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Income Tax Appellate Tribunal, MUMBAI BENCH “B”, MUMBAI
Before: SHRI G.S. PANNU & SHRI PAWAN SINGH
The captioned five appeals relate to the same assessee and since they involve certain common issues, they have been clubbed and heard together and a consolidated order is being passed for the sake of convenience and brevity.
2 Mohammed Farooque Sarang 1223, 1495 to 1497/Mum/2012
In its appeals for Assessment Years 2003-04, 2006-07 and 2007- 98, Revenue has taken the following respective Grounds of appeal :-
ITA No. 1495/Mum/2012 (A.Y : 2007-08) :-
“1. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) is justified in directing the AO to consider Rs. 11,34,710/- as explained by assessee's disclosure when the same amount is not reflected in assessee's books against the Bunch Berry flat and this amount is also not explained in the capital account and balance sheet filed along with return of income for this year.
2. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) is justified in deleting the addition of Rs.6,64,000/- made on account of deemed rent from Janjira Bungalow and flat in White Tower without appreciating the fact that section 23(2)(b) would not be applicable in this case because assessee owns more than one house property.
3. The appellant prays that the order of Commissioner of Income-tax (Appeal) on the above ground be set aside and that of the Assessing Officer be restored. The appellant craves leave to amend or alter any grounds or add a new ground which may be necessary.”
ITA No. 1496/Mum/2012 (A.Y : 2003-04) :-
“1. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) is justified in restricting the addition made on account of unexplained investment in Janjira Bungalow from Rs. 20 lacs to Rs. 17 lacs ignoring the statement of assessee made during the search.
2. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) is justified in not remanding the matter to the file of the AO for getting the investment in Janjira Bungalow valued by Government valuer.
3 Mohammed Farooque Sarang 1223, 1495 to 1497/Mum/2012
3. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) is justified in deleting the addition of Rs.2,46,666/- made on account of deemed rent from Janjira Bungalow and flat in White Tower without appreciating the fact that section 23(2)(b) would not be applicable in this case because assessee owns more than one house property.
4. The appellant prays that the order of Commissioner of Income-tax (Appeal) on the above ground be set aside and that of the Assessing Officer be restored. The appellant craves leave to amend or alter any grounds or add a new ground which may be necessary.”
ITA No. 1497/Mum/2012 (A.Y : 2006-07) :-
“1. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) is justified in holding that investment in flat 202 Shabnam Apartment are not made by the assessee and are made by firm M/s Sarang Associates and hence no addition can be made in the hand of the assessee on account of unexplained investment in this property.
2. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) is justified in deleting addition of Rs.20,50,000/- made on account of unexplained investment in flat no. 202 Shabnam Apartment without appreciating the fact that investment has been made in the name of the individual and not in the name of firm.
3. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) is justified in deleting the addition of Rs. 2,64,000/- made on account of deemed rent from Janjira Bungalow and flat in White Tower without appreciating the fact that section 23 (2)(b) would not be applicable in this case because assessee owns more than one house property.
4. The appellant prays that the order of Commissioner of Income-tax (Appeal) on the above ground be set aside and that of the Assessing Officer be restored. The appellant craves leave to amend or alter any grounds or add a new ground which may be necessary.”
4 Mohammed Farooque Sarang 1223, 1495 to 1497/Mum/2012
The CBDT vide Circular No.21/2015 dated 10/12/2015 has revised the monetary limits for filing of appeals by the Department before the Tribunal retrospectively. The tax effect in dispute in the aforesaid three appeals is stated to be below the monetary limit of Rs.10.00 lacs specified in the CBDT Circular dated 10/12/2015 (supra).
4. In this background, Ld. Departmental Representative appearing for the Revenue was required to state his position. He has not brought out any material to suggest that the three appeals are protected by any of the circumstances prescribed in Para-8 of the Circular dated 10/12/2015 (supra) and as a consequence such appeals are liable to be treated as withdrawn/not pressed. The relevant portion of the circular dated 10/12/2015 (supra) is reproduced below:-
“3. Henceforth appeals/SLPs shall not be filed in cases where the tax effect does not exceed the monetary limits given hereunder:-
Sl. No. Appeals in Income-tax matters Monetary Limits (In Rs.) 1. Before Appellate Tribunal 10,00,000 2. Before High Court 20,00,000 3. Before Supreme Court 25,00,000
..........................................................................................................
