2021 (8) TMI 284 - AT - Income Tax

Appeal before CIT(A) - Non deposit of admitted tax/advance tax as provided u/s 249(4) - HELD THAT - On perusal of the order of the ld CIT(A), we find that the ld CIT(A) has not admitted the appeal for want of payment of taxes equal to advance tax by the assessee. Apparently, there is nothing on record which suggests that the assessee has moved any application before the CIT(A) seeking exemption from payment of taxes. The assessee has moved an application seeking admission of additional evidence by way of tax challans disclosing payment of ₹ 13 lacs equal to advance tax as per section 249(4)(b) for the impugned assessment year. As noted that taxes have been deposited by the assessee before filing of appeal before the ld CIT(A), the taxes amounting to ₹ 2 lacs have been deposited after filing of appeal before the ld CIT(A) and ₹ 5 lacs have been deposited after passing of the impugned order by the ld CIT(A) which reasonably explains the financial hardship faced by the assessee and also its earnestness in taking the necessary steps to be in compliance with the provisions of section 249(4)(b) and to be heard on merits. As the assessee has deposited an amount of ₹ 13 lacs equal to advance tax as per section 249(4)(b) for the impugned assessment year, the additional evidence by way of tax challans towards payment of taxes are hereby admitted and consequent thereto, the appeal by the assessee against the order of assessment need to be admitted and adjudicated by the CIT(Appeals) on merits. Payment of tax is mandatory but the requirement of paying such tax before filing appeal is only directory and where the defect in the appeal, being the non-payment of such tax, is removed, the earlier defective appeal becomes valid, applies equally to clause (b) sub-section (4) of section 249 - where 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. Considering the same, the matter is set- aside to the file of the ld. CIT(A) with the directions to verify and consider the payment of taxes towards due discharge of the assessee s liability as per provisions of section 249(4)(b) of the Act and decide the matter on merits after providing reasonable opportunity to the assessee.

Issues Involved:
1. Condonation of delay in filing appeals.
2. Dismissal of appeals by CIT(A) due to non-deposit of admitted tax/advance tax as per Section 249(4) of the IT Act.
3. Estimation of net profit and other incomes by the AO.

Issue-Wise Detailed Analysis:

1. Condonation of Delay in Filing Appeals:
The assessee filed appeals against the orders of CIT(A) with a delay. The delay was attributed to financial hardships and the COVID-19 pandemic. The Tribunal found that the assessee had reasonably explained the delay, emphasizing the principle of substantial justice over technicalities. Consequently, the delay in filing the appeals was condoned, and the appeals were admitted for adjudication.

2. Dismissal of Appeals by CIT(A) Due to Non-Deposit of Admitted Tax/Advance Tax as per Section 249(4) of the IT Act:
The CIT(A) dismissed the appeals because the assessee did not deposit the admitted tax/advance tax as required under Section 249(4). The Tribunal examined the provisions of Section 249(4), which mandate the payment of tax on returned income or an amount equal to the advance tax if no return is filed, before admitting an appeal. The Tribunal noted that the CIT(A) has the discretion to exempt the assessee from this requirement for good and sufficient reasons.

In this case, the assessee had not filed any return of income and had not moved any application seeking exemption from payment of taxes before the CIT(A). However, the assessee later provided evidence of tax payments amounting to ?13 lakhs, which were made in installments before and after the filing of the appeal. The Tribunal referred to the decision in Bhumiraj Constructions vs Additional Commissioner of Income-tax, which held that the requirement of paying tax before filing an appeal is directory, not mandatory. Therefore, once the defect of non-payment of tax is cured, the appeal should be considered valid from the date it was originally filed.

Based on this, the Tribunal directed the CIT(A) to verify the tax payments and admit the appeal for adjudication on merits.

3. Estimation of Net Profit and Other Incomes by the AO:
The assessee challenged the AO's estimation of net profit at ?2,88,00,000 by applying an 8% NP rate on gross receipts of ?36,00,00,000, as well as the estimation of net income from interest and commission at ?3,17,048 and net income from rent at ?2,21,800. The Tribunal did not provide a detailed analysis on these grounds but directed the CIT(A) to adjudicate these issues on merits after admitting the appeal.

Conclusion:
The Tribunal condoned the delay in filing the appeals due to reasonable explanations provided by the assessee. It directed the CIT(A) to admit the appeals after verifying the tax payments made by the assessee and to adjudicate the appeals on merits, including the grounds related to the estimation of net profit and other incomes by the AO. The appeals were allowed for statistical purposes.

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