2019 (8) TMI 921 - AT - Income Tax

Maintainability of appeal before the CIT(A) - non payment of admitted taxes on the returned income before filing appeal u/s 249(4)(a) - HELD THAT - The Hon ble Mumbai ITAT in the case of Bhumiraj Constructions Vs. ACIT 2010 (4) TMI 754 - ITAT MUMBAI has held that the stipulation as to the payment of such tax ante the filing of first appeal is only directory and not mandatory. Whereas the payment of such tax is mandatory but the requirement of paying such tax before filing appeal is only directory. When the defect in the appeal, being the non-payment of such tax, is removed, the earlier defective appeal becomes valid. Once we call an appeal as valid, it is implicit that it is not time-barred. It implies that all the consequences which follow on the removal of defect are that the validity is attached to the appeal from the date when it was originally filed and not when the defect is removed. The Tribunal ultimately held that if tax due on income returned is paid even after disposal of the appeal by the CIT(A), if such payment is made the defect in the appeal due to noncompliance of a directory requirement of paying such tax before the filing of the appeal, stood removed. Ex consequential the appeal should have been revived by the first appellate authority. In the present case, the taxes due on returned income is claimed to has been paid. Therefore the appeal by the Assessee against the order of assessment should be admitted and adjudicated by the CIT(Appeals) on merits. In the decision referred to above, it has been held that if 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. Following the aforesaid decision, we set aside the order of CIT(Appeals) and direct the CIT(Appeals) to decide the appeal on merits, subject to verification of payment of taxes (excluding interest) due on the returned income. Appeal by the assessee is allowed for statistical purposes.

Summary

Issues:
1. Maintainability of appeal before CIT(Appeals) due to non-payment of taxes on returned income.
2. Interpretation of Section 249(4) of the Income Tax Act.
3. Precedents regarding the payment of taxes on returned income for admission of appeal.

Issue 1:
The appeal by the assessee was challenged before the CIT(Appeals) due to non-payment of taxes on the returned income, rendering it unadmitted. The CIT(Appeals) dismissed the appeal citing section 249(4)(a) of the Income Tax Act, which requires the payment of taxes on the income returned by the assessee for the appeal to be maintainable.

Issue 2:
Section 249(4) of the Income Tax Act was analyzed, which states that no appeal shall be admitted unless the assessee has paid the tax due on the income returned. The provision also allows for exemption by the CIT(A) under certain circumstances. The assessee argued that since taxes on the returned income were paid, the appeal should be admitted for adjudication.

Issue 3:
Various legal precedents were considered, including judgments by the Hon'ble Karnataka High Court and the Mumbai ITAT. These judgments clarified that the payment of taxes on the returned income, even after the filing of the appeal, validates the appeal. The requirement of paying taxes before the first appeal is considered directory, not mandatory. The tribunal emphasized that the objective of section 249(4) is to ensure tax payment on the returned income before the appeal's admission.

In conclusion, the ITAT Bangalore directed the CIT(Appeals) to decide the appeal on merits, subject to verifying the payment of taxes due on the returned income. The decision was based on legal precedents and interpretations of the Income Tax Act, allowing for the admission of the appeal if taxes on the returned income were paid, even after the appeal was filed. The appeal by the assessee was allowed for statistical purposes, emphasizing the importance of tax compliance in maintaining the validity of appeals.