Dismissal of appeal for non-payment of advance tax not justified since there is no admitted income: ITAT Agra

Ritika Jain Vs ITO (ITAT Agra)

ITAT Agra held that dismissal of appeal as per provisions of section 249(4)(b) for non-payment of advance tax unjustified since entre addition made by AO was challenged and there was no other income which is above threshold limit of being taxable. Accordingly, matter restored back to CIT(A).

Facts- Case of the assessee was selected by Revenue for framing scrutiny assessment. It was observed by AO that the assessee has deposited cash of Rs.16,24,600/- in Central Bank of India account, out of which an amount of Rs.14,14,600/- was deposited in cash in a single date on 11.11.2016 during the period of demonetization. AO rejected the contentions of the assessee, which led to addition in the hands of assessee to the tune of Rs.16,24,600/- u/s. 69A of the 1961 Act.

CIT(A) dismissed the appeal of the assessee as being un­admitted on the ground that the assessee has not filed return of income and has not deposited an amount equal to the amount of advance tax which was payable by it. CIT(A)relied upon the provisions of section 249(4)(b) while dismissing the appeal of the assessee as being un-admitted. Being aggrieved, the present appeal is filed.

Conclusion- Held that there is no admitted income by the assessee and the addition as was made by the Assessing Officer of Rs.16,24,600/- which is also the assessed income in the hands of the assessee, is subject matter of dispute and challenge by the assessee before the ld. CIT(Appeals) as well as before Tribunal. Thus, the assessee has never admitted this addition of Rs. 16,24,600/- to be her income ,and under these circumstances, there is no advance tax liability arising on such disputed income keeping in view the claim of the assessee that she was not having any other income in India except that there was interest income which was below matter. In any case, the AO has not brought to tax any income apart from this addition of Rs. 16,24,600/- on account of cash deposits in the bank account. Thus, So far as maintainability of appeal before ld. CIT(A) is concerned, I don’t find that in such circumstances the appeal will not be maintainable because entire additions as were made by the AO is subject to dispute and challenge before higher appellate authorities, and that the assessee does not have other income which is above the threshold limit of being taxable, as is emerging from records. In my considered view, the assessee has duly explained with sufficient and reasonable cause that the provisions of section 249(4)(b) is not applicable. Thus, The appellate order of ld. CIT(A) is set aside and the matter is now restored to the file of ld. CIT(A) to adjudicate denovo appeal of the assessee on merits in accordance with law.

FULL TEXT OF THE ORDER OF ITAT AGRA

This appeal in ITA No.168 /Agar/2023 for the assessment year 2017-18 has arisen from the appellate order dated 14.09.2023(DIN& Order No. ITBA/NFAC/S/250/2023-24/1 056081295(1)) passed by learned Commissioner of Income-tax(Appeal), NFAC, Delhi, which in turnhas arisen from the assessment order dated 24.12.2019 passed by Assessing Officer u/s. 144 of the Income-tax Act, 1961 (DIN & Order No. ITBA/AST/S/1 44/2019-20/1023021406(1)).

2. Assessee has not filed her return of income u/s 139, and notice u/s. 142(1) was issued by the Assessing Officer on 23.03.2018 to the assessee, requesting assessee to file her return of income. The notice was issued based on OCM information. Assessee did not file return of income. Case of the assessee was selected by Revenue for framing scrutiny assessment. It was observed by the Assessing Officer that the assessee has deposited cash of Rs.16,24,600/- in Central Bank of India, Shivpuri Account No. 3180350784, out of which an amount of Rs.14,14,600/- was deposited in cash in a single date on 11.11.2016 during the period of demonetization. The AO observed that since the assessee did not file return of income with department, cash deposits during demonetisation is abnormally high as compared to the pre-demonetized period, and the sources of these deposits are not known to department. A show cause notice u/s 142(1) was issued by the Assessing Officer to the assessee , on 27.11.2019, requiring assessee to explain the sources of deposits in her bank account . Thereafter , further statutory notices u/s 142(1) were issued by the AO during assessment proceedings . The assessee was asked by the AO to produce books of accounts, bills, vouchers etc pertaining to her business. Assessee submitted that she was running Kisan Seva Kendra at very interior area of Billaua, at Karhal Sheopur Road, which was closed in 2014, but there were some old outstanding recoverable from farmers and villagers which remained unrealized since then. The assessee was making efforts to collect the same and deposit into her bank limit account, where there is an loan outstanding against the assessee and the amount was deposited to clear the bank loan. It was submitted that in the month of October, 2016, because of crop and Diwali season and some more serious efforts of family member, she recovered the amount and the same was deposited into CC limit/loan account so as to pay off bank dues at least. Assessing Officer on perusal of the balance sheet as on 31.03.2013 observed that the assessee does not have any sundry debtors from whom recovery was due. The AO further observed that the contention of the assessee that due to good crop and family efforts, the sundry debtors were realized at once and the said realisations were deposited into bank account , is also unbelievable and is a story cooked by the assessee and is merely an after-thought to cover up the undisclosed sources of cash deposits during the period of demonetisation as well other deposits.The AO rejected the contentions of the assessee, which led to addition in the hands of assessee to the tune of Rs.16,24,600/- u/s. 69A of the 1961 Act. The computation of income as recorded in assessment order is reproduced hereunder :

