Case Law Details
Nine Globe Industries Pvt. Ltd Vs ACIT (ITAT Mumbai)
n the case of Nine Globe Industries Pvt. Ltd Vs ACIT, the Income Tax Appellate Tribunal (ITAT) in Mumbai delivered a significant ruling regarding the applicability of Section 249(4) of the Income Tax Act, 1961. The core issue was whether Section 249(4), which requires the payment of advance tax for an appeal to be considered valid, applies in reassessment proceedings where no advance tax liability exists. The ITAT ruled that this provision does not apply in such cases, providing clarity on a nuanced aspect of tax law.
Background and Initial Proceedings
For the assessment year 2012-13, Nine Globe Industries Pvt. Ltd. filed its Return of Income (RoI) on September 29, 2012, declaring a total income of Rs. 51,80,800. The case was initially taken up for scrutiny and no additions were made at that time. However, the case was reopened based on information from the Deputy Director of Income Tax (Investigation)-2, Surat, which suggested potential discrepancies involving accommodation entries.
The assessee did not file a return within the stipulated 30-day period following the reassessment notice. Consequently, on November 12, 2019, the assessee was issued a show-cause notice regarding a proposed addition of Rs. 14,31,25,612 under Section 144 of the Act for unexplained expenditure. In response, the assessee filed a revised RoI under Section 148 on November 19, 2019, declaring a slightly adjusted total income. Despite this, the Assessing Officer (AO) made an addition of Rs. 14,31,25,612 on December 23, 2019, under Section 69C for unexplained expenditure.
Appeal to the Commissioner of Income Tax (Appeals)
The assessee subsequently appealed to the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi. The CIT(A) dismissed the appeal on the grounds of non-compliance with Section 249(4), which mandates that an appellant must pay the advance tax before the appeal is entertained. The CIT(A) noted the appellant’s failure to provide proof of advance tax payment despite being asked to do so.
ITAT’s Review and Ruling
The ITAT reviewed the case, including the procedural history and the grounds for the CIT(A)’s dismissal. It was observed that the original scrutiny assessment for the year 2012-13 had been completed without any changes to the declared income. The assessed income had already been subject to advance tax, and this was not disputed during the hearing.
The ITAT emphasized that the reassessment was initiated for the benefit of the Revenue and was not due to any default or omission on the part of the assessee regarding advance tax payments. As such, the Tribunal concluded that Section 249(4)(b) does not apply in reassessment proceedings where the issue of advance tax is irrelevant.
Conclusion
The ITAT’s ruling in the Nine Globe Industries Pvt. Ltd Vs ACIT case provides crucial clarification on the application of Section 249(4) in reassessment proceedings. By determining that this provision does not apply when there is no advance tax liability.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
This appeal by the assessee for assessment year 2012-13 can be disposed of on a short count.
2. The assessee filed its Return of Income (RoI) on 29.09.2012 for assessment year 2012-13 declaring a total income of Rs.51,80,800/-. The case was taken up for scrutiny and there were no additions made. Subsequently, the case was reopened on the basis of information received from DDIT (Inv.)-2, Surat. However, assessee did not file return within 30 days of the notice issued and hence, by order dated 12.11.2019 the assessee was required to show cause why an addition of Rs.14,31,25,612/- be not made under Section 144 of the Income Tax Act, 1961 (‘Act’ for short) on account of sale and purchase made through accommodation entries. In response to the said notice, assessee filed RoI under Section 148 of the Act on 19.11.2019 declaring a total income of Rs.51,80,796/-. The appellant was required to furnish requisite details and upon consideration of the same, the AO by an order dated 23.12.2019 made addition of Rs.14,31,25,612/- on account of unexplained expenditure under Section 69C of the Act.
3. In appeal, the Commissioner of Income Tax (Appeals), NFAC, Delhi (‘CIT(A)’ for short) found that the appellant has not made compliance with the provisions of Section 249(4) of the Act. The CIT(A) in para 4.4 of his order has observed thus:-
“4.4 Though the appellant has not offered ‘YES’ comments at sl. No. 9 of Form-35, it was asked vide DIN & letter no. ITBA/NFAC/F/17/2023-24/1054461517(1) dated 19.07.2023 to intimate whether it has made payment of tax – which includes element of advance tax also-in compliance to notice of demand u/s 156 of the Act but the appellant made no compliance to this letter.”
4. In that view of the matter, the appeal came to be dismissed on the ground that the appellant has not filed RoI as well as not paid an amount equal to the amount of advance tax, which was payable by it. It can thus be seen that the CIT(A) had no occasion to examine the merits of the impugned additions.
5. We have heard parties. Perused record. It can be seen that the case was initially selected for scrutiny, which was completed on 29.03.2015, and there was no change in the returned income of Rs.51,80,800/- in the absence of any additions being made. It is a matter of record that originally the return was filed for the relevant year under consideration on 29.09.2012. It was not disputed during the course of hearing that the advance tax has per the assessed income of Rs.51,80,800/- has been paid. Here is the case of reassessment which is done for the benefit of Revenue. Hence, in our view, clause (b) of Section 249(4) of the Act will not apply as there is no question of paying advance tax in reassessment proceedings, even though assessee did not file RoI.
6. In the said circumstances, we find that the impugned order dismissing the appeal on the ground of non-compliance of Section 249(4) of the Act cannot be sustained and deserves to be set-aside.
7. In the result, the appeal is partly allowed. The impugned order dated 14.09.2023 is hereby set-aside. The appeal filed by the assessee is restored to the file of CIT(A) for disposal according to law. Needless to mention that we have not examined the merits of the impugned addition and the rival contentions in that regard are left open.
Order pronounced in the open court on 16/04/2024.
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