Vedala Krishnamurthy Sreevani Vs ITO (ITAT Hyderabad)
Hyderabad ITAT: Appeal Cannot Be Summarily Rejected for Non-Payment of Advance Tax u/s 249(4)(b); CIT(A) Must Examine Assessee’s Claim and Exemption Application
Summary: In Vedala Krishnamurthy Sreevani v. ITO, ITA Nos. 807–809/Hyd/2026, AY 2018-19, order dated 21.08.2026, the Hyderabad ITAT considered whether the assessee’s appeals could be dismissed as infructuous under Section 249(4)(b) for non-payment of an amount equal to advance tax where no return had been filed. The AO had reopened the assessment and treated bank transactions aggregating to ₹2,64,97,400 as undisclosed turnover/receipts, estimating income at 12% at ₹31,79,688, besides adding ₹69,277 as undisclosed interest, determining total income at ₹32,48,965. The CIT(A) dismissed the appeal without examining the additions on merits. The Tribunal noted that Section 249(4)(b) requires payment of the advance tax payable where no return has been filed, but its proviso permits exemption on an application for good and sufficient reasons. It further noted that neither the assessee nor the AO had calculated the advance tax under Section 209. Therefore, the assessee’s claim that no advance-tax liability arose because he had no taxable income could not have been summarily discarded. However, the assessee had also not filed the application contemplated by the proviso to Section 249(4)(b). The Tribunal accordingly set aside the quantum appeal to the CIT(A) for fresh adjudication after giving the assessee an opportunity to substantiate his claim; if Section 249(4)(b) was found inapplicable or exemption was granted, the CIT(A) was directed to decide the appeal on merits. The connected penalty appeals under Sections 270A and 271B were also restored on the same terms, and all three appeals were allowed for statistical purposes.
In Vedala Krishnamurthy Sreevani v. ITO, ITA Nos. 807–809/Hyd/2026, AY 2018-19, order dated 21.08.2026, the Hyderabad ITAT dealt with the maintainability of an appeal where the assessee had not filed a return of income and had also not paid advance tax.
The AO reopened the assessment and treated bank transactions of ₹2.64 crore as undisclosed turnover, estimating income thereon at 12% amounting to ₹31.79 lakh, besides adding ₹69,277 as undisclosed interest, determining total income at ₹32.49 lakh. The CIT(A), however, did not decide the additions on merits and dismissed the appeal as not maintainable for failure to comply with Section 249(4)(b).
The ITAT explained that where no return has been filed, Section 249(4)(b) ordinarily requires payment of an amount equal to the advance tax payable before an appeal can be admitted. However, its proviso empowers the CIT(A), on an application by the assessee and for good and sufficient reasons recorded in writing, to exempt the assessee from this requirement.
Significantly, the Tribunal noted that in this case neither the assessee nor the AO had computed any advance tax under Section 209. Therefore, the assessee’s contention that he had no taxable income and consequently no advance-tax liability could not have been summarily rejected by the CIT(A). At the same time, the assessee had also failed to make the requisite application seeking exemption under the proviso to Section 249(4)(b).
Accordingly, the ITAT set aside the CIT(A)’s order and restored the appeal for fresh adjudication. The CIT(A) was directed to consider the assessee’s contention regarding absence of advance-tax liability and give him an opportunity of hearing. If Section 249(4)(b) is found inapplicable, or the assessee is granted exemption on his application under the proviso, the CIT(A) must decide the appeal on merits.
Since the connected penalty appeals under Sections 270A and 271B had also been dismissed by the CIT(A) on the same Section 249(4)(b) ground, those matters were similarly restored to the CIT(A). Thus, all three appeals were allowed for statistical purposes.
List of Cases Discussed / Relied Upon
- Kumar Cherka Vs ITO (ITAT Hyderabad),— relevance: related Hyderabad ITAT decision concerning dismissal of an appeal under Section 249(4)(b) where advance-tax liability was in issue.
- Aneemoni Naga Raju vs. Income Tax Officer, Ward-8(1), Hyderabad, ITA No.2074/Hyd/2025, order dated 20/03/2026 — relevance: the Tribunal noted that this decision, involving the same issue, restored the matter to the CIT(A) with liberty to the assessee to file an application under the proviso to Section 249(4)(b).