3. Still Aggrieved, the assessee filed first appeal with ld. CIT(Appeals) and submitted in statement of facts as under :

“That the assesseeis not having any business income except interest income in the year under consideration as she has shifted from INDIA TO USA along with her husband as he has job their since 2014 thus the question of service of notice under section 142(1) issued on 23-3- 2018 on her to file the return of income for the assessment year 2017- 18 does not arise. All the notices issued by the department has been received by some one else who looked after the recoveries due from the persons/old traders and repaid them to the bank. He has recovered the dues from the traders /persons and re-invested to earn the interest income from the needy person of the villager or other places. He accumulated the cash year after year which is clear from the statement of affair prepared year after year. Bank interest is paid out of interest income The bank authority from time to time has demand to repay, the loan outstanding against her but not re-pay the outstanding balance to the bank by who looked after the affair of her. Sir later on with effect 09/11/2016 demonetization scheme came in to force, therefore who looked after the affair of her inspite of deposit the amount in her bank account re-paid the loan of the bank. The Ld AO over looked the facts stated in the reply but in his body of assessment order quoted that only a afterthought and cooked up story to some cover up the undisclosed sources of cash deposit during the period of demonetization as well as other deposit during the year under consideration fully baseless and is purely only on presumptions and surmises and also not reliable in case of the assessee. Sir as per direction, who looked after the affair of her reply has been submitted to the Ld. AO in the absence of the assessee who stay at that time in USA. After received the reply, the Ld. AO hasrefer the matter to the Hon’ble JCIT under section 144A of the Income Tax Act 1961 for obtaining the directions in disregards. The Honble JCIT has not provided any opportunity to be heard before issue of direction in proceeding under section 144A of the Act The Honble JCIT issue the direction to the ld. A.O. to called for details! address of beneficiary any from the bank and proceeds with assessment proceeding in order to complete the assessment after taken in to consideration the documents brought ! to be brought on record keeping in view of the CBDT in this regards but the Ld. AO issue show cause notice in other issue, i.e., explain the sources of the deposit in bank account and present proof of your business activities In this regard, but the assesseehas already been submitted in the explanation in this regards hence her could not filed further reply in this regard. Therefore the Ld AO has treated Rs. 1624000!- to be the income of the assessee under section 69A accordingly added to her income for the AY 201 7-18 and also issued penalty notice under section 271 AAC (1) and 271F of the Income Tax Act 1961 is also initiated. Aggrieved by this the appeal is filed inter alia on the following grounds :”

4. The assessee challenged the addition of Rs.16,24,600!- both on merits as well as legal grounds before the ld. CIT(Appeals). Main bone of contentions before the ld. CIT(Appeals) was that the assessee was not having any business income except interest income in the year under consideration, as she has shifted from India to USA along with her husband who was having job in USA since 2014. It is the claim of the assessee that the assessee has earned interest income from the bank account, while the recoveries were made from farmers etc. of the old outstanding which was deposited in the bank to clear the loan amounts. Ld. CIT(Appeals) dismissed the appeal of the assessee as being un­admitted on the ground that the assessee has not filed return of income and has not deposited an amount equal to the amount of advance tax which was payable by it. The ld. CIT(A)relied upon the provisions of section 249(4)(b) while dismissing the appeal of the assessee as being un-admitted.

