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Income Tax Appellate Tribunal, MUMBAI BENCHES “H”, MUMBAI
Before: SHRI JOGINDER SINGH & SHRI ASHWANI TANEJA
O R D E R
Per ASHWANI TANEJA, AM
This appeal has been filed against the order of Ld. Commissioner of Income-tax(Appeals) (hereinafter called Ld.CIT(A) dt 27-08-2014 passed against the assessment order passed u/s 143(3) r.w.s. 147 dt 21-03-2013 for the assessment year 2009-10. In this case, the preliminary issue involved was that the Ld.CIT(A) had dismissed appeal as “not admitted” on the ground that tax payable as per return was not paid before filing the appeal as prescribed in section 249(4) and appeal was not filed within the prescribed period of 30 days as prescribed in section 249(2) of the Act.
Being aggrieved, the assessee filed appeal before the Tribunal and raised various grounds.
During the course of hearing before us, the Ld.Counsel of the assessee submitted that total tax payable as per return was Rs.64,514 out of which Rs.52,000 was paid by way of advance-tax. The remaining amount of Rs.11,514 which was inadvertently left to be deposited. The assessee filed appeal before the Ld.CIT(A) on 15-07-2013 and as soon as the fact of non payment of full amount of tax came to the notice of the assessee, the assessee deposited the amount of tax on 23-10-2013. Due to lack of proper representation, these facts could not be properly brought to the notice of the Ld.CIT(A). Evidence of payment of is enclosed in the paper book along with evidences of payments of other instalments of arrears. It was submitted that the entire tax liability has been deposited and, therefore, this appeal could not have been dismissed u/s 249(4). The Ld.Counsel also relied upon the decision of Mumbai Bench of the Tribunal in the case of Bhumiraj Constructions vs Addl CIT 131 ITD 406 (Mum) for the proposition that in case, the assessee makes payment of tax an removes the defect, then validity is attached to the appeal from the date when it was originally filed and not when the defect is removed.
Per contra, the Ld.DR fairly submitted that if the tax has been deposited then, this appeal can be sent back to the file of the Ld.CIT(A) to address the issue of condonation of delay in filing the appeal before the Ld.CIT(A) and for decision on merits.
We have gone through the orders of lower authorities, facts and circumstances of the case and also considered the submissions made by both the sides. It is noted that substantial amount of tax payable as per return was already deposited by the assessee by way of advance tax. Only a meagre amount of Rs.11,514 was left to be paid which was paid by the assessee on 23- 10-2013. It is also noticed by us that various refunds were also due to the assessee from the income-tax department for AYs 2011-12, 2012-13, 2013-14 dn 2015-16 aggregating to Rs.53,470 which have also been adjusted by the department. The overall conduct of the assessee and facts and circumstances of the case indicate that there was no malafide intention on the part of the assessee for non payment of tax. Under these circumstances, in our opinion, the lapse in making full payment of tax as per return before filing the appeal becomes technical in nature. Perusal of provisions of section 249(4) reveals that sufficient powers have been given by the legislature to the CIT(A) to exempt the assessee from the operation of section 249(4) in appropriate cases. It appears that as submitted by the Ld.Counsel also the facts of the case could not be properly analysed by the Ld.CIT(A) due to lack of proper representation. In this regard, we would like to draw support from the judgement of the co- ordinate bench in the case of Bhumiraj Constructions (supra) wherein law in this regard has been properly analysed with the following observations:-
“5. On going through the prescription of proviso to sub-section (4) it transpires that the CIT(A) has been empowered to grant exemption from the payment of tax equal to the amount of advance tax which was payable by the assessee in a situation where no return is filed by the assessee. It implies that where the assessee did not file any return for the relevant year and still the assessment was made, the assessee can file first appeal even without the payment of tax provided he satisfies the CIT(A) for the reasons of non-payment of tax. The power of the first appellate authority as per the directive of proviso is not to accept the delayed payment of such tax, but to exempt the payment of tax altogether. The operation of proviso is restricted only to clause (b) and is not applicable to clause (a) which deals with a situation in which return was tiled by the assessee. Thus in such a situation where the return was originally filed by the assessee, the CIT(A) has no power to grant exemption from the making of payment of tax due on the income returned. The requirement of payment of tax in a case covered under clause (a) is to be examined at the time of admission of first appeal.
At this juncture, it will be apposite to note the distinction between a mandatory and directory provision. If the non-compliance with the requirement of law exposes the assessee to the penal provision, then it is mandatory, but if no penal consequences follow on non- fulfilment of the requirement, then usually it is a directory provision. The Hon'ble Karnataka High Court in M.L. Srinivasa Shetty & Sons v. State of Karnataka [1992] 193 ITR 548 had the occasion to consider the distinction between a mandatory and directory provision. It held : 'In other words, one of the crucial tests to determine whether a particular statutory requirement is mandatory or directory is that the court has to see whether any penal consequences will by the non-compliance with a particular statutory requirement. If no penal consequences are indicated, would be safe to infer that the statutory requirement was directory and not obligatory or compulsory. In reaching this conclusion the Hon'ble High Court relied on the judgment of the Hon'ble Apex Court in Uttar Pradesh v. Babu Rain Upadhya AIR 1961 AC 751.