FULL TEXT OF THE ORDER OF ITAT HYDERABAD
The present appeals filed by the assessee are directed against the respective orders passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi (for short, “CIT(A)”), dated 17/02/2026, which in turn arise from the respective orders passed by the Assessing Officer (“AO”) under Section 147 r.w.s 144 r.w.s 144B of the Income Tax Act, 1961 (for short, “the Act”), dated 26/02/2024, under section 270A of the Act, dated 13/08/2024 and under section 271B of the Act, dated 13/08/2024 for Assessment Year (AY) 2018-19. Since a common issue is involved in the above-mentioned appeals, the same are being taken up and disposed of vide a consolidated order. We shall first take up the quantum appeal filed by the assessee in ITA No.807/Hyd/2026, wherein the assessee has assailed the impugned order of the CIT(A) on the following grounds of appeal:
1) The learned Commissioner of Income Tax (Appeals) erred both in law and on facts in dismissing the appeal on the alleged ground of defect in Form No 35 by misreading Sl No 9 thereof although no defect whatsoever existed in the appeal filed by the Appellant
2) The learned CIT(A) erred in dismissing the appeal solely on the ground of alleged nonpayment of advance tax under section 249(4)(b) without appreciating that (a) No return of income had been filed for the relevant Assessment Year; (b) There was no admitted income on the part of the Appellant; (c) The entire assessed income was wholly disputed in appeal; and (d) Assesse contends that there was in fact there was loss and the business of agency has been closed. Hence the requirement of payment of advance tax under section 249(4)(b) was not attracted in the facts and circumstances of the case
3) The learned CIT(A) erred in law in dismissing the appeal without adjudicating the grounds on merits thereby denying the Appellant a reasonable opportunity of being heard and acting in violation of the principles of natural justice.
4) The learned CIT(A) failed to appreciate that the estimation of income at 12% on the entire cash deposits treated as turnover is arbitrary excessive and without reference to any statutory provision comparable case OR past history of the Appellant and is therefore unsustainable in law.”
2. Succinctly stated, the AO based on information that the assessee during the subject year had carried out substantial financial transactions, viz., (i) cash deposits in bank account held with Union Bank of India: Rs.2,46,04,600/-; (ii) cash withdrawals from Union Bank of India: Rs.2,40,000/-; (iii) cash deposits in bank account held with Oriental Bank of Commerce: Rs.2,46,04,600/-; and (iv) interest other than interest on securities from Oriental Bank of Commerce: Rs.69,277/-, initiated proceedings under Section 147 of the Act. Notice under Section 148 of the Act, dated 02/04/2022, was issued to the assessee. However, the assessee failed to furnish his return of income in compliance with the aforesaid notice.
3. Thereafter, the AO vide his order passed under Section 147 r.w.s 144 r.w.s 144B of the Act, dated 26/02/2024 made two additions in the hands of the assessee, viz., (i) treating the transactions reflected in the assessee’s bank accounts aggregating to Rs.2,64,97,400/- as the assessee’s undisclosed turnover/receipts on which income was estimated @ 12%: Rs.31,79,688/-; and (ii) addition of undisclosed interest income received on account with Oriental Bank of Commerce: Rs.69,277/-, and determined his income at Rs.32,48,965/-.
4. Aggrieved, the assessee carried the matter in appeal before the CIT(A). However, as the assessee, who had not filed his return of income, had failed to make payment of tax equal to the amount of advance tax payable by him as required per the mandate of clause (b) of Section 249 of the Act, the CIT(A) refrained from admitting the appeal and dismissed the same as infructuous.
5. The assessee, aggrieved with the order of the CIT(A), has carried the matter in appeal before us.
6. We have heard the Learned Authorized Representatives of both parties, perused the orders of the authorities below and the material available on record, as well as considered the judicial pronouncements relied upon by the Ld.AR to drive home his contentions.