For this purpose, "tax effect" means the difference between the tax on the total income assessed and the tax that would have been chargeable had such total income been reduced by the amount of income in respect of the issues against which appeal is intended to be filed (hereinafter referred to as "disputed issues"). However the tax will not include any interest thereon, except where chargeability
5 Mohammed Farooque Sarang 1223, 1495 to 1497/Mum/2012 of interest itself is in dispute. In case the chargeability of interest is the issue under dispute, the amount of interest shall be the tax effect. In cases where returned loss is reduced or assessed as income, the tax effect would include notional tax on disputed additions. In case of penalty orders, the tax effect will mean quantum of penalty deleted or reduced in the order to be appealed against. ………………………………………………………………………………………………….....
8. Adverse judgments relating to the following issues should be contested on merits notwithstanding that the tax effect entailed is less than the monetary limits specified in para 3 above or there is no tax effect:
(a) Where the Constitutional validity of the provisions of an Act or Rule are under challenge, or (b) Where Board's order, Notification, Instruction or Circular has been held to be illegal or ultra vires, or (c) Where Revenue Audit objection in the case has been accepted by the Department, or (d) Where the addition relates to undisclosed foreign assets/ bank accounts.
The monetary limits specified in para 3 above shall not apply to writ matters and direct tax matters other than Income tax. Filing of appeals in other Direct tax matters shall continue to be governed by relevant provisions of statute & rules. Further, filing of appeal in cases of Income Tax, where the tax effect is not quantifiable or not involved, such as the case of registration of trusts or institutions under section 12A of the IT Act, 1961, shall not be governed by the limits specified in para 3 above and decision to file appeal in such cases may be taken on merits of a particular case.
This instruction will apply retrospectively to pending appeals and appeals to be filed henceforth in High Courts/ Tribunals. Pending appeals below the specified tax limits in para 3 above may
6 Mohammed Farooque Sarang 1223, 1495 to 1497/Mum/2012 be withdrawn/ not pressed. Appeals before the Supreme Court will be governed by the instructions on this subject, operative at the time when such appeal was filed.”
Thus, without going into the merit of the issues raised by the Revenue, the three appeals are deemed to be withdrawn/not pressed as their filing is in contravention of the CBDT Circular dated 10/12/2015(supra).
In conclusion, by applying the CBDT Circular dated 10/12/2015(supra), the three appeals of the Revenue are dismissed as withdrawn/not pressed.
Now, we take up assessee’s appeals, which are directed against the respective orders of the CIT(A)-41, Mumbai, dated 13/12/2011, pertaining to the Assessment Years 2008-09 and 2009-10, which in turn have arisen from the orders passed by the Assessing Officer dated 27/12/2010 under section 143(3) r.w.s 153A of the Act.
As the facts in both the assessment years are similar, therefore, the appeal in for Assessment Year 2008-09 is taken as the lead case.
9. In this appeal, assessee has taken the following Grounds of appeal :-
“1. Considering the facts and circumstances of the case, the Commissioner of Income Tax (Appeals) - 41, Mumbai, (hereinafter, for the sake of brevity,
7 Mohammed Farooque Sarang 1223, 1495 to 1497/Mum/2012 referred to as 'the CIT(A)') erred in facts and in law in dismissing the appeal of the appellant on account of non- payment of tax due as per income returned and the same ought to be restored to the file of CIT(A).
2. Considering the facts and circumstances of the case, the CIT(A) erred in facts and in law in not considering rent on hire of Madh bungalow of `800000 as 'Income from house property' as claimed by the appellant, and the same ought to be considered under the head 'Income from house property'.
3. Considering the facts and circumstances of the case, the CIT(A) erred in facts and in law in confirming an addition of `480000 on account of low withdrawals and the same ought to be deleted
4. Considering the facts and circumstances of the case, the CIT(A) erred in facts and in law in confirming an addition of `7993024 u/s 68 of the Income Tax Act, 1961, (hereinafter, for the sake of brevity, referred to as "the Act") on account of unsecured loan of the appellant.
5. Considering the facts and circumstances of the case, the CIT(A) erred in facts and in law in confirming an addition of `664000 as deemed rent of residential flats and the same ought to be deleted.”
10. In this appeal, the first and the foremost grievance of the assessee is that the CIT(A) has erred on facts and in law in dismissing the appeal as unadmitted by wrongly invoking the provisions of Sec.249(4) of the Act.
