee during filing of appeal petition. So the Ld.CIT(A) correctly rejected the appeal of the assessee.
We have heard the rival submissions and perused the documents available on record. During the appellate proceedings, the issue was raised before the Bench that the Ld. CIT(A) erred in invoking Section 249(4)(b) of the Act, and consequently dismissed the appeal, despite the fact that the assessee was not liable to pay advance tax under Sections 208 and 209 of the Act. The Ld. AR placed on record the Profit & Loss account of the assessee for the financial year 2018-19, which reflects a net loss of Rs.5,45,561/-. Based on this, the assessee contended that there was no liability to pay advance tax under Sections 208 and 209 of the Act. We find that the applicability of Section 249(4)(b) of the Act is contingent upon certain conditions, namely: (i) whether the assessee is a non-filer, and (ii) whether the assessee was required to make an advance tax payment at the time of filing the appeal. If advance tax has not been paid, the assessee must satisfy the statutory requirements as prescribed under Section 249(4)(b) of the Act.
Mahalaxmi Automobiles However, in the present case, the assessee failed to comply with these statutory requirements. Furthermore, the addition was made by the Ld. AO through an ex- parte order. Upon a careful examination of Sections 208 and 209(1)(a) of the Act, we note that the determination of advance tax liability rests upon the assessee. In support of this contention, the Ld. AR relied on the order of the co-ordinate bench of the ITAT, Raipur, in the case of Vishnusharan Chandravanshi v. ITO, Ward-Kawardha [2024 (6) TMI 238 – ITAT Raipur], order dated 10.04.2024. The relevant observations of the Bench are reproduced below: “12. Admittedly, as per section 249(4)(b) of the Act, in a case where no return of income has been filed by the assessee, then his appeal shall be maintainable before the CIT(Appeals) only if he had paid an amount equal to the amount of advance tax which was payable by him. At the same time, the legislature had carved out an exception to the applicability of the aforesaid statutory requirement by way of a "proviso" to Section 249(4) of the Act, as per which, on an application made by the appellant, the CIT(Appeals) may, for any good and sufficient reason to be recorded in writing exempt him from the operation of the aforesaid statutory provision.
At this stage, I may herein observe that the statutory requirement contemplated in Clause (b) of sub-section (4) of Section 249 of the Act would stand triggered only where any obligation was cast upon the assessee to pay “advance tax”. As stated by the Ld. AR, and rightly so, in absence of any taxable income for the year under consideration [as was stated by him in the “SOF” filed before the CIT(Appeals)] no obligation was cast upon him to compute and pay any advance tax u/ss. 208 & 209 of the Act. Considering the fact that as no obligation was cast upon the assessee to compute/deposit any amount towards “advance tax´ for the subject year, I am unable to concur with the view taken by the CIT(Appeals) who had dismissed the appeal as not maintainable for the reason of non-compliance of the mandatory condition contemplated in Clause (b) of sub-section (4) of Section 249 of the Act. Although, at the first blush, I was of the view that the amount assessed by the A.O vide his order u/s. 144 of the Act dated 23.11.2019 of Rs.10 lacs would saddle the assessee with an obligation to pay “advance tax”, but stood corrected on a careful perusal of Section 208 and Section 209(1)(a) of the Act, which contemplates determination of the said tax liability at the behest of the assessee.
Mahalaxmi Automobiles 14. As in the present case, the assessee had not only before me but had also in the “Statement of facts” stated before the CIT(Appeals) that he had no taxable income, therefore, in my view in absence of any obligation cast upon the assessee to compute/pay “advance tax” u/ss. 208 and 209 of the Act for the subject year, the first appellate authority could not have held that he had failed to comply with the statutory conditions contemplated in Sec. 249(4)(b) of the Act. My aforesaid view is fortified by the orders of the ITAT, Bengaluru in the case of Shamanna Reddy Vs. ITO, dated 20.02.2024 and that of ITAT, Delhi in the case of Vikram Singh Vs. ITO, dated 21.02.2023.
I, thus, in terms of my aforesaid observations, set aside the order of the CIT(Appeals) and restore the same to his file with a direction to dispose off the appeal after considering the merits of the case. Needles to say, the CIT(Appeals) shall in the course of the set-aside proceedings afford a reasonable opportunity of being heard to the assessee.
In the result, appeal of the assessee is allowed for statistical purposes in terms of the aforesaid observations.” Additionally, the Ld. AR relied on the co-ordinate bench decision of ITAT, Indore, in Deepak Khandelwal v. ITO, Sehore order dated 05.07.2024, where the Tribunal took a similar view. Respectfully following the aforementioned judicial precedents, we hold that the provisions of Section 249(4)(b) of the Act are not applicable in the present case. Accordingly, we restore the matter to the file of the Ld. CIT(A) and direct that the appeal be adjudicated on its merits. Needless to say, the assessee shall be afforded a reasonable opportunity of hearing in the set-aside appellate proceedings.