2022 (10) TMI 476 - AT - Income Tax

Appeal dismissed by CIT(A) as not maintainable un/s 249(4) - CIT-A declined the admission of the appeal of the assessee, for the reason that it had not paid the taxes which is a pre-condition for maintainability of an appeal as per section 249(4) - HELD THAT - Commissioner of Income-tax (Appeals) losing sight of the fact that the instant case of the assessee was covered by clause (b) of section 249(4) of the Act, which did vest a discretion with him to exempt the assessee for good and sufficient reasons to be recorded in writing from the pre-condition of payment of tax and admit the appeal, had however, without exercising his discretion in the backdrop of the reason given by the assessee dismissed its appeal in limine, for the reason that it had not filed its return of income and paid taxes. In our considered view, as stated by the learned authorised representative, and rightly so, CIT (Appeals) in the present case had failed to exercise the judicial discretion that was vested with him for exempting the assessee from the operation of the provisions of clause (b), despite there being a categorical claim of the assessee that the failure on its part to deposit the tax had occasioned on account of financial difficulties. We are unable to persuade ourselves to subscribe to the dismissal of the assessee's appeal in limine by the Commissioner of Income-tax (Appeals), who in our considered view had misconceived ; or in fact had misconstrued the scope and gamut of the provisions of section 249(4)(b) of the Act as were applicable to the case of the assessee before us. We, thus, in terms of our aforesaid observations, set aside the impugned order of the Commissioner of Income-tax (Appeals) and restore the matter to his file with a direction to reconsider the maintainability of the appeal on the basis of reasons given by the assessee as regards the failure on its part to pay the amount of tax as contemplated in clause (b) of section 249(4) of the Act.

Summary

Issues Involved:
1. Legality and sustainability of the appellate order passed by the Commissioner of Income-tax (Appeals).
2. Dismissal of the appeal by the Commissioner of Income-tax (Appeals) under section 249(4) of the Income-tax Act, 1961 due to non-payment of taxes.
3. Failure of the Commissioner of Income-tax (Appeals) to exercise discretion under the proviso to section 249(4) of the Act.
4. General grounds of appeal and the right to amend grounds.

Detailed Analysis:

Issue 1: Legality and Sustainability of the Appellate Order
The assessee-company challenged the appellate order passed by the Commissioner of Income-tax (Appeals)-II, Raipur, claiming it to be "highly illegal, bad in law, unsustainable and not in accordance with the provisions of law." The appellant sought annulment of the order.

Issue 2: Dismissal Under Section 249(4)
The Commissioner of Income-tax (Appeals) dismissed the appeal in limine, citing the provisions of section 249(4) of the Income-tax Act, 1961. According to section 249(4), an appeal cannot be admitted unless the assessee has paid the tax due on the returned income or an amount equal to the advance tax payable if no return has been filed. The assessee argued that due to severe financial crisis, it was unable to file the return of income or pay the taxes, and thus the Commissioner should have exercised discretion under the proviso to section 249(4).

Issue 3: Exercise of Discretion Under Proviso to Section 249(4)
The assessee contended that the Commissioner of Income-tax (Appeals) failed to exercise the discretion vested in him under the proviso to section 249(4), which allows for exemption from the obligation of tax payment for good and sufficient reasons recorded in writing. The Tribunal observed that the Commissioner of Income-tax (Appeals) did not consider the financial difficulties claimed by the assessee and dismissed the appeal without exercising this discretion. The Tribunal referenced the judgment of the Madhya Pradesh High Court in Shyam Electric Works v. CIT, which mandates that the Commissioner must consider an application for exemption under the proviso to section 249(4).

Issue 4: General Grounds of Appeal
The appellant also included a general ground, reserving the right to add, amend, alter, or delete any grounds of appeal during the hearing. This ground was dismissed as not pressed.

Tribunal's Conclusion:
The Tribunal set aside the impugned order of the Commissioner of Income-tax (Appeals) and remanded the matter back to his file. The Commissioner was directed to reconsider the maintainability of the appeal, taking into account the reasons given by the assessee for the failure to pay the amount of tax as contemplated in clause (b) of section 249(4) of the Act. The Tribunal allowed the appeals for statistical purposes and directed the Commissioner to exercise the discretion vested in him under the proviso to section 249(4).

Result:
Both appeals for the assessment years 2012-13 and 2013-14 were allowed for statistical purposes, with directions to the Commissioner of Income-tax (Appeals) to reconsider the maintainability of the appeals based on the reasons provided by the assessee regarding the non-payment of taxes.

Pronouncement:
The order was pronounced in the open court on May 27, 2022.