1980 (9) TMI 106 - AT - Income Tax

Summary

Issues:
Appeal against assessment order for non-compliance with tax payment provision under IT Act, 1961.

Detailed Analysis:

1. The assessee appealed against the assessment order to the CIT (Appeals) for the assessment year 1975-76, where the tax payable on the returned income was Rs. 1,04,774. The appeal was dismissed for non-compliance with the tax payment provision under sub-section (4) of section 249 of the IT Act, 1961. The provision required the tax due on the returned income to be paid at the time of filing the appeal unless exempted by the CIT (Appeals) for good and sufficient reasons.

2. The assessee's request for exemption from tax payment was based on the seizure of 2432 kgs of silver by the ITO under section 132 of the Act. Out of this, 1932 kgs were released to the assessee, and the remaining 500 kgs were still with the Department. The released silver was sold to pay tax, and the assessee requested the release of the remaining silver to comply with the tax payment provision. The assessee's other assets were subject to proceedings under the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, making it difficult to convert assets into cash for tax payment.

3. The ITO objected to the assessee's claim of insufficient means for tax payment, citing substantial agricultural income and assets that could have been utilized for tax payment. The CIT (Appeals) agreed with the ITO, rejecting the appeal for non-compliance with the tax payment provision due to the availability of other income sources and assets that could have been used for tax payment.

4. The CIT (Appeals) primarily relied on the agricultural income as a potential source for tax payment, which was contested by the assessee due to the forfeiture of agricultural properties under the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act. The assessee's other assets were also frozen under the same Act, making it challenging to access funds for tax payment.

5. The Tribunal considered the frozen bank deposit and sundry debts of the assessee, concluding that these amounts were not readily convertible into cash for tax payment. The Tribunal found that the assessee was not in a position to pay the tax on the returned income at the time of filing the appeal, justifying exemption from compliance with the tax payment provision. The Tribunal set aside the CIT (Appeals) order and directed a disposal of the appeal on merits after giving the assessee a reasonable opportunity to be heard.

6. Ultimately, the Tribunal allowed the appeal, emphasizing the assessee's lack of financial capability to pay the tax on the returned income at the time of filing the appeal, warranting exemption from the tax payment provision under the IT Act, 1961.