2018 (12) TMI 1061 - AT - Income Tax

Maintainability of appeal before CIT(A) - Taxes due on the returned income not paid by the assessee - Omission to comply with a mandatory requirement - Held that - If tax due on income returned is paid even after disposal of the appeal by the CIT(A), if such payment is made the defect in the appeal due to noncompliance of a directory requirement of paying such tax before the filing of the appeal, stood removed. Ex consequenti the appeal should have been revived by the first appellate authority. In the present case, the taxes due on returned income is claimed to have been paid. Therefore, the appeal by the Assessee against the order of assessment should be admitted and adjudicated by the CIT(Appeals) on merits. If the admitted taxes are paid at a later point of time, then the appeal of the assessee should be considered as properly instituted and should be heard and decided by the CIT(Appeals) on merits. We set aside the order of CIT(Appeals) and direct the CIT(A) to decide the appeal on merits, subject to verification of payment of taxes due on the returned income. Assessee is allowed for statistical purposes.

Issues:
- Maintainability of appeal due to non-payment of taxes on returned income
- Delay in filing appeal and condonation of delay
- Interpretation of Sec. 249(4) of the Income Tax Act
- Precedent regarding payment of taxes before admission of appeal
- Adjudication of appeal on merits

Issue 1: Maintainability of appeal due to non-payment of taxes on returned income
The appeal was filed by the assessee against the order of assessment for the assessment year 2013-14. The CIT(Appeals) dismissed the appeal stating that the assessee had not paid taxes on the returned income, making the appeal not maintainable as per section 249(4)(a) of the Income Tax Act. The assessee contended that the taxes due on the returned income were paid and provided challans as evidence. The Tribunal referred to a Mumbai ITAT case where it was held that an appeal filed without paying tax due on returned income is defective, not void. If taxes are paid on the returned income before or after the filing of the return, the appeal can be admitted. The Tribunal concluded that since taxes on the returned income were claimed to have been paid, the appeal should be admitted and decided on merits by the CIT(Appeals, subject to verification of tax payment.

Issue 2: Delay in filing appeal and condonation of delay
There was a delay of 23 days in filing the appeal, which was explained by the sudden death of the husband and the wife's ignorance of the business affairs. The Tribunal accepted the reasons given for the delay and decided to condone the delay based on judicial pronouncements referred to in the application for condonation of delay.

Issue 3: Interpretation of Sec. 249(4) of the Income Tax Act
Section 249(4) of the Income Tax Act states that no appeal shall be admitted unless the tax due on the returned income is paid by the assessee. The Tribunal interpreted this provision in light of the Mumbai ITAT case, distinguishing between mandatory and directory provisions. It was held that the requirement of paying tax on the returned income before the admission of appeal is directory, not mandatory. If taxes are paid later, the defective appeal becomes valid, ensuring the payment of tax before the appeal is taken up for disposal.

Issue 4: Precedent regarding payment of taxes before admission of appeal
The Tribunal relied on precedents to establish that the payment of taxes on the returned income before the admission of appeal is crucial for the appeal to be considered valid. The objective behind this requirement is to ensure tax payment before the appeal is heard and decided. If taxes are paid after the filing of appeal but before disposal, the defective appeal becomes valid, allowing for the appeal to be revived and heard on merits.

Issue 5: Adjudication of appeal on merits
The Tribunal set aside the order of the CIT(Appeals) and directed the CIT(A) to decide the appeal on merits, given that the taxes due on the returned income were claimed to have been paid. Following the precedent, the appeal was allowed for statistical purposes, emphasizing the importance of verifying the payment of taxes before proceeding with the adjudication on merits.

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