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TMI Blog2004 (12) TMI 328X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 1961. The facts of the case are as follows. 3. Shri Shamraj Moorjani, Shri Devraj Moorjani and Shri Vishnukumar Moorjani are brothers. Along with their families they were residents of Dubai, UAE, from the year 1973, where they were carrying on business of general trading under the name and style of "Moorjani General Trading Establishment" dealing in plastic granules and raw gold. The father of these brothers was a retired CID Inspector of Police and was residing at Hyderabad. During their stay in Dubai, the brothers remitted money through legal channels to their father, who from time-to-time acquired immovable properties and also made deposits in banks. In the year 1995, Shri Shamraj Moorjani and Shri Devraj Moorjani shifted to Hyderabad while the third brother Shri Vishnukumar Moorjani along with his family carried on the business in Dubai. 4. On 3rd Jan., 1995, Shri Shamraj Moorjani and his nephew Shri Lalitkumar Moorjani were arrested by the DRI authorities on the ground that they were involved in an illegal activity of narcotics trade, as they had assisted one Mr. M.K. Abdullah in taking on lease a residential house at Banjara Hills, Hyderabad. The DRI had not found a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ock period. In that letter, it was submitted that Shri Shamraj and his nephew Shri Lalitkumar Moorjani, S/o Vishnu Kumar Moorjani, were imprisoned and only Shri Devraj Moorjani was the person looking after the matters, that all the investments of the family were in immovable properties, by way of advance for properties and in shares in Integrated Thermo Plastics Ltd., that the only income for the entire family was income from M/s Gruhalakshmi Super Market and that this income was not sufficient for their day-to-day maintenance. In short, it was pleaded that they had no liquid funds and were not in a position to pay the admitted tax on the undisclosed income. 7. On 29th Nov., 1999, the assessees filed first appeals before the CIT(A)-II, Hyderabad, against the block assessment orders. Along with the appeals, they filed a copy of the letter dt. 23rd Nov., 1999, referred to in the preceding paragraph. On 14th Dec., 1999, the TRO issued notice of demand requiring the assessees to pay the outstanding demand within 15 days and also prohibiting the assessees from dealing with the immovable properties. To this notice, Shri Shamraj Moorjani sent a reply dt. 31st Dec., 1999, requesting the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he same, permission may be accorded for selling the property by private sale. The assessee also assured the CIT that the entire sale proceeds to the extent of tax dues would be immediately remitted to the Department. On 18th Sept., 2000, the Chief CIT, Andhra Pradesh, Hyderabad, laid down certain conditions and subject to the same directed that the sale may be permitted by the TRO by lifting attachment of immovable properties. 11. The CIT(A)-II, Hyderabad, issued a letter dt. 19th Oct., 2000, calling for objections as to why the appeals should not be dismissed for non-payment of admitted tax as per the provisions of s. 249(4)(a) and also posted the case for final hearing on 25th Oct., 2000. By letter dt. 24th Oct., 2000, Shri Devraj Moorjani replied to the CIT(A) and submitted that he was not having any liquid funds. He also brought to the notice of the CIT(A) the entire sequence of events. He further stated that the Chief CIT had finally permitted the sale of the property and that the admitted taxes would be paid very shortly, that Shri Shamraj Moorjani and Shri Lalitkumar Moorjani were under trial since 1995, that during the pendency of the trial, nobody helped them either fina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able to sell immovable property and pay the tax on the admitted income in full. He drew the attention of this Bench to the fact that the main persons of this group, Shri Shamraj Moorjani and his nephew Shri Lalitkumar Moorjani, were behind bars from 3rd Jan., 1995 to 26th April, 2001, i.e., six and half years, and that consequent to the acquittal by the Hon ble Andhra Pradesh High Court they had been released from jail. He also drew the attention of this Bench to the fact that during the course of search and seizure operation under s. 132, the income-tax officials had not found or seized any cash or jewellery, that all that was found were documents relating to immovable properties and that this would indicate that the assessees had no other means to pay the taxes on the admitted income except by selling some of the immovable properties which were under attachment by the Department. He submitted that the assessees, even while filing the block returns, addressed letters to the AO, that the fact that all the investments were in immovable properties and that the assessees had no liquid assets was not controverted by the Revenue, that all the facts narrated above show that the Revenue h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Department and the request of the assessees for permission to dispose of one of the immovable properties to pay the taxes therefrom was not granted and that under these circumstances the payment in this case should have been treated as constructively made. He also relied on the judgment of the Delhi Bench of the Tribunal in the case of Anil Sanghi vs. Asstt. CIT (2003) 79 TTJ (Del)(SB) 517 : (2003) 85 ITD 73 (Del)(SB), specifically at para 27. He also relied on the decision of the Ahmedabad Bench of the Tribunal in the case of J.K. Chaturvedi vs. Asstt. CIT (2004) 82 TTJ (Ahd) 284. He also relied on the decision of the Amritsar Bench of the Tribunal in the case of Ravinder Singh vs. Asstt. CIT (2003) 80 TTJ (Asr) 224 : (2004) 89 ITD 477 (Asr). 