Case Law Details
Topworth Urja & Metal Limited Vs ACIT (ITAT Raipur)
M/s.Topworth Urja & Metals Limited vs. ACIT, CC-2 IT(SS)A.No.44 & 29/RPR/2018 (Date of Order : 27.05.2022) relating to dismissal of appeal in limine on account of non payment of taxes & non filing of returns u/s.153A. Appeal restored to file of CIT(A) in view of proviso to section 249(4)(b) to exercise the discretion vested in him & to consider the plea taken by appellant as regards financial difficulties.
On a perusal of the Section 249(4) of Income Tax Act, 1961, we find that the same contemplates the pre-conditions for admission of an appeal filed before the CIT(Appeals) in two different circumstances, viz. (a) in a case where return has been filed by the assessee; and (b) in a case where no return has been filed by the assessee. In so far a case where a return of income had been filed by the assessee is concerned, the taxes on the returned income is mandatorily required to have been paid by the assessee at the time of filing of the appeal before the CIT(Appeals), failing which the appeal would not be maintainable. On the other hand, though the legislature in all its wisdom had cast a similar statutory obligation on an assessee who had not filed his return of income, therein, making it obligatory for him to pay an amount equal to the amount of advance tax which was payable by him, but carves out an exemption from operation of the aforesaid statutory requirement by way of a “proviso” to section 249(4) of the Act, as per which on an application filed by the assessee before the CIT(Appeals), the latter may for good and sufficient reasons to be recorded in writing exempt him from the obligation of payment of taxes as therein contemplated. At this stage, we may herein observe, that the exemption envisaged in the “proviso” to section 249(4) of the Act can only be made available to an assessee whose case falls within the realm of clause (b) and cannot be applied to a case covered by clause (a) of Sec. 249(4) of the Act.
In the backdrop of the aforesaid position of law, we shall now deal with the sustainability of the order of the CIT(Appeals) who had declined the admission of the appeal of the assessee, for the reason that it had not paid the taxes which is a pre-condition for maintainability of an appeal as per Sec. 249(4) of the Act. At this stage, we may herein observe, that admittedly as the assesee company had not filed its return of income either u/s. 139 or u/s. 153A of the Act, therefore, its case would fall within the scope and gamut of clause (b) of section 249(4) of the Act. On a perusal of the orders of the lower authorities, it transpires, that the assessee had claimed before the CIT(Appeals) that owing to its financial difficulties taxes could not be paid even till the time of filing of the appeal before him. However, we find that the CIT(Appeals) losing sight of the fact that the instant case of the assessee was covered by clause (b) of Section 249(4) of the Act, which did vest a discretion with him to exempt the assessee for good and sufficient reasons to be recorded in writing from the pre-condition of payment of tax and admit the appeal, had however, without exercising his discretion in the backdrop of the reason given by the assessee dismissed its appeal in limine, for the reason that it had not filed its return of income and paid taxes. In our considered view, as stated by the Ld. AR, and rightly so, the CIT(Appeals) in the present case had failed to exercise the judicial discretion that was vested with him for exempting the assessee from the operation of the provisions of clause (b), despite there being a categorical claim of the assessee that the failure on its part to deposit the tax had occasioned on account of financial difficulties. Our aforesaid conviction that the CIT(Appeals) was under an obligation to have exercised his discretion within the meaning of the “proviso” to Section 249(4) of the Act is fortified by the judgment of the Hon’ble High Court of Madhya Pradesh in the case of Shyam Electric Works Vs. CIT, (2006) 284 ITR 413 (MP). In the aforesaid case the tribunal had allowed the appeal of the revenue, for the reason, that as the assessee had failed to pay the taxes as contemplated under Sec. 249(4) of the Act, therefore, its appeal was not maintainable before the CIT(Appeals). On appeal, the Hon’ble High Court while setting aside the order of the Tribunal, observed, that the tribunal instead of allowing the revenue’s appeal should have remanded the matter to the file of the CIT(Appeals) for granting an opportunity to the assessee to make an application as required under the “Proviso” to Section 249(4) of the Act, which provides for exemption from payment of taxes.
Considering the aforesaid facts involved in the present appeal a/w the aforesaid position of law, we are unable to persuade ourselves to subscribe to the dismissal of the assessee’s appeal in limine by the CIT(Appeals), who in our considered view had misconceived; or in fact had misconstrued the scope and gamut of the provisions of Section 249(4)(b) of the Act as were applicable to the case of the assessee before us. We, thus, in terms of our aforesaid observations, set-aside the impugned order of the CIT(Appeals) and restore the matter to his file with a direction to reconsider the maintainability of the appeal on the basis of reasons given by the assessee as regards the failure on its part to pay the amount of tax as contemplated in clause (b) of Sec. 249(4) of the Act. Accordingly, the Grounds of appeal No.(s) (i) to (iii) raised by the assessee are allowed for statistical purposes in terms of our aforesaid observations.
