2011 (7) TMI 960 - HC - Income Tax

Search and seizure of Hundis - On account of the seizure of Hundis it became impossible for the assessee to have realized the amount of Hundis and to have paid the admitted tax for making the appeal competent - In the circumstances he prayed that the said recovery from the Hundis may be ordered to be adjusted towards the payment of admitted tax treating it to be compliance of the requirement of s. 249(4) - Held that the defect in the appeal before the CIT(A) due to non-compliance of payment of admitted tax which is a directory requirement can be treated to have been removed - Appeal is allowed by way direction to treat the said realization of the amount towards payment of admitted tax and to treat the appeal before the CIT(A) to be competent for the purposes of s. 249(4) of the Act

Summary

Issues:
Appeal against order dismissing appeal for non-compliance of payment of admitted tax under s. 249(4) of the IT Act, 1961.

Analysis:
The appeal was filed under s. 260A of the IT Act, 1961 against the order passed by the Income-tax Appellate Tribunal, which dismissed the assessee's appeal for non-compliance with the requirement of payment of admitted tax as per s. 249(4) of the Act. The CIT(A) had initially dismissed the appeal for this reason, and the Tribunal upheld this decision. A rectification application submitted by the assessee was also rejected by the Tribunal. The assessee challenged these decisions by filing the current appeal.

The appellant argued that due to the seizure of Hundis during a search and seizure conducted by the Revenue, it was impossible to realize the amount and pay the admitted tax required for the appeal to be competent. However, the Revenue had since recovered an amount exceeding the admitted tax from the seized Hundis. The appellant requested that this recovery be adjusted towards the payment of admitted tax to make the appeal maintainable before the CIT(A).

The counsel for the Revenue acknowledged that the amount recovered from the seized Hundis exceeded the admitted tax required for the appeal to be competent. Considering this subsequent event and the undisputed recovery amount, the Court held that the non-compliance with the payment of admitted tax, which is a directory requirement, could be deemed to have been rectified. Consequently, the Court directed the Revenue to treat the realized amount as payment of admitted tax, making the appeal before the CIT(A) competent under s. 249(4) of the Act.

As a result, the impugned orders passed by the CIT(A) and the Tribunal were set aside, and the matter was remitted to the CIT(A) with directions to decide the appeal on its merits, without being influenced by the earlier orders. The Court instructed the CIT(A) to handle the matter expeditiously. The appeal was allowed to the extent indicated above.