prpri Revision petition to CIT maintainable despite dismissal of first appeal at CIT(A) at admission stage Revision petition to CIT maintainable despite dismissal of first appeal at CIT(A) at admission stage

Case Law Details

Case Name : S. Ravinder Vs CIT (Telangana High Court)
Appeal Number : Write Petition No. 5974 of 2005
Date of Judgement/Order : 25/06/2021
Related Assessment Year :

S. Ravinder Vs CIT (Telangana High Court)

It is also to be noted that Section 251(1)(a) of the Act stipulates that an appeal filed before the appellate authority to be considered as disposed, would require such order under challenge to be either confirmed, reduced, enhanced or annulled. It goes without saying that the disposal is by considering the merits of the matter. In the facts of the present case, the order passed by the 2nd respondent, in rejecting the appeal as void ab initio, cannot be considered as disposing the appeal by any of the above modes specified. Thus, it cannot be said that the order of assessment of the 3rd respondent is “subject of an appeal” placing embargo/ousting the jurisdiction of the 1st respondent under Section 264(4) of the Act.

Further, the Circular No.367, issued by the Central Board of Direct Taxes, also supports the contention of the petitioner. It is trite law that the Circulars issued by the CBDT are binding on the Revenue, in view of the authoritative pronouncement of the Apex Court in COMMISSIONER OF CUSTOMS V/s. INDIAN OIL CORPORATION LIMITED5 . The Supreme Court after examining the entire case law, culled out the following principles: (i) Although a circular is not binding on a court or an assessee, it is not open to the Revenue to raise a contention that it is contrary to a binding circular by the Board. When a circular remains in operation, the Revenue is bound by it and cannot be allowed to plead that it is not valid nor that it is contrary to the terms of the Statute. (ii) Despite the decision of this Court, the Department cannot be permitted to take a stand contrary to the instructions issued by the Board. (iii) A show cause notice and demand contrary to existing circulars of the Board are ab initio bad.

Having regard to the position of law elucidated above, this Court is of the considered view that the impugned order passed by the 1st respondent under Section 246(6) of the Act, refusing to exercise Revisional power conferred on him under Section 264(4) of the Act, on the ground that the order of the 3rd respondent dt.31.03.2003 was “subject of an appeal” (underlining supplied by the Court) before the 2nd respondent, cannot be sustained.

Accordingly, the Writ Petition is allowed; the impugned order dt.30.09.2004, passed by the 1st respondent, is set aside; the matter is remitted back to the 1st respondent (or the concerned Commissioner, in view of passage of time and change of jurisdiction); the 1st respondent (or the concerned Commissioner) is directed to dispose of the Revision petition filed by the petitioner within a period of three (3) months from the date of receipt of a copy of this order, by passing a reasoned order in accordance with law, after affording personal hearing to the petitioner and communicate the same to the petitioner.

FULL TEXT OF THE HIGH COURT ORDER /JUDGEMENT

In this writ petition, the petitioner assails the correctness of the proceeding, dt.30.09.2004, passed by the 1st respondent, under Section 264(6) of the Income-tax Act, 1961 (for short, ‘the Act’), for the Assessment Year 1997-98.

2. Heard Sri A.V.Siva Karthikeya, learned Counsel for the petitioner, and Sri J.V.Prasad, learned Senior Standing Counsel, appearing on behalf of the respondents.

3. The petitioner contends that the 3rd respondent passed an Order of Assessment dt.31.03.2003, for the Assessment Year 1997-98 under Section 144 read with Section 147 of the Act, on the father of the petitioner, represented by the petitioner as the son and legal heir; that aggrieved by the said Assessment Order, the petitioner had filed an appeal before the 2nd respondent, as provided under the Act; the said appeal filed by the petitioner was dismissed by the 2nd respondent, by order dt.09.07.2003, holding that the appeal filed was void ab initio and cannot be admitted, since the appellant had failed to pay the admitted tax due, as per the return of income filed voluntarily on 31.03.2003; and the 2nd respondent, thus, held that no adjudication on merits of the appeal, is warranted, having regard to the express provisions of Section 249(4)(a) of the Act.

4. Petitioner further contends that, upon the rejection of the appeal by the 2nd respondent (as cannot be admitted), the petitioner invoked the power of Revision conferred on the 1st respondent under Section 264 of the Act, and filed an application on 29.03.2004, seeking Revision of the assessment order dt. 31.03.2003 made by the 3rd respondent. In the said Revision preferred, the petitioner sought for reconsideration of the issue relating to proceeds from sale of agricultural land by the petitioner’s father being subjected to Long Term Capital Gains, applying the provisions of Section 54-F of the Act.

