MAROOFALI I SHAIKH ,BAGALKOT vs. INCOME TAX OFFICER, WARD-1 & TPS, BAGALKOT

PER KESHAV DUBEY, JUDICIAL MEMBER:

2.1 In our opinion, the explanation given is bona fide and it is a good and sufficient reason to condone the delay in filing the appeal before us. It is noted that there is no malafide intention on behalf of assessee in not filing the present appeal within time. In these circumstances, it cannot be said that assessee is very callous in its approach in filing the appeal before us. 2.2 At this stage, it is appropriate to refer to the judgement of Hon’ble Supreme Court in the case of Collector, Land Acquisition v. Mst. Katiji and Ors. (167 ITR 471), Hon’ble Supreme Court laid down six principles. For the purpose of convenience, the principles laid down by the Apex Court are reproduced hereunder: “(1) Ordinarily, a litigant does not stand to benefit by lodging an appeal late.

(2) Refusing to condone delay can result in a meritorious matter being thrown at the very threshold and cause of justice being defeated. As against this, when delay is condoned, the highest that can happen is that a cause would be decided on merits after hearing the parties. (3) 'Every day's delay must be explained' does not mean that a pedantic approach should be made. Why not every hour's delay, every Maroofali I Shaikh, Bagalkot Page 8 of 17 second's delay? The doctrine must be applied in a rational, commonsense and pragmatic manner. (4) When substantial justice and technical consideration are pitted against each other, the cause of substantial justice deserves to be preferred, for the other side cannot claim to have vested right in injustice being done because of a nondeliberate delay. (5) There is no presumption that delay is occasioned deliberately, or on account of culpable negligence, or on account of mala fides. A litigant does not stand to benefit by resorting to delay. In fact, he runs a serious risk. (6) It must be grasped that the judiciary is respected not on account of its power to legalise injustice on technical grounds but because it is capable of removing injustice and is expected to do so. 2.3 Being so, when substantial justice and technical consideration are pitted against each other, the cause of substantial justice deserves to be preferred, for the other side cannot claim to have vested right for injustice being done because of non-deliberate delay. In our opinion, this is a fit case to condone the short delay of 51 days in filing the appeal before this Tribunal. Accordingly, the delay is condoned and the appeal is taken up for adjudication on merits.

2. The Appellant denies himself liable to be assessed at Rs.1,56,92,000/- for the assessment year 2015-16, on the facts and circumstances of the case.

3. Grounds on dismissal on first appeal under section 249(4)(b) of the Act: a. The learned CIT(A) is not justified in dismissing the appeal in limeine by relying on the provisions of section 249(4) of the Act, on the facts and circumstances of the case. b. The learned CIT(A) has erred in arriving at a conclusion that the appellant is required to 90% of the disputed demand of Rs.1,40,27,642/- which is an incorrect interpretation of section 249(4) of the Act, on the facts and circumstances of the case. c. The learned CIT(A) has failed to appreciate that the appellant has admitted tax liability of Rs.64,460/- which has been discharged vide

4. Grounds on addition made under section 69A of the Act, Rs.1,56,92,000/-:

a. The learned assessing officer has erred in considering that a sum of Rs.1,56,92,000/- has been deposited in the bank account, whereas the actual cash deposits made in Rs.77,98,300/-, on the facts and circumstances of the case. b. The cash deposits is out of the sale proceeds and the cash withdrawals made from the bank account, thus, the provisions of section 69A of the Act finds no applicability on the facts and circumstances of the case. 4, c. The learned assessing officer has erred in treating the entire cash deposits as unexplained and ought to have estimated the profit from business on the facts and circumstances of the case. d. The learned assessing officer has failed to appreciate that the power to invoke the rigours of section 69A of the Act is directory in nature and not mandatory on the facts and circumstances of the case.

Maroofali I Shaikh, Bagalkot Page 10 of 17 b. The learned assessing officer has failed to strike off the irrelevant portion in the 148 notice, thereby rendering the reopening as void ab initio on the facts and circumstances of the case. c. The reopening is based on suspicion and that there are no reasons to believe that the income of the appellant has escaped assessment, on the facts and circumstances of the case. d. The learned assessing officer is not justified in issuing notice under section 148 of the Act for making enquires with respect to the cash deposits made, on the facts and circumstances of the case. e. The learned assessing officer has failed to follow the mandatory procedures for assessment under section 147 of the Act, on the facts and circumstances of the case. f. The learned assessing officer has failed to obtain the mandatory sanction for reopening. Without prejudice, the sanction obtained, if any, is not in accordance with law, on the facts and circumstances of the case.

Maroofali I Shaikh, Bagalkot Page 11 of 17 5. Brief facts of the case are that the assessee is an individual and during the FY 2014-15, the assessee has deposited huge amount of cash at Rs.1,56,92,000/- in his savings bank account maintained with SBI vide saving account No.11029313443. However, assessee had not filed his return of income as per provision section 139 of the Act for FY 2014-15 relevant to AY 2015- 16. Accordingly, notice u/s 148 of the Act was issued to the assessee on 31.3.2021. In response to the notice the assessee has also not filed his return of income within stipulated time. The case was then transferred to the ReFAC(AU) on 10.12.2021. Accordingly, notices u/s 142(1) of the Act along with questionnaire were issued but no reply was received from the assessee. In the absence of any details/submission from the assessee, the AO passed assessment order by observing that the assessee has made substantial cash deposits in the bank accounts totalling to Rs.1,56,92,000/- and since proper explanation was not given by the assessee regarding source of deposit, the AO treated entire deposit as unexplained money u/s 69A of the Act and added to the total income of the assessee and accordingly computed the tax and interest payable at Rs.1,40,27,642/-. Aggrieved, the assessee went in appeal before ld. CIT(A)/NFAC.