FULL TEXT OF THE ORDER OF ITAT RAIPUR
The captioned appeals filed by the assessee company are directed against the respective orders passed by the CIT(Appeals)-II, Raipur (C.G.), which in turn arises from the consolidated order passed by the A.O under Sec. 153A r.w.s. 144 AND under Sec. 144 of the Income-tax Act, 1961 (for short ‘the Act’) dated 10.11.2016 for the assessment years 2012-13 & 2013-14, respectively. As the issues involved in the captioned appeals are inextricably interlinked or in fact interwoven, therefore, the same are being taken up and disposed off together by way of a common order. We shall first take up the appeal filed by the assessee for the assessment year 2012-13 wherein the assessee has assailed the impugned order on the following grounds of appeal before us:
“GROUND NO.I
That the Appellate Order passed by the Learned Commissioner of Income Tax (Appeals) – II, Raipur thereinafter referred to as “the Ld. CIT(A)”] is highly illegal, bad in law, unsustainable and not in accordance with the provisions of law. It is prayed that the Order passed may please be annulled.
GROUND No.II
2.1 On the facts and in the circumstances of the case as well as in law, the Ld. CIT(A) has erred in dismissing the appeal in limine holding it as not maintainable under the provisions of section 249(4) of the Act which is highly unjustified, unwarranted, unsustainable, not proper on facts and not in accordance with the provisions of law.
2.2 The Ld.CIT(A) has failed to appreciate that the appellant could not file the return of income and could not pay the taxes due on such income owing to severe financial crisis and hence, there were good and sufficient reasons for such contravention hence, the Ld.CIT(A) ought to have exercised his discretion in favour of the appellant and ought to have exempted the appellant from the operation of clause (b) of section 249(4) of the Act.
Hence, it is prayed that the Order passed by the Ld.CIT(A) may please be annulled and may please be set aside for adjudication on merits.
GROUND NO.III
On the facts and in the circumstances of the case as well as in law, the Ld.CIT(A) has grossly erred in dismissing the appeal in limine without considering the grounds raised by the appellant on merits which is highly unjustified, unwarranted, unsustainable and not in accordance with the provisions of law.
GROUND No. IV
That the appellant craves leave to add, amend, alter or delete all or any of the grounds of appeal at the time of hearing of the appeal.”
2. Search and seizure proceedings u/s. 132 of the Act were conducted at the business and factory premises of Crest Topworth Group on 10.10.2012. The assessee company was covered in the aforesaid search and seizure proceedings. As the assessee company had failed to file its return of income for the year under consideration i.e., AY.2012-13 either u/s.139(1) or u/s.153A of the Act, therefore, the A.O vide his order passed u/s. 153A r.w.s 144, dated 10.11.2016 after considering its audited financial statements assessed its income at Rs.112,53,62,130/.
3. Aggrieved, the assessee carried the matter in appeal before the CIT(Appeals). Observing, that the assesee company had neither filed its return of income for the year under consideration nor paid the taxes till date, the CIT(Appeals) called upon it to put forth an explanation that as to why its appeal may not be dismissed as not maintainable as per provisions of Section 249(4) of the Act. In reply, it was the claim of the assessee that it had failed to deposit the tax owing to financial difficulties. However, the CIT(Appeals) holding a conviction that as the assessee company had neither filed its return of income nor paid the taxes, therefore, its appeal was not maintainable, thus, dismissed the same in limine.
4. The assessee being aggrieved with the order of the CIT(Appeals) has carried the matter in appeal before us.
5. Before us, it was submitted by the Ld. Authorized Representative (for short ‘AR’) for the assessee, that the assessee company had though neither filed its return of income for the year under consideration nor owing to financial difficulties paid an amount equal to the amount of advance tax which it was obligated to pay at the time of filing of the appeal i.e, a pre-condition contemplated in clause (b) of Sec. 249(4) of the Act for the maintainability of the appeal, however, the CIT(Appeals) who as per the “Proviso” to Sec. 249(4) was vested with a discretion to exempt him from the payment of tax for any good and sufficient reason to be recorded in writing had refrained from exercising the said discretion. In sum and substance, it was claimed by the Ld. AR that now when the assessee company had not filed its return of income, therefore, its case was covered by clause (b) to Section 249(4) of the Act which, therein, vested with the CIT(Appeals) a discretion, as per which he could on the basis of a claim raised by the assessee before him, for any good and sufficient reason to be recorded in writing, dispense with the obligation cast upon the assessee to pay an amount equal to the amount of advance tax at the time of filing of the appeal, i.e a precondition for the maintainability of its appeal. On the basis of the aforesaid facts r.w the settled position of law, it was submitted by the Ld. AR that as the CIT(Appeals) had failed to exercise the discretion vested with him which he was obligated to exercise as per the “Proviso” to Sec. 249(4) of the Act, therefore, the matter in all fairness be restored to his file with a direction to reconsider the maintainability of the assessee’s appeal de-hors deposit of an amount equal to the amount of advance taxes i.e, in the backdrop of the reasons raised by the assessee before him.
