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Income Tax Appellate Tribunal, “B” BENCH, AHMEDABAD
Before: SHRI PRADIP KUMAR KEDIA
PER PRADIP KUMAR KEDIA - AM:
The captioned appeal in ITA No.858/Ahd/2015 arises from the order of the CIT(A) dated 20.01.2015 in relation to assessment order passed under s.143(3) of the Income Tax Act, 1961 (the Act) dated 25.01.2016 concerning AY 2003-04. The appeal in ITA No. 859/Ahd/2015 concerns imposition of penalty under s.271(1)(c) of the Act arising from the order of the CIT(A) dated 20.01.2015 in relation to penalty order passed by the AO dated 20.06.2007 under s.271(1)(c) of the Act concerning AY 2003-04.
I.T.A. Nos. 858 & 859/Ahd/15 [M/s. Brijlaxmi Leasing & Finance Ltd. vs. AC IT] A.Y. 2003-04 - 2 - 2. We shall first take up quantum appeal in ITA No.858/Ahd/2015 for adjudication purposes.
When the matter was called for hearing, the learned AR submitted that the assessee is aggrieved by the disallowance on account of loss on sale of certain investments amounting to Rs.29,31,239/-. The learned AR however in the same vain, pointed out that the CIT(A) has dismissed the appeal of the assessee as non maintainable on the grounds of lack of jurisdiction. The learned AR adverted to the peculiar facts of the case to submit that the assessee filed return of income on 30.11.2003 declaring total income of Rs.17,56,577/-. However, the return was filed without payment of taxes due as determined on the income returned by the assessee. The return was subjected to scrutiny assessment and certain additions/disallowances made by the AO. The assessee preferred appeal against the aforesaid order of the AO passed under s.143(3) of the Act dated 16.11.2007 before the CIT(A). The CIT(A) however dismissed the appeal of the assessee on the ground on non-compliance of the statutory notice vide order dated 03.01.2007. Thereafter, the assessee filed another appeal before the CIT(A) again and alongwith petition for condonation of delay on the premise that the earlier appeal was not maintainable at all in view of the mandatory provisions of Section 249(4)(a) of the Act. The CIT(A) however did not entertain the appeal filed for the second time before him on the ground that CIT(A) is not competent to entertain such another appeal without jurisdiction and such action tantamounts to review. In this backdrop, the learned AR for the assessee referred to the provisions of Section 249(4)(a) of the Act and submitted that no appeal before the CIT(A) can be admitted unless the assessee has paid tax dues on the income returned. It is an admitted position that the assessee had not paid tax dues on the returned income at the time of filing the appeal till the
I.T.A. Nos. 858 & 859/Ahd/15 [M/s. Brijlaxmi Leasing & Finance Ltd. vs. AC IT] A.Y. 2003-04 - 3 - disposal of the appeal dated 03.01.2007. Thus, the aforesaid appeal in the first round was non-est and not maintainable at the threshold. When the first order on a non-maintainable appeal is non-est, the CIT(A) ought to have entertained the appeal filed for adjudication again after payment of taxes in the second round of proceedings. There is no review in the present case as the first order was non-est at the threshold and was not passed on merits. The learned AR also pointed out that the CIT(A) has taken a contradictory stand and rejected the appeal filed before the CIT(A) in quantum proceedings on the ground of disposal of appeal earlier; whereas in the similar circumstances and for the same cause of action, the CIT(A) agreed with the plea of the assessee that appeal filed before the CIT(A) earlier could not lie before the CIT(A) in the absence of payment of admitted tax as per returned income in view of the mandatory provisions of Section 249(4)(a) of the Act and proceeded to adjudicate the applicability of penalty under s.271(1)(c) of the Act on merits on the appeal filed again. The learned AR accordingly urged for setting aside the quantum appeal in ITA No.858/Ahd/2015 to the file of the CIT(A) for adjudication of its appeal on merits. In the same vain, the learned AR submitted that ITA No.859/Ahd/2015 concerns penalty emanating from the quantum proceedings and therefore also requires to be set aside to be adjudicated afresh by the CIT(A) in the light of the outcome of quantum appeal and in accordance with law.
The learned DR, on the other hand, relied upon the orders of the authorities below.
We have carefully considered the rival submissions. The overriding point for adjudication in the present case is maintainability of appeal before the CIT(A) re-filed yet again after disposal of the earlier appeal on the ground that earlier appeal could not lie before the
I.T.A. Nos. 858 & 859/Ahd/15 [M/s. Brijlaxmi Leasing & Finance Ltd. vs. AC IT] A.Y. 2003-04 - 4 - CIT(A) at the first instance in view of the mandatory fetters placed by Section 249(4)(a) of the Act whereby the assessee is bound to pay admitted tax on the returned income for admission of the appeal before the CIT(A) for effective disposal. It is the case of the assessee that in view of the mandatory provisions under s. 249(4)(a) of the Act, the earlier appeal (disposed of by the CIT(A) for non prosecution) was non-est and an inherently inadmissible appeal having regard to the fact that the assessee failed to comply with the stipulations made in Section 249(4)(a) of the Act towards payment of admitted tax. The appeal once again filed before the CIT(A) after broad compliance of Section 249(4)(a) of the Act is therefore the effective appeal maintainable before the CIT(A) for adjudication on merits. This position taken by the assessee has been accepted by the CIT(A) albeit in penalty appeal. The relevant operative para of the order of the CIT(A) in penalty appeal is reproduced hereunder for ready reference:
“5. I have considered the facts of the case as well as the order of the AO and the submission of the AR of the appellant. The facts involved in the case of appellant are that in its case assessment order u/s 143(3) r.w.s. 144of the Act dated 25/01/2006 was passed by the AO for the year under consideration by disallowing the loss on sale of shares of Rs.29,31,329/-. While completing the assessment u/s 143(3), the AO also initiated penalty proceeding u/s 271(1)(c) of the IT. Act. Subsequent to passing of order u/s 143(3)/ the AO passed penalty order u/s 271(1)(c) levying the penalty of Rs. 10,78,000/- for the year under consideration. The appellant had filed appeal to the CIT(A)-1, Baroda against this penalty order u/s 271(1)(c) dated 20/06/2007 as passed by the AO. However, the Ld. CIT(A)-1, Baroda (i.e. my predecessor) dismissed the appeal of the appellant on the ground that the appellant had not paid tax due on the returned income in full before filing the appeal. As per the Ld. CIT(A) the self assessment tax u/s 40A was not paid in the case of appellant for the year under consideration in full and also the installments granted
I.T.A. Nos. 858 & 859/Ahd/15 [M/s. Brijlaxmi Leasing & Finance Ltd. vs. AC IT] A.Y. 2003-04 - 5 - were not adhere to. In view of this fact the appeal of the appellant was not admitted by the Ld. CIT(A) u/s 2.49(4) (a). However, the appellant has subsequently paid the entire self assessment tax amounting to Rs.9,21,701/- on various dates. Based on this, the appellant has prayed that the appeal may be restored for fresh hearing.