17. He referred to the reliance placed by the Revenue on the decision of the Mumbai Bench of the Tribunal in the case of Bharat Kumar Saksaria vs. Dy. CIT (2002) 77 TTJ (Mumbai) 769 : (2002) 82 ITD 512 (Mumbai), which is in favour of the Revenue on the very same issue and submitted that the decision of the Ahmedabad Bench of the Tribunal in the case of J.K. Chaturvedi and that of the Amritsar Bench of the Tribunal in the case of Ravinder ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... admitted taxes even to date. He gave his own computations, which are at pp. 3 and 4 of his written submissions. According to the learned Departmental Representative, there is still a deficit of Rs. 6,95,898 to date as tax payable on admitted income. He specifically argued that the amount paid towards interest under s. 220(2) cannot be treated as tax paid on the returned income. 22. The learned Departmental Representative relied heavily on the order of the Mumbai Bench of the Tribunal in the case of Bharat Kumar Sekhsaria vs. Dy. CIT, and submitted that there is nothing wrong in the orders of the CIT(A), that the language of s. 249(4)(a) is very plain and without any ambiguity, that the intention of the legislature is very clear and that the CIT(A) was right in dismissing the appeals. He also referred to the decision of the Hyderabad Bench B of the Tribunal in the case of Smt. Ch. Nivedita Reddy, Prop. Nischint Constructions, Hyderabad, vs. Dy. CIT in IT(SS)A No. 90/Hyd/2003 and C.O. No. 15/Hyd/2003, dt. 14th Nov., 2003, and submitted that the Tribunal had set aside the appeal to the file of the CIT(A) in that case for consideration and that that case is not applicable to the fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irst arugment is as to whether an appeal lies against the order of the CIT(A) wherein the appeal was dismissed for non-payment of admitted tax on returned income. This issue stands concluded in favour of the assessees. 26. Hon ble Supreme Court, in the case of Mela Ram Sons vs. CIT, held as follows: "An order by the AAC holding that there was no sufficient reason for excusing delay under s. 30(2) of the IT Act and rejecting the appeal as time-barred is an order passed under s. 31 and an appeal lies from that order to the Tribunal. It makes no difference whether the order of dismissal is made before or after the appeal is admitted. An appeal presented out of time is an appeal and an order dismissing it as time-barred is one passed in appeal." Hon ble Orissa High Court followed this judgment of the Hon ble Supreme Court in the case of CIT vs. Kalipada Ghose, and held as follows: "The assessee filed appeals for the asst. yrs. 1974-75 and 1975-76. The AAC held that the appeals were incompetent as the assessee had not paid the admitted tax for the years as required under s. 249(4) of the IT Act, 1961, and accordingly rejected the same in limine. The Tribunal, considering the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ithin the period of limitation. The question will then have to be decided whether there was sufficient cause for condonation of delay." Applying this case law, Hyderabad Bench B of the Tribunal in the case of Smt. Ch. Nivedita Reddy, Prop. Nischint Constructions, Hyderabad, vs. Dy. CIT in IT(SS)A No. 90/Hyd/2002, vide order dt. 14th Nov., 2003, held as follows, at para 9 of the order proposed by learned JM: "Suffice it to say that in the light of the decision of Filmistan Ltd., which was explained succinctly by the Tribunal Bombay "B" Bench in the case of Umesh Papatlal Shah Ors. [IT(SS)A No. 42/Mum/2000], we are of the considered opinion that the learned CIT(A) ought to have given the assessee an opportunity of explaining the reasons for non-payment of tax and the date of payment of tax should have been taken as the date of filing the appeal so as to exercise the power vested in 249(3) of the Act with regard to the condonation of delay." In a separate but concurring order in that case, the learned AM held at paras 1 to 16 as follows: "1. This is a case where an apparent favour done by the CIT(A) by way of the admission of the appeal without payment of the undisputed ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er for consideration. It may be at the admission stage or if by the rules of that Tribunal, the appeals are automatically admitted, it will be time of hearing of the appeal. The words 'no appeal shall be entertained' in the proviso to s. 9 do not denote the filing of the memorandum of appeal but refer to the point of time when the appeal is being considered...... 