In this context, the relevant facts are that the appellant is an individual in whose case a search action u/s 132(1) of the Act was carried out on 24.2.2009. For the assessment year under consideration, i.e., 2008-09, assessee had not filed its regular return u/s 139(1) of the Act and it was only after a notice u/s 153A of the Act dated 5.10.2009 was issued, assessee filed return of income on 18.11.2009 declaring the 8 Mohammed Farooque Sarang 1223, 1495 to 1497/Mum/2012 total income at Rs.1,55,11,800/-. In the assessment order, the Assessing Officer has further noted that on 12.11.2010 assessee filed a revised return declaring an income of Rs.6,32,11,810/-. In the assessment finalized u/s 143(3) r.w.s. 153A of the Act dated 27.12.2010, the Assessing Officer determined the total income at Rs.7,23,89,630/- after making certain additions/disallowances on account of low withdrawals, unexplained credits and rent from property, etc. Assessee challenged the additions in appeal before the CIT(A). The CIT(A) referred to the provisions of Sec. 249(4) of the Act, which prescribes that no appeal shall be admitted unless at the time of filing of appeal, assessee has paid the tax due on the income returned by him. The CIT(A) referred to clause (a) of Sec. 249(4) of the Act and noted that the assessee had not paid the tax on the income of Rs.6,32,11,810/- declared in the revised return filed on 12.11.2010 and, therefore, the appeal was dismissed as unadmitted.
Before us, the learned representative for the assessee vehemently pointed out that the CIT(A) has erroneously considered the return filed on 12.11.2010 inasmuch as the same was non-est in the eyes of law. The learned representative pointed out that in the present case no return was filed u/s 139(1) of the Act and that even the return dated 5.10.2009 filed in response to notice u/s 153A of the Act was filed belatedly, therefore, the revised return filed by the assessee on 12.11.2010 was not a valid return within the meaning of Sec. 139(5) of the Act. On this basis, it was pointed out that though the assessee filed the revised return on 12.11.2010 voluntarily, but it could not be treated as a valid return because the original return itself was belated and in 9 Mohammed Farooque Sarang 1223, 1495 to 1497/Mum/2012 support of the said proposition, he has relied on the judgment of the Hon'ble Bombay High Court in the case of Menezes Fernandes Enterprises, [2013] 30 taxmann.com 388 (Bombay). The learned representative emphasized that the return contemplated u/s 249(4)(a) of the Act is a return which is valid in the eyes of law and not a non-est return. In this context, he has referred to the judgment of Hon'ble Karnataka High Court in the case of K. Nagesh, [2015] 57 taxmann.com 439 (Karnataka) and sought to draw an analogy and contended that the return referred to in Sec. 249(4) of the Act ought to be a valid return and not a return which is non-est in the eyes of law. Thus, according to the learned representative, it is the return filed by the assessee on 18.11.2009 declaring total income of Rs.1,55,11,800/- which is the correct return to be considered while considering the applicability of Sec. 249(4) of the Act. With reference to the tax due on the income declared in the return filed on 18.11.2009, the learned representative has furnished a statement showing payment of taxes on various dates according to which, the appellant has paid in excess of the tax payable on the returned income before the passing of order by CIT(A) on 13.12.2011. It is pointed out that even after the passing of the order of CIT(A), assessee has made a further payment of Rs.13,00,000/- and that till date, tax of Rs.97,81,518/- has been paid, which is more than the tax on the returned income determined at Rs.52,14,678/-. Accordingly, it is contended that the order of CIT(A) be set-aside and the matter be restored back to his file for adjudication on merits.
On the other hand, the ld. CIT-DR appearing for the Revenue has defended the order of CIT(A) and has pointed that in the present case
10 Mohammed Farooque Sarang 1223, 1495 to 1497/Mum/2012 assessee has not paid the tax due on the income returned at the time of filing of appeal before the CIT(A) and, therefore, the provisions of Sec.249(4)(a) of the Act have been validly invoked in dismissing the appeal.
We have carefully considered the rival submissions. Sec. 249(4) of the Act, which is of relevance in the present case, reads as under :-
“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:
Provided that, in a case falling under clause (b) and on an application made by the appellant in this behalf, 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.”