5.1 The above plea of the appellant is found to be acceptable in view of decision of Hon'ble ITAT, Ahmedabad in the case of ITO Ahmedabad vs. Ankush Fin Stock Ltd. 21 Taxmann.com 119. In this particular case the question before the Hon'ble ITAT arose as to whether CIT(A) can not admit an appeal u/s 249(4) in case of default of not payment of tax, but on removable of defect of nonpayment of tax an appeal deserves to be admitted. The Hon'ble ITAT has replied this question in affirmative i.e. yes. As per the Hon'ble ITAT on removable of defect on nonpayment of tax an appeal can be admitted. The Hon'ble ITAT, Ahmedabad, Bench WC" after following the decision of Hon'ble ITAT, Mumbai in the case of Sai Krupa Construction Company, 13 SOT 459 has held that if an appeal has been filed after making payment of unpaid taxes, it cannot be said that the requirement of section 249(4) has not been complied with and the only requirement of section 249(4) is payment of tax due on returned income. Following this decision of Hon'ble ITAT, Ahmedabad in the case of ITO vs. Ankush Fin Stock Ltd., the appeal of the appellant is admitted and accordingly the appeal of the appellant is decided on merits.”
A bare reading of Section 249(4)(a) of the Act gives an infallible impression that the appeal before the CIT(A) would lie for adjudication on merits only on satisfaction of the mandatory condition towards payment of tax determined as per the income returned. A waiver of such mandatory provision for adjudication of appeal on merits without compliance thereof is totally impermissible. Thus, the
I.T.A. Nos. 858 & 859/Ahd/15 [M/s. Brijlaxmi Leasing & Finance Ltd. vs. AC IT] A.Y. 2003-04 - 6 - jurisdiction could not be conferred on the CIT(A) to adjudicate the appeal on merits even if acquiescenced or estoppel or the bar of res judicata being attracted because the order in such case would lack inherent jurisdiction unless the conditions precedent are fulfilled. The order passed in the first instance in contravention of Section 249(4)(a) of the Act is thus a void order and hence a nullity in the eyes of law. Besides, the CIT(A) itself, in a similarly placed situation, has taken a favourable view in the penalty proceedings before it. Therefore, in the facts and circumstances of the case, we are of the view that the appellate order passed by the CIT(A) pursuant to appeal filed by the assessee prior to non-payment of admitted tax is a nonest order and deserves to be quashed. The appeal re-filed by the assessee before the CIT(A) thus requires to be restored and revived as a regular appeal for adjudication on all aspects as raised or sought to be raised before the CIT(A) including condonation of delay. Therefore, we admit the prayer of the assessee for restoration of appeal filed second time for its disposal in accordance with law. Consequently, while the order of the CIT(A) dated 03.01.2007 is quashed, the second order of the CIT(A) dated 20.01.2015 which is subject matter of the appeal before us, is set aside and restored and all the issues in relation to the appeal connected are remanded back to the file of the CIT(A) for its consideration afresh and adjudication in accordance with law.
In the result, appeal of the assessee in ITA No.858/Ahd/2015 is allowed for statistical purposes.
As the quantum appeal in ITA No.858/Ahd/2015 is being restored back to the file of the CIT(A) for adjudication, the appellate order passed in the consequential penalty proceedings dated 20.01.2015 which is the subject matter of the appeal in ITA No.859/Ahd/2015 also requires to be restored as a logical corollary
I.T.A. Nos. 858 & 859/Ahd/15 [M/s. Brijlaxmi Leasing & Finance Ltd. vs. AC IT] A.Y. 2003-04 - 7 - thereof. Consequently, order of the CIT(A) appealed against in ITA No.859/Ahd/2015 is also set aside and restored back to the file of the CIT(A) for adjudication on correctness of action towards imposition of penalty under s.271(1)(c) of the Act in the light of the outcome in the quantum proceedings and in accordance with law.
In the result, appeal of the assessee in I.T.A. No. 859/Ahd/2015 is also allowed for statistical purposes.
In the combined result, both captioned appeals of the assessee are allowed for statistical purposes.
This Order pronounced in Open Court on 08/10/2018
Sd/- Sd/- (MADHUMITA ROY) (PRADIP KUMAR KEDIA) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad: Dated 08/10/2018 True Copy S. K. SINHA आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. राज�व / Revenue 2. आवेदक / Assessee 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त- अपील / CIT (A) 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड� फाइल / Guard file. By order/आदेश से,
उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, अहमदाबाद ।