5. The 1st respondent by order dt.30.09.2004, rejected the said Revision application filed by the petitioner. In the order, the 1st respondent stated the reason for such rejection as, since, the petitioner/assessee filed an appeal against the Assessment Order of the 3rd respondent, dt.31.03.2003 before the 2nd respondent under Section 246 of the Act, and the 2nd respondent having dismissed the same by order dt.09.07.2003, the provisions of Section 264(4) of the Act would stand attracted. According to the 1st respondent, as per the mandate of provisions of Section 264(4) of the Act, the 1st respondent shall not exercise the power of revision in respect of an order that has been made “subject of an appeal” to the Commissioner of Appeals or the Appellate Tribunal. Thus, the 1st respondent rejected the Revision petition without admitting the same.

6. The petitioner contends that the rejection of the Revision petition by the 1st respondent, is without proper appreciation and understanding of the scope and application of provisions of Section 264(4) of the Act; that since the appeal filed by the petitioner to the 2nd respondent having not been adjudicated, on merits and having been rejected as void ab initio due to non-payment of admitted tax due, the same cannot be considered as an “appeal adjudicated” under Section 251 of the Act; and also that the rejection of the revision petition by the 1st respondent is also contrary to Circular No.367, dt.26.05.1983, issued by the Central Board of Direct Taxes, wherein it has been clarified that “where the appeal was dismissed on the ground that the appeal was incompetent”, the same cannot be said to have made “subject of an appeal” under Section 251(1) or Section 254(1) of the Act, thereby, attracting provisions of Section 264(4)(c) of the Act preventing/precluding the exercise of powers by the 1st respondent under Section 264 of the Act.

7. On the other hand, learned Senior Standing Counsel placing reliance on the counter-affidavit supports the impugned order passed by the 1st respondent under Section 264(6) of the Act and seeks for sustaining the same.

8. We have given due consideration to the submissions made by the learned counsel appearing for the parties.

9. The short question that falls for our consideration in this writ petition is “Whether the rejection of the appeal by the 2nd respondent as void ab initio for having been filed without complying with mandatory provisions of Section 249(4)(a) of the Act, can be considered as a matter having been “subject of an appeal”, to oust or prevent the 1st respondent from exercising the power of Revision conferred on him under Section 264 of the Act?”

10. Admittedly, in the facts of the present case, the appeal filed by the petitioner against the order of the 3rd respondent dt.31.03.2003, had been filed without payment of admitted tax due as per the return of income. Since, the admitted tax due is required to be paid for filing the appeal before the 2nd respondent for it to be entertained, and the appeal having been filed by the petitioner without making such payment, the said appeal, even if filed, cannot be considered as a validly presented appeal.

It is for the said reason, the 2nd respondent, without adjudicating the matter on merits, has rejected the appeal as void ab initio, though by using the term as “dismissed”.

11. Any appeal, which is not accompanied either by the requisite Court fee, or any other mandatory payment required to be made as per the provisions of the relevant Statute, cannot be considered as a validly presented appeal, and such appeal would be non-est in the eye of law. Once an appeal is considered as non-est in the eye of law, any order impugned in such appeal cannot be considered as “subject of an appeal”, as there is no ascertainment or adjudication of the issues raised in the appeal on its merits.

12. The expression “subject of an appeal” as used in Section 264 of Act, is analogous to the language used in Section 34 of Madras General Sales Tax Act, 1959 (for short, ‘the Sales Tax Act’), dealing the power of review conferred on Board of Revenue. The Hon’ble Supreme Court in BOARD OF REVENUE V/s. RAJ BROTHERS AGENCIES1 , while construing the meaning of the expression “the order has been made subject of an appeal” as used in the Sales Tax Act, in deciding the question, whether an appeal against an order, which was dismissed, as having been barred by time, can be considered as an order, which had been subject of an appeal, held that –

“This question does present some difficulty. But in view of the circumstances, which we shall presently set out, we will not be justified in examining the correctness of the conclusion reached by the High Court. As far back as 1963 the scope of Section 34 came up for consideration before the Madras High Court in ERODE YARN STORES V/s. STATE OF MADRAS2 . Therein, the assessee contended that once an appeal is filed before a Tribunal, the Board is precluded from invoking its power under Section 34. The State of Madras controverted that position.

