SUNIL MANTRIL REALITY LTD, MUMBAI V. ACIT CEN CIR -29, MUMBAI

ITA 3252/MUM/2010

• Counselvise Citation: 325219914 RSA 2010
• Duration Of Justice: 1 year(s) 1 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-06-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: J
• Next Hearing Date: 23-06-2011
• Assessment Year: 2008-2009
• Appeal Filed On: 26-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K SINGH
• Assessee Lawyers: NARAYAN ATAL
• Keywords: Search and seizure; Right to appeal

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES J, MUMBAI BEFORE SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER AND SHRI V. DURGA RAO, JUDICIAL MEMBER ITA NO. 3252/MUM/2010 ASSESSMENT YEAR 2008-2009 M/S SUNIL MANTRI REALITY LTD., GA-1, COURT CHAMBERS, 35 NEW MARINE LINES, MUMBAI-400 020. PAN: AADCN 6966 F VS. ASST. COMMISSIONER OF INCOME- TAX, CENTRAL CIRCLE-29, MUMBAI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI NARAYAN ATAL , A.R. RESPONDENT BY : SHRI S.K. SINGH, D.R. O R D E R PER PRAMOD KUMAR: 1. BY WAY OF THIS APPEAL, THE ASSESSEE APPELLANT H AS CALLED INTO QUESTION CORRECTION OF LD. CIT (A) ORDER DATED 7 TH MAY, 2009 IN THE MATTER OF PENALTY U/S 221(1) R.W.S 140A OF THE INCOME TAX ACT, 1961 F OR THE ASSESSMENT YEAR 2008-2009. 2. GRIEVANCES RAISED BY THE ASSESSEE ARE AS FOLLOWS :- 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - 40, MUMBAI (HEREAFTER REFERRED TO AS CIT (A) ERRED IN DISMISSI NG THE APPEAL IN LIMINE ON THE GROUND THAT IT IS HIT BY THE PROVISIO N OF SEC. 249(4) OF THE IT ACT, 1961, SINCE THE ENTIRE TAX ON SELF ASSE SSMENT AS PER THE RETURN OF INCOME FILED WAS NOT PAID. ITA NO 3252/MUM/2010 A.Y.2008-2009 2 YOUR APPELLANT SUBMITS THAT THE PROVISIONS OF SEC. 249(4) CANNOT BE APPLICABLE PARTICULARLY IN CASE OF APPEAL FILED AGA INST PENALTY U/S. 221(1) R.W.S. 140A OF THE ACT. YOUR APPELLANT FURTHER SUBMITS THAT THE PROVISIONS OF SEC. 249(4) ARE RELEVANT ONLY IN CONTEXT OF AN APPEAL WHICH IS RELA TABLE TO ASSESSMENT OF INCOME AND AGAINST ORDERS IMPOSING PE NALTIES IN CONNECTION WITH ASSESSMENT OF INCOME. 2. THE LEARNED CIT (A) ERRED IN NOT APPRECIATING TH E FACT THAT THE APPEAL HAS BEEN FILED AGAINST PENALTY FOR NON PAYMENT OF S ELF ASSESSMENT TAX ITSELF AND THAT SUCH APPEAL IS MAINTAINABLE U/S 246A(1)(J) OF THE IT ACT. YOUR APPELLANT SUBMITS THAT THE VIEW TAKEN BY THE C IT (A) IS NOT IN ACCORDANCE WITH THE INTENT AND PURPOSE OF SEC. 249( 4) OF THE ACT AND FURTHER PROVISION OF SEC. 249(4) DO NOT EXTEND TO A N APPEAL WHICH IS DIRECTED AGAINST PENALTY U/S 221 FOR BEING AN ASSES SEE IN DEFAULT. IN RESPECT OF NON PAYMENT OF SELF ASSESSM ENT TAX. 3. THE CIT (A) ERRED IN NOT ADJUDICATING THE APPEAL ON THE MERITS OF THE CASE, AND THEREBY CONFIRMING THE ORDER OF PENALTY P ASSED U/S 221(1) R.W.S 140A OF THE ACT LEVYING A PENALTY OF RS.1,00, 00,000/-. YOUR APPELLANT SUBMITS THAT ON THE FACTS AND CIRCUM STANCES OF THE