7. Shri D N Joshi, CA, Learned Authorized Representative (for short, “Ld. AR”) for the assessee, at the threshold of hearing of the appeal, submitted that the CIT(A) had grossly erred in law and facts of the case in dismissing the appeal filed by the assessee by treating it as infructuous. Elaborating on his contention, the Ld. AR submitted that though the assessee in his Memorandum of Appeal, i.e., “Form- 35” had against “Column No.9” wherein information was sought as to whether the amount equal to the amount of advance tax as per Section 249(4)(b) had been paid, specifically stated that the same was “Not applicable”, but the CIT(A) had summarily brushed aside the same and wrongly observed that the assessee had failed to comply with the mandate of Section 249(4)(b) of the Act. The Ld. AR submitted that the CIT(A) ought to have called for an explanation from the assessee instead of summarily treating him as being in default of the aforesaid statutory compliance and dismissing the appeal by treating the same as infructuous. However, the Ld. AR on a specific query by the Bench as to whether the assessee, as required per the “proviso” to Section 249(4)(b) of the Act, had filed any application before the CIT(A) explaining as to why it be exempted from the operation of the said statutory provision, answered in the negative. The Ld. AR submitted that as the assessee had no taxable income for the subject year, therefore, no obligation was cast upon him for either estimating the advance tax, much less payment of the said amount. The Ld. AR submitted that now when the assessee had specifically stated that the obligation to pay any amount of advance tax as per Section 249(4)(b) of the Act was not applicable in his case, there was no reason for the CIT(A) to have summarily discarded his said claim and dismiss the appeal as not maintainable for non-compliance of the said statutory provision. The Ld. AR submitted that the matter, in all fairness, be set aside to the file of the CIT(A) with a direction to admit the appeal and adjudicate the same on the merits.
8. Per contra, Shri Mohan Babu, Learned Senior Departmental Representative (for short, “Ld. Sr-DR”) submitted that as the assessee had failed to file an application as per which an exemption was sought from the application of the provisions of Section 249(4)(b) of the Act as was statutorily required by the “proviso” to Section 249(4)(b) of the Act, the CIT(A) had rightly dismissed the appeal as not maintainable. However, the Ld. Sr. DR candidly submitted that the Tribunal involving the same set of facts had disposed of the appeal in the case of Aneemoni Naga Raju vs. Income Tax Officer, Ward-8(1), Hyderabad, ITA No.2074/Hyd/2025, dated 20/03/2026, and restored the matter to the file of the CIT(A) with a liberty to the assessee to file an application as per the “proviso’ to Section 249(4)(b) of the Act before the said appellate authority (copy of the order placed on our record). The Ld. Sr. DR submitted that based on the view taken by the Tribunal in the aforementioned case, the matter in the present case on the same terms can be set aside to the file of the CIT(A) with a liberty to the assessee appellant to file an application as required by the “proviso” to Section 249(4)(b) of the Act.
9. We have given thoughtful consideration to the contentions advanced by the Learned Authorized Representatives of both parties in the backdrop of the orders of the authorities below.
10. Before proceeding further, we deem it apposite to cull out the provisions of Section 249(4) of the Act, as under:
“249. (1) to (3)………
(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.”
11. Ostensibly, Section 249(4) of the Act contemplates the conditions which are statutorily required to be satisfied failing which the appeal filed by an assessee before the CIT(A) shall not be admitted, viz., (a) where the assessee has filed a return of income, the tax due on the income returned by him has been paid; or (b) where the assessee has not filed any return of income, then an amount equal to the amount of advance tax which was payable by him has been paid. At this stage, we may herein observe that the second situation contemplated under clause (b) of Section 249, i.e., a case where the assessee has not filed the return of income comes with a concession as per which on an application made by the assessee/appellant, the Commissioner (Appeals), for any good and sufficient reason to be recorded in writing, exempt him from the operation of the provisions of that clause. Accordingly, in a case where the assessee has not filed any return of income, then he remains under an obligation to pay an amount equal to the amount of advance tax which was payable by him, but the CIT(A) may, for any good and sufficient reason given by an assessee by filing an application, dispense with the satisfaction of the pre-condition. However, the said concession is available only for cases falling within the meaning of clause (b).
12. As in the case before us, the assessee had failed to file his return of income; therefore, his case is regulated by clause (b) of Section 249(4) of the Act.