5. In the case of Lalta Prasad Khinni Lal vs. Asstt. CIT (Judicial) Sales-tax (1972) 29 STC 201, the apex Court considered the provisions of s. 9 of the U.P. Sales-tax Act (15 of 1948) which had a proviso analogous to s. 249(4) of the IT Act. The proviso to s. 9 of the U.P. Sales-tax Act reads as under: Provided that no appeal against an assessment shall be entertained unless it is accompanied by satisfactory proof of the payment of the amount of tax admitted by the appellant to be due, or of such instalments thereof as may have become payable. Reversing the decision of the Hon ble Allahabad High Court that the delay in the payment of the tax could not be condoned, the apex Court observed as under: 'We are wholly unable to comprehend and appreciate the above reasoning or the conclusion of the Allahabad High Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h High Court consisting of Subba Rao, C.J. (as he then was) and Bhimasankaram, J., had to consider the provisions of the Indian IT Act, 1922, similar to s. 9 of the Act. According to the proviso to s. 30(1) of that Act, no appeal lay against an order under sub-s. (1) of s. 46 unless the tax had been paid. Sub-s. (2) of. that section provided that the appeal was to be ordinarily presented within 30 days but the AAC could admit the same after the expiration of the period if he was satisfied that the appellant had sufficient cause for not presenting it within that period. It was held that the payment of the tax was a condition precedent to the maintainability of the appeal. If an appeal was filed, though after the prescribed period of time, the Asstt. CIT had the jurisdiction to hear the appeal after the tax due was paid. The only possible objection that could have been raised was that the appeal was barred as having been filed beyond the period prescribed by s. 30(2). But the appellate authority had the jurisdiction to excuse the delay. The ratio of this decision is that, even though the payment of tax was a condition precedent to the maintainability of the appeal, the delay could be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... That is how they mentioned in Form No. 35 filed before the CIT(A) that they were seeking stay of the entire demand. According to them, this action proved their bona fides. I see no reason to take exception to it. No taxpayer would risk rejection of an appeal in limine if he were aware of the consequences of the non-payment of undisputed tax. So, I am prepared to accept the version of the assessee that the failure to pay the entire demand was only because of ignorance or oversight. The Hon ble Supreme Court has observed in the case of Motilal Padampat Sugar Mills Co. Ltd. vs. State of Uttar Pradesh Ors. (1979) 118 ITR 326 (SC), as per the relevant portion of the headnote, as under: '(ii) There is no presumption that every person knows the law. It is often said that every one is presumed to know the law, but that is not a correct statement there is no such maxim known to the law.' 9. On the question of the statutory duty of the CIT(A) to issue show-cause notice, it is argued by the learned Departmental Representative that when there is failure on the part of the assessee, and the non-admission of the appeal is due to such failure, there is no duty cast on the CIT(A) to issue an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efect is cured. Under s. 249(4) payment of undisputed tax is a precondition only for the admission of the appeal, and so, "the Revenue is correct in arguing that the appeal cannot be admitted unless the admitted tax is paid. That does not mean that, if the tax is not paid at the time of the filing of the appeal, the assessee loses the right of appeal automatically. It must be construed that the appeal is filed on the date of payment. So, a case of delayed payment of undisputed tax is only a case of delayed filing of appeal, and a delay in the filing of appeal can always be condoned by the CIT(A) in exercise of his powers under s. 249(3). Sec. 249(3) should be read in harmony, as contended by the learned counsel for the assessee, with the provisions of s. 249(4). 13. If any other construction is placed upon the scope of ss. 249(3) and 249(4), it may create an anomalous situation as contended by the learned counsel for the assessee. There can be an assessee who files the return subsequent to the limitation period and pays the admitted tax on the same day and applies for condonation of delay and possibly gets it condoned; whereas an assessee who has filed the appeal before the limit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se that the order of the CIT(A) preceded the date of filing of the appeal. To avoid this technical flaw or anomaly, I go along with my learned brother and agree to the remand of the matter to the file of the CIT(A) with a direction to consider the aspect of condonation of delay, and redispose of the appeal on merits in the light of the above remarks." Similar are the decisions of the Delhi Bench of the Tribunal in the case of Gopal Chand Khandelwal vs. Asstt. CIT, the Amritsar Bench of the Tribunal in the case of Ravinder Singh vs. Asstt. CIT, and the Ahmedabad Bench of the Tribunal in the case of J.K. Chaturvedi vs. Asstt. CIT. 28. The sole decision that is in favour of the Revenue is that of the Mumbai Bench of the Tribunal in the case of Bharat Kumar Sekhsaria vs. Dy. CIT. That case is distinguishable on facts as it was not the case of that assessee that he was prevented by the IT Department in discharging his duty for payment of tax. 29. The Delhi Bench of the Tribunal in the case of Anil Sanghi vs. Asstt. CIT, while dealing with first appeal to the Tribunal for the block period, in para 27, held as follows: "We are also in agreement with the learned counsel for the app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he same on merits after giving opportunity of being heard to the assessees. 