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2019 (5) TMI 740 - AT - Income TaxPower of CIT(A) to entertain appeal - violation of provisions of section 249(4) - assessee had not paid admitted tax on the returned income - difference of opinion between Members on the Bench - CIT(A) entertaining the assessee s appeal without fulfilling conditions of section 249(4)(a) - HELD THAT - While construing section 129E of the Customs Act, which is analogous to section 249(4) of the Income Tax Act , Hon ble Supreme Court in VIJAY PRAKASH D. MEHTA VERSUS COLLECTOR OF CUSTOMS (PREVENTIVE) , BOMBAY 1988 (8) TMI 109 - SUPREME COURT has observed that purpose of conditions incorporated in section 129E is to make people to comply with the provisions. Similar object is being achieved with the help of section 249(4)(a). With regard to other cases, and to take care of hardship of tax payers, remedy is being provided in sub-clause (b) of section 249(4). It is pertinent to observe that at the time of hearing, the ld.counsel for the assessee also not disputed this construction of section 249(4)(a). He raised alternative submissions, which we are going to deal with in the later part of this order. Thus, we are of the firm view that if an assessee filed return of income, admitted taxes under self-assessment, then unless these taxes are paid, his appeal will be hit by section 249(4)(a) and it cannot be entertained by the CIT(A). First proposition raised by the ld.counsel for the assessee was that the assessee has not paid tax on the returned income, therefore, return deserves to be treated as defective within meaning of section 139(9) Explanation (c) and if return is defective, then no cognizance of such return for passing assessment order can be taken. If it is construed that no return was filed (being non-est on account of defective return), then case of the assessee will fall within the section 249(4)(b) and CIT(A) could exempt the assessee from payment of alleged advance taxes required to be paid. We do not find any merit in this proposition of the ld.counsel for the assessee. Next proposition raised by the ld.counsel for the assessee before us was that real income ought to have been taxed, and for that purpose, he made reference to the decision of Hon ble Supreme Court in the case of Godhra Electricity Co. Ltd. 1997 (4) TMI 4 - SUPREME COURT and Excel Industries Ltd. 2013 (10) TMI 324 - SUPREME COURT . On due consideration of the above proposition, we are of the view that all these arguments on merit can possibly be raised if there is a valid appeal before the ld.CIT(A). Upto and until, the assessee pays tax on self-assessment/returned income, no other plea could be entertained. By entertaining such plea, we will be committing same mistake as has been committed by the ld.CIT(A). The ld.counsel for the assessee on the strength of Hon ble Karnataka High Court s decision in the case of D. Komlakshi 2006 (11) TMI 155 - KARNATAKA HIGH COURT contended that the assessee be given an opportunity to pay tax on the returned income now, and direct the ld.CIT(A) to decide the appeal on merit. As far as the above contention is concerned, no such plea was raised before the Division Bench who heard the appeal on 21.3.2013. Issue before us is to resolve difference of opinion amongst the members, whether having regard to the provisions of section 249(4)(a) of the Act the ld.CIT(A) has erred in law and on facts in entertaining assessee s appeal. By entertaining the additional plea, we will be enhancing the scope of reference which is not within the power of this Bench. Hence, this plea cannot be examined in the present proceedings. Therefore, in view of the above discussion, we agree with the ld.Judicial Member and hold that the ld.CIT(A) has erred in entertaining the assessee s appeal without fulfilling conditions of section 249(4)(a).
Issues Involved:
1. Whether the CIT(A)-XI, Ahmedabad erred in law and on facts in entertaining the appeal in violation of provisions of section 249(4) of the Income Tax Act, 1961, given that the assessee had not paid the admitted tax on the returned income. Detailed Analysis: 1. Interpretation of Section 249(4) of the Income Tax Act, 1961: The Revenue contended that the CIT(A)-XI, Ahmedabad erred in entertaining the appeal without the assessee paying the admitted tax on the returned income, as mandated by section 249(4)(a) of the Income Tax Act, 1961. The Tribunal noted that section 249(4)(a) clearly stipulates that an appeal cannot be admitted unless the tax due on the returned income is paid. The Tribunal emphasized that this condition is mandatory and not merely procedural, aligning with the Supreme Court’s interpretation in the case of Vijay Prakash D. Mehta Vs. Collector of Customs, where it was held that the right to appeal is statutory and can be circumscribed by conditions specified in the statute. 2. Validity of the Return and Defective Return under Section 139(9): The assessee argued that the return should be treated as defective under section 139(9) because the tax on the returned income was not paid, and therefore, the return should be considered non-est. The Tribunal rejected this argument, clarifying that the conditions enumerated in section 139(9) did not categorize the non-payment of self-assessment tax as a defect. The Tribunal observed that the return was validly filed, and the Assessing Officer (AO) rightly took cognizance of it. 3. Historical Context and Legislative Intent: The Tribunal reviewed the historical amendments to section 249(4) and noted that the legislative intent behind the amendment was to ensure that taxes due on the returned income are paid before an appeal is entertained. The Tribunal referred to the Direct Tax Laws (Amendment) Act, 1989, which emphasized that there is no justification for allowing an appeal without the payment of tax on the returned income, aligning with the new assessment procedures effective from 1-4-1989. 4. Real Income and Taxation: The assessee contended that only real income should be taxed, citing the Supreme Court decisions in Godhra Electricity Co. Ltd. and Excel Industries Ltd. The Tribunal acknowledged this principle but maintained that such arguments on merits could only be entertained if there was a valid appeal before the CIT(A). Since the mandatory condition of paying the tax on the returned income was not fulfilled, the Tribunal held that the appeal could not be entertained. 5. Opportunity for Payment of Taxes: The assessee requested an opportunity to pay the tax on the returned income now and have the appeal decided on merits. The Tribunal noted that this plea was not raised before the Division Bench that initially heard the appeal. The Tribunal concluded that entertaining this additional plea would exceed the scope of the reference and therefore could not be examined in the present proceedings. Conclusion: The Tribunal concurred with the view that the CIT(A) erred in entertaining the appeal without the assessee fulfilling the conditions of section 249(4)(a) of the Income Tax Act. The Tribunal held that the appeal could not be admitted without the payment of taxes on the returned income and directed that the record be placed before the Division Bench for deciding the remaining appeal and other grounds, if any.
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