2018 (10) TMI 503 - AT - Income Tax

Validity of order passed by CIT(A) on merit - Filing of an appeal without depositing admitted tax u/s 249(4)(a) - Restoration of appeal filed second time - non-compliance of the statutory notice - Penalty under s.271(1)(c) - Held that - Bare reading of Section 249(4)(a) gives an infallible impression that the appeal before the CIT(A) would lie for adjudication on merits only on satisfaction of the mandatory condition towards payment of tax determined as per the income returned. A waiver of such mandatory provision for adjudication of appeal on merits without compliance thereof is totally impermissible. Thus the jurisdiction could not be conferred on the CIT(A) to adjudicate the appeal on merits even if acquiescenced or estoppel or the bar of res judicata being attracted because the order in such case would lack inherent jurisdiction unless the conditions precedent are fulfilled. The order passed in the first instance in contravention of Section 249(4)(a) of the Act is thus a void order and hence a nullity in the eyes of law. CIT(A) itself in a similarly placed situation has taken a favourable view in the penalty proceedings before it. Therefore we are of the view that the appellate order passed by the CIT(A) pursuant to appeal filed by the assessee prior to non-payment of admitted tax is a nonest order and deserves to be quashed. The appeal re-filed by the assessee before the CIT(A) thus requires to be restored and revived as a regular appeal for adjudication on all aspects as raised or sought to be raised before the CIT(A) including condonation of delay. Therefore we admit the prayer of the assessee for restoration of appeal filed second time for its disposal in accordance with law.

Summary

Issues Involved:
1. Maintainability of appeal before CIT(A) re-filed after disposal of earlier appeal.
2. Adjudication of quantum appeal in ITA No.858/Ahd/2015.
3. Adjudication of penalty appeal in ITA No.859/Ahd/2015.

Analysis:

Issue 1: Maintainability of appeal before CIT(A) re-filed after disposal of earlier appeal:
The appeal in question relates to the assessment order passed under s.143(3) of the Income Tax Act, 1961 concerning AY 2003-04. The appellant was aggrieved by the disallowance on account of loss on sale of certain investments. The CIT(A) dismissed the appeal as non-maintainable due to lack of jurisdiction, citing non-compliance with statutory notice. The appellant filed another appeal along with a petition for condonation of delay, arguing that the earlier appeal was not maintainable under Section 249(4)(a) of the Act. The CIT(A) rejected the second appeal, stating that it was not competent to entertain another appeal without jurisdiction. The appellant contended that the first appeal was non-est and not maintainable, emphasizing the need to pay tax dues on the returned income for appeal admission. The ITAT held that the first order on a non-maintainable appeal was non-est, and the CIT(A) should have entertained the appeal for adjudication after payment of taxes in the second round of proceedings. The ITAT quashed the initial CIT(A) order and restored the appeal for fresh adjudication in accordance with law.

Issue 2: Adjudication of quantum appeal in ITA No.858/Ahd/2015:
The quantum appeal involved the disallowance of loss on the sale of investments. The appellant argued that the appeal should be set aside to the file of the CIT(A) for adjudication on merits due to the non-maintainability of the initial appeal. The ITAT considered the mandatory provisions of Section 249(4)(a) of the Act, emphasizing the necessity of paying tax dues for appeal admission. The ITAT found the initial order by the CIT(A) to be void due to non-compliance with Section 249(4)(a) and ordered the restoration and revival of the appeal for proper adjudication on all aspects raised by the appellant.

Issue 3: Adjudication of penalty appeal in ITA No.859/Ahd/2015:
The penalty appeal stemmed from the quantum proceedings and required re-adjudication by the CIT(A) in light of the outcome of the quantum appeal. The CIT(A) had initially dismissed the penalty appeal based on non-payment of tax dues, but later admitted the appeal after the appellant paid the entire self-assessment tax. The ITAT upheld the appellant's plea for restoration of the penalty appeal, citing precedents that allowed admission of appeals upon rectifying defects like non-payment of tax. The ITAT set aside the CIT(A) order and remanded all issues related to the penalty appeal for fresh consideration in accordance with law.

In conclusion, both appeals of the assessee were allowed for statistical purposes, with the ITAT emphasizing the importance of complying with statutory provisions for appeal maintainability and proper adjudication.