33. In the result, these appeals are allowed. N.D. Raghavan, VICE PRESIDENT: 34. I have carefully gone through the order proposed by my learned Brother. After doing so and duly considering the various aspects of the issues involved and after a very long and due deliberations amongst us, giving meticulous care and attention on the complexities involved while closely analyzing the facts and circumstances of the instant case roped with the issue in adjudication before us, however much I persuaded myself to dissent from the view proposed by my learned Brother I failed very often in succeeding to dissent so because of the erudition reflected in the order proposed by my learned Brother. While I was, therefore, contemplating as to whether a separate order is necessary by me to be written as below, I could not resist my temptation in writing so because of the tremendous efforts put in by the learned representatives for the assesseess and the Department presenting before us their respective stands in their own inimitable style highlighting the various papers filed on record and copious case laws showering n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the assessees investments were in immovable properties, having no liquid assets. The Department delayed granting permission to the assessees to sell the property and discharge the tax liability. Permission granted by the Chief CIT to sell the property by his letter dt. 18th Sept., 2000, seems to have been also after enormous correspondence and interaction by the assessee and the Department. After such permission, it appears, the property at Krishna Nagar, Jubilee Hills, was sold by the assessee and the purchaser of the property directly made over the entire sale consideration to the Department by DD towards the assessee s payment of tax on admitted income as well as interest under s. 220(2) and also towards tax on capital gains arising out of the sale of the said property. Therefore, there is every justification for the assessee to plead that the assessees were prevented by sufficient cause from paying the tax on admitted income and that the CIT(A) was consequently wrong in dismissing the appeal as infructuous under s. 249(4)(a) of the Act. 38. If is, therefore, clear that the Revenue s submission that the assessees were not interested in paying the taxes as per return of inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ht provided to an assessee to prefer an appeal. When the very liability is disputed, the right guaranteed to the assessee to prefer an appeal cannot be deprived by taking the view that the assessee has failed to pay the tax due on the income shown in the return filed." 39.4 The Ahmedabad Bench of the Tribunal in the case of J.K. Chaturvedi cited supra and relied upon by the assessee, held as below: "It is undisputed proposition of law that appeal is a continuation of the original proceedings and right of appeal is not an inherent right but it is a statutory right. It is open to the legislature to give or not to give a right of appeal against decisions made by authorities. The right of appeal wherever conferred by statute has to be exercised strictly in conformity with the statutory provisions which create it. If the statute put any restriction then, such right would be available along with such restrictions. It is also not disputed that assessee had made the payment of agreed tax during the pendency of these appeals. A plain reading of sub-s. (3) of s. 249 shall reveal that if the assessee showed sufficient reasons for late filing of his appeals, then such delay can be condoned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "Further, there was merit in the alternative contention of the assessee that the CIT(A) should have condoned the delay in filing the appeal under s. 249(3). The assessee submitted that from day one the assessee had requested the Departmental authorities that whatever tax was due may be realised out of the assets seized and the refunds due to him. Ultimately, the Department made the adjustments in the month of April, 2000. It was clear that the due taxes had already been paid by the assessee before 27th April, 2000, on which date, the appeal of the assessee was dismissed by the CIT(A) in limine. There was merit in the contention of the assessee that the CIT(A) ought to have condoned the delay in filing the appeal, particularly keeping in view the facts and the circumstances of the instant case as well as the ratio laid down by the Supreme Court in the case of Collector, Land Acquisition vs. Mst. Katiji (1987) 62 CTR (SC) 23 : (1987) 167 ITR 471 (SC). The assessee was facing extreme financial stringency due to fall in business and seizure of substantial assets and withholding of substantial refunds. In that view of the matter also, it could be said that there was sufficient caus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authorities in the country, having that at least persuasive value until a decision of jurisdictional High Court or apex Court would be rendered. In the event of any conflicting decisions of the same forum, that decision which is in favour of the assessee has to be followed, as per jurisprudence. 41. In regard to whether or not the matter has to be set aside to the CIT(A) for condoning the delay, I do opine, as my learned Brother opined, that it is not necessary to do so in accordance with the doctrine of useless formality theory enunciated by the Hon ble apex Court in the case of Aligarh Muslim Varsity and as discussed in para 15 of the Tribunal s order dt. 14th Nov., 2003, in the case of Smt. Ch. Nivedita Reddy in IT(SS)A No. 90/Hyd/2002. 42. To sum up, three questions that could be said to have arisen in these appeals are: (a) Whether an appeal lies against the order of the CIT(A) wherein the appeal was dismissed for non-payment admitted tax on returned income. (b) Whether the CIT(A) erred in holding that the appeals are infructuous as the admitted taxes were not paid on income returned as required under s. 249(4)(a) of the Act. (c) Whether the issue should be remitt ..... X X X X Extracts X X X X X X X X Extracts X X X X
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