2006 (11) TMI 155 - HC - Income Tax

Non-admission of appeal u/s. 249(4) - no admitted tax liability - Payment of tax due on the income returned - Search and seizure operation - whether the order of the Commissioner confirmed in the appeal before the Tribunal is sustainable or not - HELD THAT - From a reading of the order of the Commissioner and the Tribunal it is clear to us that tax due at the time of filing of appeal was not made over in terms of section 249(4) of the Act. It is also to be noticed at this stage by us that the appellants in terms of the material on record have chosen to say in unmistakable terms that they did not have any source to raise funds to make good the tax due at the time of filing the appeal. They have further stated in their statement of objections that in terms of section 249(4) of the Act the appeal cannot be admitted in the absence of tax on the admitted income. This very statement of the appellants before the authority would go to show that the appellants have failed even according to them to comply with the mandatory requirement of section 249(4) of the Act. Therefore we are satisfied that there exist no legal errors either in the order of the Commissioner or in the order of the Tribunal. The orders are therefore accepted by us in the case on hand particularly in the light of the admitted facts in terms of the return and in terms of the submission as we see from the material on record. Thus we hold that both the appeals are liable to be rejected by answering the questions of law against the assessees. At this stage Sri A. Shankar learned counsel for the assessees would say that he would advise his clients to make good the admitted tax in terms of the returns filed by them for the purpose of consideration of appeals for which he wants some breathing time for making such payment. If payment is made by the assessees-appellants in terms of this order the Commissioner (Appeals) shall consider the appeals on merits and pass appropriate orders in accordance with law without in any way being influenced by the earlier proceedings. No opinion on the merits is expressed by us. All contentions of either of the parties are left open. Ordered accordingly.

Summary

Issues:
1. Maintainability of appeals under section 249(4) of the Income-tax Act, 1961.
2. Determination of undisclosed income and tax payable for block assessment.
3. Challenge to search operation and jurisdiction under section 158BC of the Act.

Issue 1: Maintainability of appeals under section 249(4) of the Income-tax Act, 1961:
The appellants, a husband and wife, filed appeals challenging the block assessments conducted by the Assessing Officer. The Commissioner (Appeals) rejected the appeals citing section 249(4) of the Act, which requires payment of tax due on the income returned for admission of the appeal. The Tribunal upheld the Commissioner's decision. The court analyzed the provisions of section 249(4) and noted that the appeals were not admitted due to non-payment of the tax due at the time of filing the appeal. The appellants admitted their inability to raise funds to pay the tax. Consequently, the court found no legal errors in the Commissioner's and Tribunal's orders, as the appellants failed to comply with the mandatory requirement of section 249(4). The court held that the appeals were liable to be rejected as the tax due was not made over as required by law.

Issue 2: Determination of undisclosed income and tax payable for block assessment:
The husband's premises were searched under section 132 of the Act, leading to block assessments for both spouses. The wife declared a total undisclosed income of Rs. 19,32,838, while the husband declared Rs. 1,07,96,536. The Assessing Officer determined the wife's undisclosed income at Rs. 83,19,650 and the husband's at Rs. 4,64,85,100. The tax payable for the husband was Rs. 2,78,91,060. The Commissioner and the Tribunal rejected the appeals on maintainability grounds under section 249(4), which the court upheld.

Issue 3: Challenge to search operation and jurisdiction under section 158BC of the Act:
The appellants challenged the search operation conducted under section 132 of the Act and the jurisdiction of proceedings under section 158BC. They argued that the tax liability was disputed, and the search operation was illegal and void ab initio. The court, after careful consideration, found that the appeals were not maintainable due to non-compliance with section 249(4) and upheld the decisions of the Commissioner and the Tribunal. The court allowed the appellants time to make the required tax payments for the appeals to be considered on merits by the Commissioner (Appeals).

In conclusion, the High Court of Karnataka upheld the rejection of the appeals by the Commissioner and the Tribunal due to non-payment of tax as required under section 249(4) of the Income-tax Act, 1961. The court provided the appellants with an opportunity to make the necessary payments within a specified timeframe for their appeals to be considered on merits.