7. It is trite law that omission to comply with a mandatory requirement renders the action void, whereas omission to do the directory requirement makes it only defective or irregular. On the removal of such defect, the irregularity stands removed and the status of validity is attached. There is no dearth of judgments holding the requirement of filing the report of the auditors in connection with the grant of deductions under Chapter VI-A as only directory and not mandatory. In such cases it has been held that even if the audit report was not filed along with the return of income as per the necessity of the relevant section, still the deduction could not be denied if such report was subsequently filed during the course of assessment proceedings. In a case where the assessee failed to submit audit report in support of claim for deduction under sections 80H1-I and 80J during the course of assessment proceedings, the Hon'ble High Court in CiT v. Trehan Enterprises [2001] 248 ITR 333 /r20001 108 Taxman 189 (J&K) held that when such report was filed before the id. CIT(A), it was necessary for him either to allow deduction or send the matter to the file of Assessing Officer for a fresh decision in the light of such report. It, therefore, transpires that non-compliance of directory requirement does not make the action as invalid. As soon as such requirement is fulfilled, the deficiency stands removed and the action is validated. It can also be seen from the mandate of section 139(9), dealing with the defective return, which provides that on the removal of defect, the return becomes valid. In the like manner if the appeal filed by the assessee is only defective, it assumes validity on the removal of such defect or irregularity.
In the present case, the id. CIT(A) granted a time of ten days to the assessee for depositing the tax due. It was only on the failure of the assessee to do so that the appeal was dismissed as unadmitted. If the assessee had made good the deficiency within the period of ten days, then the appeal would have been admitted and taken for disposal on merits. It shows that the appeal filed without paying tax due on returned income is only defective but not void. Thus if tax is paid on the income returned, either before or at the time of or after due date of filing of return, it will be sufficient compliance with the provisions of sub-section (4) of section 249. The pre-requisite is that the payment of such tax, in the category of cases in which tax is paid after the filing of return should be before the admission of first appeal. In case such tax is not paid upto the filing of appeal before the CIT(A), the same shall not be admitted. In other words if the appeal is to be admitted by the first appellate authority, it is sine qua non that the assessee must have made the payment of tax on the income returned. If no payment of tax on the income returned is made at all and the appeal is filed, that cannot be admitted If however the appeal is filed without the payment of such tax but subsequently the required amount of tax is paid, the appeal shall be admitted on payment of tax and taken up for hearing. Now the moot point for determination is that if the due tax is paid by the assessee after the filing of first appeal but before it is taken up for consideration, it is admitted and taken up for disposal, then can the payment of due tax after the non admission of appeal by the authority can come to the rescue of the assessee and save the appeal from non consideration? In our considered opinion the answer to this question needs to be given in affirmative.
9.The objective behind section 249(4) is to ensure the payment of tax on income returned before the admission of appeal. If such payment after the filing of appeal but before it is taken up for disposal validate the defective appeal, then there is no reason as to why the doors of justice be closed on a poor assessee who could manage to make the payment of tax at a later date, The stipulation as to the payment of such tax ante the filing of first appeal is only directory and not mandatory. Whereas the payment of such tax is mandatory but the requirement of paying such-tax before filing appeal is only directory. When the defect in the appeal being the non- payment of such tax, is removed, the earlier defective appeal becomes valid. Once we call an appeal as valid, it is implicit that it is not time-barred. It implies that all the consequences which follow on the removal of defect are that the validity is attached to the appeal from the date when it was originally filed and not when the defect is removed. “ 6. Thus, in view of the aforesaid judgement and facts of the case brought before us, we find that since tax due as per return has been paid by the assessee, that too, before the date of passing of the order by the Ld.CIT(A), this appeal ought not have been dismissed by invoking provisions of section 249(4), therefore, we direct the Ld.CIT(A) to consider the appeal and give opportunity to the assessee to address the other issues. The assessee shall submit petition for condonation of delay in filing the appeal before the Ld.CIT(A) duly supported by an affidavit explaining the reasons for delay in filing of the appeal. In case, delay is condoned by the Ld.CIT(A), then, the same shall be disposed of on merits. The Ld.CIT(A) shall give adequate opportunity of hearing to the assessee. The assessee shall extend full cooperation to the Ld.CIT(A) by filing written submissions and documentary evidences, as may be required by the Ld.CIT(A) or as may be considered appropriate by the assessee, as per law. Thus, grounds 1 & 2 are allowed and ground 3, 4 5 are sent back to the file of the Ld.CIT(A) to be decided afresh in accordance with our directions as given above.
As a result, this appeal may be treated as partly allowed, for statistical purpose.
Order pronounced in the court at the conclusion of hearing .