5. Aggrieved, the assessee has filed second appeal with the Tribunal and has raised as many as seven grounds of appeal in which the assessee has challenged the additions on both legal ground as well as on merits.

6. When this appeal was called for hearing before the Bench(SMC), Shri Rajendra Sharma, Advocate alongwith Sh. Manuj Sharma and Mrs. Ayushi Pareekh, Advocates appeared before the Bench, while the department is represented by Sh. Shailendra Srivastava, Sr. DR. . Ld. Counsel Shri Rajendra Sharma, Advocate at the outset stated before the Bench that the assessee has already migrated to USA and was not having any business income in the year under consideration. It was stated that the assessee was only having interest income which was below taxable limits , and hence no return of income was filed. It was submitted that there were some old outstanding’s recoverable from farmers, which were recovered from the farmers etc. in cash, and was deposited in cash in the bank account. It was the say of the ld. Counsel for the assessee that perusal of the assessment order will reveal that the assessee had not filed return of income as the income of the assessee was below taxable limit. It was submitted that the additions were made by the AO u/s. 69A with respect to cash deposit in the bank account which is a disputed liability, and the assessee has challenged the additions as were made by the AO before the ld. CIT(Appeals) as well as before the Tribunal. It was also submitted that the assessee has meagre interest income, which is much below the taxable limit and hence, the assessee has not filed return of income because the assessee is not liable to file the return of income. Thus, it was submitted that the ld. CIT(Appeals) has wrongly invoked the provisions of section 249(4)(b) of the Act and appeal has been dismissed as un-admitted.

6.2 Ld. Sr. DR fairly submitted that there is no admitted liability by the assessee and the addition of Rs.16,24,600/- is the addition made by the Assessing Officer u/s. 69A vide assessment order dated 24.12.2019, which is a disputed tax liability, as the assessee has filed appeal before the ld. CIT(Appeals) as well as before the Tribunal , challenging the additions as were made by the AO both on legal grounds and on merits. He fairly submitted that the provisions of section 249(4)(b) are not applicable in this case.

7. I have considered rival contentions and perused the material on record. I have observed that the assessee has not filed return of income u/s 139. It is the claim of the assessee that she moved to USA from India along with her husband. She claimed that was running the Kisan Seva Kendra at very interior of Bilaua at KarahalSheopurRoad .Her business closed down in 2014. Assessing Officer issued notice u/s. 142(1) and show cause notice to explain the deposit of Rs.16,24,600/- with Central Bank of India in her Bank Account, during the year under consideration of which Rs. 14,14,600/- was deposited on single day in cash on 11.11.2016 during the demonetisation period. The assessee explained that these amounts deposited in Central Bank of India were old recoverable from the farmers and villagers, which remained unrealised since then. The assessee was making efforts to collect the outstanding and the amounts recovered were deposited in her bank account with Central Bank of India to clear all the liabilities of the bank dues. This explanation of the assessee has not found favour with the Assessing Officer, which led to addition of Rs.16,24,600/- in the hands of the assessee. On perusal of the assessment order, it is clearly discernible that there is no admitted income by the assessee and the only income assessed is Rs.16,24,600/- which is disputed by the assessee, which is subject to appeal by the assessee before ld. CIT(Appeals) as well as before the Tribunal. The relevant extract of the assessment order is reproduced hereunder:

7.2 This entire addition is disputed tax liability as the assessee has raised grounds of appeal before ld. CIT(A) as well before ITAT, challenging this entire addition of Rs. 16,24,600/- as were made by the AO both on legal ground as well on merits. There is no other income assessed apart from this addition of Rs. 16,24,600/- as is discernible from assessment order. Relevant extract is reproduced earlier in this order. Thus, the is no admitted tax liability. So far admitted income is concerned, it is admitted that the assessee has income from interest which is much below taxable limits, and hence no return of income was filed nor there was any liability to deposit advance tax as per the provisions of the 1961 Act. The relevant ground of appeal (Ground No. 1) before ITAT is reproduced hereunder:-

1) “The Ld. CIT(A) erred in Non-Admitting the Appeal Filed by the Appellant with the reason that “ The appellant has not offered YES comment at Sl. No. 09 of Form 35” further with the comment “ Since the appellant has not filed the Return of Income as well not paid an amount equal to the amount of advance tax which was payable by it, present appeal is not liable to be admitted” without considering the fact that the appellant was not liable to File Return of income originally as she was not having income chargeable to Tax in India and accordingly the appellant has filed rightly Not Applicable comment in the Sl. No. 09 of Form 35.”