6. Per contra, the Ld. Departmental Representative (for short ‘DR’) relied on the orders of the lower authorities. It was submitted by the Ld. DR that as the assessee company which had not filed its return of income had failed to pay an amount equal to the amount of advance tax at the time of filing of the appeal, therefore, the CIT(Appeals) observing that the assessee company had not complied with the mandate of Sec. 249(4) of the Act, rightly dismissed its appeal in limine. It was submitted by the Ld. DR that even otherwise as the assessee company has a substantial net worth, therefore, its claim of having failed to pay the taxes on account of financial constraints was devoid and bereft of any merit. At the same time, it was fairly stated by the Ld. DR that the CIT(Appeals) at the time of holding the assessee’s appeal as not maintainable for the reason of nonpayment of taxes should have given explicit reasons for holding so.
7. We have heard the ld. authorized representatives for both the parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by the ld. AR to drive home his contentions. Controversy involved in the present appeal lies in a narrow compass i.e., as to whether or not the appeal of the assessee had rightly been dismissed by the CIT(Appeals) as not maintainable u/s. 249(4) of the Act.? Before proceeding any further, we deem it fit to cull out section 249(4) of the Act which reads as under:
“(4) No appeal under this Chapter shall be admitted unless at the time of filing of the appeal,—
(a) where a return has been filed by the assessee, the assessee has paid the tax due on the income returned by him; or
(b) where no return has been filed by the assessee, the assessee has paid an amount equal to the amount of advance tax which was payable by him.”
On a perusal of the aforesaid statutory provision, we find that the same contemplates the pre-conditions for admission of an appeal filed before the CIT(Appeals) in two different circumstances, viz. (a) in a case where return has been filed by the assessee; and (b) in a case where no return has been filed by the assessee. In so far a case where a return of income had been filed by the assessee is concerned, the taxes on the returned income is mandatorily required to have been paid by the assessee at the time of filing of the appeal before the CIT(Appeals), failing which the appeal would not be maintainable. On the other hand, though the legislature in all its wisdom had cast a similar statutory obligation on an assessee who had not filed his return of income, therein, making it obligatory for him to pay an amount equal to the amount of advance tax which was payable by him, but carves out an exemption from operation of the aforesaid statutory requirement by way of a “proviso” to section 249(4) of the Act, as per which on an application filed by the assessee before the CIT(Appeals), the latter may for good and sufficient reasons to be recorded in writing exempt him from the obligation of payment of taxes as therein contemplated. At this stage, we may herein observe, that the exemption envisaged in the “proviso” to section 249(4) of the Act can only be made available to an assessee whose case falls within the realm of clause (b) and cannot be applied to a case covered by clause (a) of Sec. 249(4) of the Act.
8. In the backdrop of the aforesaid position of law, we shall now deal with the sustainability of the order of the CIT(Appeals) who had declined the admission of the appeal of the assessee, for the reason that it had not paid the taxes which is a pre-condition for maintainability of an appeal as per Sec. 249(4) of the Act. At this stage, we may herein observe, that admittedly as the assesee company had not filed its return of income either u/s. 139 or u/s. 153A of the Act, therefore, its case would fall within the scope and gamut of clause (b) of section 249(4) of the Act. On a perusal of the orders of the lower authorities, it transpires, that the assessee had claimed before the CIT(Appeals) that owing to its financial difficulties taxes could not be paid even till the time of filing of the appeal before him. However, we find that the CIT(Appeals) losing sight of the fact that the instant case of the assessee was covered by clause (b) of Section 249(4) of the Act, which did vest a discretion with him to exempt the assessee for good and sufficient reasons to be recorded in writing from the pre-condition of payment of tax and admit the appeal, had however, without exercising his discretion in the backdrop of the reason given by the assessee dismissed its appeal in limine, for the reason that it had not filed its return of income and paid taxes. In our considered view, as stated by the Ld. AR, and rightly so, the CIT(Appeals) in the present case had failed to exercise the judicial discretion that was vested with him for exempting the assessee from the operation of the provisions of clause (b), despite there being a categorical claim of the assessee that the failure on its part to deposit the tax had occasioned on account of financial difficulties. Our aforesaid conviction that the CIT(Appeals) was