Therein the State contended that before the jurisdiction of the Board to exercise its power under Section 34 can be held to be taken away, the appeal filed before the Tribunal must have been an effective appeal and that an appeal which was dismissed on the ground of limitation is not an effective appeal. The High Court of Madras accepted that contention and decided the case in favour of the State. In arriving at the conclusion that the words “subject of an appeal” mean subject of an “effective appeal”, the High Court took into consideration the mischief that would otherwise arise, namely, all that an assessee, who wants to stifle the Board’s suo motto power of revision, has to do is to file a time-barred appeal and get it dismissed. It was because of that difficulty the High Court in Erode Yarn Stores’ case came to the conclusion that the expression “the order which has been the subject of an appeal” as meaning “subject of an effective appeal”.”

13. In CHIRANJILAL DAGA V/s. COMMISSIONER OF INCOME TAX3 , the Madras High Court, while construing Section 33A of the Indian Income Tax Act, 1922, which corresponds to Section 264 of the Act, expressed the view that an order is made the “subject of an appeal” within the meaning of Clause (c) of the first proviso to Sub-section (2) of Section 33A, only when it is the subject-matter of an “effective” appeal. The Madras High Court also held that if an appeal to the Appellate Tribunal under Section 33 is not admitted and is disposed of on the ground that it was filed after the prescribed time, the order cannot be said to be the “subject of an appeal”.

14. The Kerala High Court in C.C. JAYARAM V/s. CIT4 also expressed a similar view and held that-

“There is no effective disposal of the petitioner’s appeal either by the Commissioner of Income Tax (Appeals) or by the Income Tax Appellate Tribunal. In exhibit P-2, the Commissioner of Income Tax (Appeals) refused to entertain the appeal filed by the petitioner on the ground that the petitioner failed to pay the admitted tax and the said decision was confirmed by exhibit P-3 order of the Appellate Tribunal, so much so that there is no effective disposal of the petitioner’s appeal and, consequently, the first respondent has jurisdiction to revise the order which has been made the subject of appeal before the Appellate Tribunal.”

15. It is also to be noted that Section 251(1)(a) of the Act stipulates that an appeal filed before the appellate authority to be considered as disposed, would require such order under challenge to be either confirmed, reduced, enhanced or annulled. It goes without saying that the disposal is by considering the merits of the matter. In the facts of the present case, the order passed by the 2nd respondent, in rejecting the appeal as void ab initio, cannot be considered as disposing the appeal by any of the above modes specified. Thus, it cannot be said that the order of assessment of the 3rd respondent is “subject of an appeal” placing embargo/ousting the jurisdiction of the 1st respondent under Section 264(4) of the Act.

16. Further, the Circular No.367, issued by the Central Board of Direct Taxes, also supports the contention of the petitioner. It is trite law that the Circulars issued by the CBDT are binding on the Revenue, in view of the authoritative pronouncement of the Apex Court in COMMISSIONER OF CUSTOMS V/s. INDIAN OIL CORPORATION LIMITED5 . The Supreme Court after examining the entire case law, culled out the following principles:

(i) Although a circular is not binding on a court or an assessee, it is not open to the Revenue to raise a contention that it is contrary to a binding circular by the Board. When a circular remains in operation, the Revenue is bound by it and cannot be allowed to plead that it is not valid nor that it is contrary to the terms of the Statute.

(ii) Despite the decision of this Court, the Department cannot be permitted to take a stand contrary to the instructions issued by the Board.

(iii) A show cause notice and demand contrary to existing circulars of the Board are ab initio bad.

(iv) It is not open to the Revenue to advance an argument or file an appeal contrary to the circulars.

17. Having regard to the position of law elucidated above, this Court is of the considered view that the impugned order passed by the 1st respondent under Section 246(6) of the Act, refusing to exercise Revisional power conferred on him under Section 264(4) of the Act, on the ground that the order of the 3rd respondent dt.31.03.2003 was “subject of an appeal” (underlining supplied by the Court) before the 2nd respondent, cannot be sustained.

18. Accordingly, the Writ Petition is allowed; the impugned order dt.30.09.2004, passed by the 1st respondent, is set aside; the matter is remitted back to the 1st respondent (or the concerned Commissioner, in view of passage of time and change of jurisdiction); the 1st respondent (or the concerned Commissioner) is directed to dispose of the Revision petition filed by the petitioner within a period of three (3) months from the date of receipt of a copy of this order, by passing a reasoned order in accordance with law, after affording personal hearing to the petitioner and communicate the same to the petitioner.

19. Pending miscellaneous petitions, if any, shall stand closed in the light of this final order. No order as to costs.

Note

1 (1973) 31 STC 434 SC.

2 (1963) 14 STC 724 Mad.

3 (1978) 113 ITR 363 Mad.

4 (1994) 207 ITR 662 Ker.

5 (2004) 267 ITR 272 SC = (2004) 3 SCC 488

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