7.3 Reference is drawn to the provisions of section 249(4), which is reproduced as under :

Section 249:

“(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:

Provided that, in a case falling under clause (b) and on an application made by the appellant in this behalf, the [Joint Commissioner (Appeals) or the] Commissioner (Appeals) may, for any good and sufficient reason to be recorded in writing, exempt him from the operation of the provisions of that clause.”

7.4 Section 249(4)(b) clearly stipulates that no appeal shall be admitted by ld. CIT(Appeals) unless at the time of filing of appeal where in the cases 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. Further, there is proviso which clearly stipulates that in a case falling under clause (b) and on an application made by the appellant in this behalf, the Joint Commissioner (Appeals) or the Commissioner (Appeals) may, for any good and sufficient reason to be recorded in writing, exempt him from the operation of the provisions of said clause. I am of the considered view that only income, which is assessed to tax in the instant case in the hands of the assessee is addition of Rs.16,24,600/- u/s. 69A as was made by the AO, with respect to cash deposited in the bank account. There is no admitted income by the assessee, as the assessee has claimed that she was living outside India with her husband and was having only interest income which was bleow taxable limits and there was no obligation to file return if income. This addition of Rs. 16,24,600/- as was made by the AO is disputed by the assessee, as the assessee filed first appeal challenging on both legal grounds as well on merits the additions as were made by the AO. The ld. CIT(A) dismissed the appeal as unadmitted as the assessee has not filed return of income and also the assessee has also not paid an amount equal to the amount of advance tax which was payable by her. The assessee has claimed that the amount deposited in cash in her bank account represents old recoveries from the farmers/villagers and there is no income during the year under consideration, as the assessee has shifted to USA and the business has been closed down since 2014. In any case, on perusal of the assessment order, it is clearly discernible that there is no admitted income by the assessee and the addition as was made by the Assessing Officer of Rs.16,24,600/- which is also the assessed incomein the hands of the assessee, is subject matter of dispute and challenge by the assessee before the ld. CIT(Appeals) as well as before Tribunal. Thus, the assessee has never admitted this addition of Rs. 16,24,600/- to be her income ,and under these circumstances, there is no advance tax liability arising on such disputed income keeping in view the claim of the assessee that she was not having any other income in India except that there was interest income which was below matter. In any case, the AO has not brought to tax any income apart from this addition of Rs. 16,24,600/- on account of cash deposits in the bank account. Thus, So far as maintainability of appeal before ld. CIT(A) is concerned, I donot find that in such circumstances the appeal will not be maintainable because entire additions as were made by the AO is subject to dispute and challenge before higher appellate authorities, and that the assessee does not have other income which is above the threshold limit of being taxable, as is emerging from records. In my considered view, the assessee has duly explained with sufficient and reasonable cause that the provisions of section 249(4)(b) is not applicable. Moreover, the proviso also provides that when there is good and sufficient reasons then appeal can still be admitted and the CIT(Appeals) can exempt from operation of the provisions of that clause. Reference is drawn to the order of ITAT, Raipur in the case of Vishnusharan Chandravanshi v. ITO (2024) 161 taxmann.com 803(Raipur-Trib.) .Thus, I direct the ld. CIT(Appeals) to admit the appeal of the assessee and thereafter adjudicate the same on merits in accordance with law after providing opportunity to both the parties. I clarify that I have not commented on the merits of the issue involved in this appeal. The assessee is also directed to comply with the notices issued by ld. CIT(A). The appellate order of ld. CIT(A) is set aside and the matter is now restored to the file of ld. CIT(A) to adjudicate denovo appeal of the assessee on merits in accordance with law. All the contentions are kept open. The appeal of the assessee is partly allowed for statistical purposes. I order accordingly.

8. In the result, appeal of the assessee is partly allowed for statistical purposes.

Order pronounced in the open court on 03/12/2024.