Conditions of liability to pay advance tax: “208. Advance tax shall be payable during a financial year in every case where the amount of such tax payable by the assessee during the year, as computed in accordance with the provisions of this Chapter, is (ten thousand) rupees or more] Maroofali I Shaikh, Bagalkot Page 14 of 17 Computation of advance tax: 209 (1) The amount of advance tax payable by an assessee in the financial year shall, subject to the provision of sub-sections (2) and (3), be computed as follows, namely:- (a) Where the calculation is made by the assessee for the purposes of payment of advance tax under sub-section (1) or sub-section(2) or sub- section (5) or sub-section (6) of section 210, he shall first estimate his current income and income-tax thereon shall be calculated at the rates in force in the financial year. (b) ………………………………… Payment of advance tax by the assessee of his own accord or in pursuance of order of Assessing Officer. “210. (1) Every person who is liable to pay advance tax under section 208 (whether or not he has been previously assessed by way of regular assessment) shall, of his own accord, pay, on or before each of the due dates specified in section 211, the appropriate percentage, specified in that section, of the advance tax on his current income, calculated in the manner laid down in section 209.”

9.2 From the plain reading of the above provisions, we can safely say that firstly for the purposes of payment of Advance tax, the assessee shall first estimate his current income (Section 290(1)(a) of the Act), secondly the advance tax shall be payable during the financial year where the amount of tax payable is Rs.10,000/- or more (Sec.208 of the Act) and thirdly every person liable to pay advance tax shall, of his own accord pay on or before each of the due dates specified in section 211 of the Act (Sect 210(1) of the Act). 9.3 In the present case, it is an undisputed fact that the assessee could not file his return of income for the assessment year 2015-16 and therefore, the provisions of section 249(4)(b) of the Act will be clearly applicable to the assessee. The provisions of section 249(4) of the Act is reproduced below for ease of reference and convenience: Section 249(4): No appeal under this chapter shall be admitted unless at the time of filing of the appeal— (a) Where a return has been filed by the assessee, the assessee has paid the tax due on the income returned by him; or (b) Where no return has been filed by the assessee, the assessee has paid an amount equal to the amount of advance tax which was payable by him; Maroofali I Shaikh, Bagalkot Page 15 of 17 Provided that, [in a case falling under cluse (b) and] on an application made by the appellant in this behalf, the [Joint Commissioner (Appeals) or the] [Commissioner (Appeals)] may, for any good and sufficient reason to be recorded in writing, exempt him from the operation of the provisions of [that clause]].

9.4 Thus, from the plain reading of above provisions of law, we can safely infer that if the assessee has not filed any return of income, then no appeal shall be admitted unless at the time of filing of the appeal, the assessee has paid an amount equal to the amount of advance tax which was payable by him. The legislature at their full wisdom had used the term “Amount equal to the amount of advance tax which was payable by him”. As discussed earlier, the advance tax is the tax payable on the estimated total income of the relevant financial yar, which is chargeable to tax in the assessment year but is payable in that very financial year. A catena of decisions by various High Courts has reiterated that the advance tax payable under chapter XVII is based on an estimate of the total income of the assessee. An estimate always has an element of guess work. There could be various reasons due to which an estimate may be faulty and inaccurate which is why, there is a provision for payment of interest on deficient or excess payment of advance tax when there is variation between advance tax paid and actual liability to tax. 9.5 Section 249(4)(b) of the Act which states that the assessee has paid an amount equal to the amount of advance tax which was payable by him can never even stretch of imagination be treated as “advance tax payable on 90% of the disputed demand as held by ld. CIT(A). In our opinion, the ld. CIT(A) in para 2.3 although reproduced the provisions of section 249(4) of the Act and accepted the fact that the assessee has not filed the return of income and therefore, the second part of the provision is applicable to the case of the assessee but grossly erred in holding that as per the provisions of the Act, the Advance tax payable is 90% of the disputed demand amount i.e. Rs.1,26,24,879/- and the assessee has paid only Rs.64,460/- and Maroofali I Shaikh, Bagalkot Page 16 of 17 accordingly, not admitted the appeal as per provisions of section 249(4) of the Act. 9.6 We are of firm opinion that in the present case, before filing the appeal, the assessee has on his own accord computed the taxable income for the assessment year 2015-16 and the entire admitted tax has also been paid on or before the filing of appeal. Further, the assessee had also submitted the computation of income and copy of challans paid at the time of filing the appeal and therefore, the order of ld. CIT(A) in not admitting the appeal is illegal and bad in law. 9.7 Further, the question of filing of an application as per the proviso to section 249(4) of the Act also does not arise as the assessee has paid the entire admitted tax on or before the filing of appeal before first appellate authority. 9.8 With the above observations, we remit the entire issue in dispute to the file of ld. CIT(A) for fresh consideration and to decide the same on merits in accordance with law after giving reasonable opportunity of being heard to the assessee.