Quite clearly, the case of assessee falls in clause (a) of Sec. 249(4) of the Act as assessee had filed a return of income. Thus, in terms of Sec. 249(4)(a) of the Act, assessee ought to have paid the tax due on the income returned by him at the time of filing of appeal before the CIT(A). The first issue in this appeal is what is the connotation of the expression “return” contained in clause (a) of Sec. 249(4) of the Act? As per the Revenue, compliance of Sec. 249(4) of the Act has to be seen vis-à-vis the revised return filed by the assessee on 12.11.2010 whereas as per
11 Mohammed Farooque Sarang 1223, 1495 to 1497/Mum/2012 the assessee, the relevant return is the one filed on 18.11.2009. The revised return filed on 12.11.2010 is claimed to be non-est in the eyes of law inasmuch as it could not have been filed in terms of Sec.139(5) of the Act. The learned representative has made a statement at Bar that assessee has not filed a regular return as required u/s 139(1) of the Act and further, even the return filed on 18.11.2009 in response to notice issued u/s 153A of the Act dated 5.10.2009 was filed belatedly. The aforesaid factual matrix has not been disputed by the Revenue and we proceed further on the basis of the aforesaid admitted fact-situation. Under these circumstances, if one has to examine the validity of the revised return filed on 12.11.2010, then, in terms of Sec. 139(5) r.w.s. 153A(1)(a) of the Act, it has to be examined as to whether the original return, which is sought to be revised, was filed within the period specified or not? Ostensibly, the fact-situation shows that no return has been filed in pursuance of Sec. 139(1) of the Act and even the return filed in response to notice u/s 153A of the Act is belated and, therefore, under these circumstances, the revised return filed on 12.11.2010 is not in consonance with the requirements of Sec. 139(5) of the Act. Under these circumstances, we find enough justification in the plea of assessee that the revised return filed on 12.11.2010 is non-est in the eyes of law and the same is not relevant for the purpose of examining the applicability of Sec. 249(4)(a) of the Act. At this stage, we may refer to the judgment of the Hon'ble Karnataka High Court in the case of K. Nagesh (supra) wherein the issue related to refund of tax and interest due to the assessee having regard to Sec. 240 of the Act. In the context of Sec. 240 of the Act, the Hon'ble High Court held that the return contemplated therein was a valid return and the revised return
12 Mohammed Farooque Sarang 1223, 1495 to 1497/Mum/2012 which was not in compliance with Sec. 139(5) of the Act was a non-est return and it could not be considered as the ‘return’ contemplated u/s 240 of the Act. On a similar analogy in the present case, it has to be held that the revised return filed by the assessee on 12.11.2010 is non- est as it is not in compliance with the requirements of Sec. 139(5) of the Act and, therefore, the same would not constitute the return contemplated in Sec. 249(4)(a) of the Act. Therefore, the requirements of Sec. 249(4) of the Act have to be examined with reference to the tax payable on the income declared in the return filed on 19.11.2009.
The learned representative pointed out that at the time of filing of appeal before the CIT(A), admittedly the tax on the income returned was not paid. Under these circumstances, in our view, the rigors of Sec. 249(4)(a) of the Act clearly come into operation and the appeal before the CIT(A) deserved to be treated as unadmitted. It is also axiomatic that so far as the situation contemplated in clause (a) of Sec. 249(4) of the Act is concerned, the CIT(A) is not vested with any power to waive payment of the admitted tax and entertain the appeal in contrast to the situation contemplated in clause (b) to Sec. 249(4) of the Act. However, the defense put up by the appellant is that the non-payment of admitted tax on returned income is a curable defect and once such a defect has been cured, there is enough justification for the appeal being admitted by the CIT(A). Our coordinate Bench in the case of Smt. Banu Begum, [2012] 22 taxmann.com 235 (Hyd) has observed that non- payment of admitted tax is a defect which can be cured by payment of tax. In fact, the Hon'ble Karnataka High Court in the case of K. Satish Kumar Singh, [2012] 19 taxmann.com 154 (Kar) noted that even after
13 Mohammed Farooque Sarang 1223, 1495 to 1497/Mum/2012 the dismissal of appeal by the CIT(A) for non-payment of admitted tax, if assessee pays the admitted tax, even then the CIT(A) may recall the order dismissing the appeal and consider the appeal on its merits. In view of the aforesaid proposition, in the present case too, since the assessee has claimed that it has paid tax on the returned income before passing of order by the CIT(A), in our view, it will be in the fitness of things that the matter is remitted back to the file of CIT(A) to be considered afresh. Before us, the learned representative for the assessee has made a tabulation showing payment of tax on various dates and also challans evidencing the payment of admitted tax. We deem it fit and proper to remit the matter back to the file of CIT(A) who shall verify whether the entire admitted tax has been paid and if it is so found, he shall proceed to decide the various Grounds raised by the assessee on merits. Needless to mention, the CIT(A) shall allow the assessee a reasonable opportunity of being heard and thereafter pass an order afresh, as per law. In the result, insofar as Ground of appeal no. 1 is concerned, the same is treated as allowed for statistical purposes.
Insofar as Ground of appeal nos. 2 to 5 are concerned, same relate to merits of the additions, which are also being restored back to the file of CIT(A), as same have not been addressed by him since the appeal of assessee was dismissed by the CIT(A) in limine.
Resultantly, appeal of assessee for Assessment Year 2008-09 is partly allowed for statistical purposes.
14 Mohammed Farooque Sarang 1223, 1495 to 1497/Mum/2012
At the time of hearing, it was a common point between the parties that the facts and circumstances in Assessment Year 2009-10 are pari materia to those considered by us in for Assessment Year 2008-09, therefore, our decision therein shall apply mutatis mutandis in the said appeal also.
Resultantly, all the appeals filed by the Revenue are dismissed whereas both the appeals filed by assessee are partly allowed for statistical purposes.
Order pronounced in the open court on 28th April, 2017.