13. Controversy involved in the present case lies in a narrow compass, i.e., as to whether or not the CIT(A) is right in law and facts of the case in observing that the assessee/appellant was required to pay an amount equal to the advance tax which was due on his assessed income irrespective of the fact that the impugned additions made by the AO were assailed by the assessee in the appeal filed before him?
14. In our view, the answer to the aforesaid issue would require adverting to Section 209 of the Act which contemplates the “computation of advance tax”. We find that Section 209(1) of the Act envisages the determination of the amount of advance tax payable by the assessee. We find on a careful perusal of Section 209(1) of the Act, that the same encompasses two situations, viz., (i) where the computation of the advance tax is based on the estimation of the current income and the income tax by the assessee; and (ii) where the calculation of the advance tax is made by the AO. Admittedly, in the case before us, there has been no calculation of the advance tax by the AO as provided in Section 209(1)(b) of the Act. Also, we find there has been no calculation made by the assessee for the purpose of payment of advance tax as contemplated in Section 209(1)(a) of the Act.
15. Considering the aforesaid facts, as there has been no calculation of the advance tax payable either by the assessee or by the AO, we are of the view that the claim of the assessee that in the absence of any income chargeable to tax for the subject year he was not liable for any advance tax liability could not have been summarily discarded by the CIT(A). In our view, the CIT(A), instead of calling for an explanation from the assessee as to why the obligation to pay an amount equal to the amount of advance tax as per section 249(4)(b) of the Act was not applicable in his case, had, however, wrongly summarily discarded the same. At the same time, we cannot also remain oblivion of the fact that the assessee had failed to comply with the obligation that was cast upon him as per the “proviso” to section 249(4) of the Act, as per which he ought to have filed an application before the CIT(A) based on which it was claimed by him that the obligation under Section 249(4)(b) of the Act was not applicable in his case.
16. Be that as it may, we are of a firm conviction that in the totality of the facts involved in the present case, the matter requires to be set aside to the file of the CIT(A) who is directed to re-adjudicate the appeal after taking cognizance of the fact that the assessee had specifically claimed before him that in absence of any taxable income no obligation was cast upon him to estimate the amount of advance tax and pay the same per the mandate of Section 249(4)(b) of the Act. Needless to say, the CIT(A) shall, in the course of the set-aside proceedings, afford an opportunity of being heard to the assessee regarding his claim that the provisions of Section 249(4)(b) of the Act were not applicable to his case. In case the CIT(A) finds favor with the claim of the assessee that the provisions of Section 249(4)(b) were not applicable in his case; or an application filed by the assessee exempts him from the operation of Section 249(4)(b), then he shall dispose of the appeal on merits. We thus, in terms of our aforesaid observations, set aside the matter to the file of the CIT(A) in terms of our aforesaid observations.
17. In the result, the appeal filed by the assessee is allowed for statistical purposes in terms of our aforesaid observations.
ITA No.808 & 809/Hyd/2026
AY: 2018-19
18. We shall now take up the appeals filed by the assessee against the respective orders of the CIT(A), NFAC, Delhi, which in turn arise from the respective orders passed by the AO under Section 270A and under Section 271B of the Act for the AY 2018-19.
19. As the facts and the issue involved in the captioned appeals remain the same as were there before us in the assessee’s quantum appeal in ITA No.807/Hyd/2026, and the appeals filed by the assessee assailing the respective penalties had been dismissed by the CIT(A) as infructuous for failure on the part of the assessee to comply with the condition contemplated under Section 249(4)(b) of the Act, therefore, our order passed while disposing of the aforementioned quantum appeal shall apply mutatis mutandis for the purpose of disposing of the present appeals wherein the impugned penalties imposed by the AO had been upheld by the CIT(A) by dismissing the respective appeals as infructuous.
20. Accordingly, as the quantum appeal has been set aside by us to the file of the CIT(A), the present appeals are also set aside on the same terms to his file.
21. In the result, both the appeals in ITA No.808 & 809/Hyd/2026 filed by the assessee are allowed for statistical purposes in terms of our aforesaid observations.
22. Ex-consequenti, all the three appeals filed by the assessee are allowed for statistical purposes in terms of our aforesaid observations.
Order pronounced in the open court on 21st August, 2026.