under an obligation to have exercised his discretion within the meaning of the “proviso” to Section 249(4) of the Act is fortified by the judgment of the Hon’ble High Court of Madhya Pradesh in the case of Shyam Electric Works Vs. CIT, (2006) 284 ITR 413 (MP). In the aforesaid case the tribunal had allowed the appeal of the revenue, for the reason, that as the assessee had failed to pay the taxes as contemplated under Sec. 249(4) of the Act, therefore, its appeal was not maintainable before the CIT(Appeals). On appeal, the Hon’ble High Court while setting aside the order of the Tribunal, observed, that the tribunal instead of allowing the revenue’s appeal should have remanded the matter to the file of the CIT(Appeals) for granting an opportunity to the assessee to make an application as required under the “Proviso” to Section 249(4) of the Act, which provides for exemption from payment of taxes. For the sake of clarity, the relevant observations of the Hon’ble High Court are culled out as under:
“9. In our opinion, the compliance of Section 249(4) is mandatory before the appeal is entertained. Indeed, the jurisdiction of CIT(A) in hearing and then deciding the appeal depends upon the strict compliance of requirements contained in Section 249(4) ibid. If the appellant fails to deposit the tax strictly in accordance with the requirement of Clause (a) or (b) as the case may be, the appeal has to be dismissed as not maintainable. If the appellant makes an application as contemplated under proviso to sub-s. (4) then it is the duty of CIT(A) to pass an appropriate order on the application so made by either granting an exemption from payment of tax or refuse the prayer. Depending upon the outcome of the application, the CIT(A) has to proceed. In other words, if the application is rejected, then appellant has to deposit the tax strictly in accordance with the requirement of Clause (a) or
(b) as the case may be, to enable the CIT(A) to admit the appeal and then proceed to decide the same finally. In case, if the CIT(A) allows the application and grants exemption as prayed, then the appeal can be heard without making any compliance of Section 249(4) ibid. However, in either case, the right to file an application claiming exemption being a statutory one, cannot be taken away.”
Also, a similar view had been taken by the co-ordinate benches of the Tribunal, i.e, ITAT, Pune “A” Bench in the case of Hotel Sai Siddhi (P) Ltd. Vs. DCIT, Central Circle-1, Nashik (2011) 13 taxmann.com 155 (Pune) and by the ITAT, Chennai “A” Bench in the case of C. Subhamanian Vs. DCIT, (2003) 84 ITD 23 ( Chennai).
9. Considering the aforesaid facts involved in the present appeal a/w the aforesaid position of law, we are unable to persuade ourselves to subscribe to the dismissal of the assessee’s appeal in limine by the CIT(Appeals), who in our considered view had misconceived; or in fact had misconstrued the scope and gamut of the provisions of Section 249(4)(b) of the Act as were applicable to the case of the assessee before us. We, thus, in terms of our aforesaid observations, set-aside the impugned order of the CIT(Appeals) and restore the matter to his file with a direction to reconsider the maintainability of the appeal on the basis of reasons given by the assessee as regards the failure on its part to pay the amount of tax as contemplated in clause (b) of Sec. 249(4) of the Act. Accordingly, the Grounds of appeal No.(s) (i) to (iii) raised by the assessee are allowed for statistical purposes in terms of our aforesaid observations.
10. Ground of appeal No.(iv) being general in nature is dismissed as not pressed.
11. In the result, appeal of the assessee in ITA No.44/RPR/2018 for the assessment year 2012-13 is allowed for statistical purposes in terms of our aforesaid observations.
IT(SS)A No.29/RPR/2018 A.Y. 2013-14
12. As the facts and the issue involved in the present appeal remains the same as were there before us in the aforementioned appeal of the assessee in ITA No.44/RPR/2018 for assessment year 2012-13, therefore, our order therein passed while disposing off the said appeal shall apply mutatis-mutandis for disposing off the present appeal in ITA No.29/RPR/201 for the assessment year 2013-14. We, thus, in terms of our observations recorded while disposing off the assessee’s appeal for the immediately preceding year i.e., AY 2012-13 in ITA No.44/RPR/2018 set-aside the order of the CIT(Appeals) and restore the matter to his file with a direction to reconsider the maintainability of the assessee’s appeal on the basis of the reasons given by the assessee as regards the failure on its part to pay the amount of tax as contemplated in clause (b) of Sec. 249(4) of the Act.
13. In the result, appeal of the assessee in ITA No.29/RPR/2018 for the assessment year 2013-14 is allowed for statistical purposes in terms of our aforesaid observations.
14. Resultantly, both the appeals of the assessee are allowed for statistical purposes in terms of our aforesaid observations.
Order pronounced in open court on 27th day of May, 2022.
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