CASE, THE PENALTY LEVIED IS NOT ON GOOD AND SUFFICI ENT REASONS AND THEREFORE OUGHT TO BE DELETED. YOUR APPELLANT FURTHER SUBMITS THAT THE LEVY OF PEN ALTY OF RS. 1,00,00,000/- WILL CAUSE GREAT HARDSHIP TO THE APPE LLANT AND IS NOT JUST AND FAIR ON THE PART OF ACIT TO LEVY THE PENAL TY. 4. THE LEARNED CIT (A) FAILED TO EXAMINE THE CONCLUSIO N ARRIVED AT BY THE ACIT THAT THE NON PAYMENT OF SELF ASSESSMENT TAX BY THE APPELLANT WAS INTENTIONAL AND DELIBERATE. YOUR APPELLANT SUBMITS THAT IT WAS THE INTENTION OF THE APPELLANT TO PAY THE TAXES IN FULL AND IT WAS ONLY DUE TO ABNORM AL AND UNFORESEEN CIRCUMSTANCES AFFECTING THE ENTIRE INDUS TRY IN PARTICULAR AND BUSINESS IN GENERAL THAT THE FILL AMOUNT OF ASS ESSMENT TAX COULD NOT BE PAID AT THE TIME OF FILING OF RETURN OF INCO ME. 3. BRIEFLY STATED, THE RELEVANT FACTS OF THE MATERI AL FACTS ARE LIKE THIS. THE ASSESSEE IS A BUILDER ENGAGED IN DEVELOPMENT OF RES IDENTIAL AND COMMERCIAL ITA NO 3252/MUM/2010 A.Y.2008-2009 3 PROPERTY. ON 9 TH JULY, 2008, A SEARCH AND SEIZURE OPERATION WAS CAR RIED OUT AT ASSESSEES PREMISES. SUBSEQUENTLY RETURN OF INC OME WAS FILED FOR THE A.Y. 2008-2009 DECLARING A TAXABLE INCOME OF RS. 35,50,4 4,715/-, BUT, AS AGAINST TAX DUE AMOUNTING TO RS.13,39,36,817/-, THE ASSESSEE HAD PAID TAX, INCLUDING TDS, AMOUNTING TO RS. 7,02,05,803/-. ACC ORDINGLY, AN AMOUNT OF RS. 6,37,31,014/- REMAINED UNPAID OUT OF SELF-ASSES SMENT TAXES. IT WAS IN THIS BACK DROP THAT A NOTICE U/S 221(1) R.W.S. 140A DATED 17 TH MARCH, 2009 WAS SERVED UPON THE ASSESSEE REQUIRING THE ASSESSEE TO SHOW CAUSE AS TO WHY PENALTY SHOULD NOT BE LEVIED FOR NON-PAYMENT OF SELF-ASSESSMENT TAXES. IT WAS SUBMITTED BY THE ASSESSEE THAT THE PARTIAL N ON PAYMENT OF SELF ASSESSMENT TAXES IS DUE TO RECESSION AND THE TURBU LENT TIME THAT REAL ESTATE INDUSTRY IS PASSING THROUGH, AND THE LIQUIDITY PROB LEMS OF THE ASSESSEE. IT WAS ALSO SUBMITTED THAT THE SALES EFFECTED BY THE A SSESSEE WAS NOT EVEN ENOUGH FOR MEETING DAY TO DAY COSTS AND THAT THE AS SESSEE WAS DEPENDING ON BARROWED FUNDS, WHICH IN ANY WAY ARE NOT COMING EASILY, TO MEET OPERATIONAL COSTS. IT WAS ALSO STATED THAT THE EFF ORTS ARE BEING MADE TO OBTAIN DISBURSEMENT OF INSTITUTIONAL BARROWINGS, A ND AS SOON AS ASSESSEE IS ABLE TO GET THE SAME, SELF-ASSESSMENT TAX SHORTFALL WILL BE MADE GOOD. THE ASSESSEE FURTHER POINTED OUT THAT IN VIEW OF THE PR OBLEMS BEING FACED BY REAL ESTATE INDUSTRY, GOVERNMENT HAS EXTENDED HELPI NG HAND BY PROVIDING RESCHEDULING AND RESTRUCTURING OF ADVANCES GIVEN TO REAL ESTATE INDUSTRY. IN EFFECT, THUS, IT WAS CONTENDED THAT THE ASSESSEE HA S NOT BEEN ABLE TO PAY SELF-ASSESSMENT TAX DUE TO LIQUIDITY PROBLEMS AND D IFFICULTIES BEING FACED BY MOST OF PERSONS IN THE LINE OF BUSINESS ACTIVITY. THESE SUBMISSIONS HOWEVER DID NOT IMPRESS THE ASSESSING OFFICER. HE WAS OF T HE VIEW THAT THE ASSESSEE ITA NO 3252/MUM/2010 A.Y.2008-2009 4 WAS A DEFAULTER IN PAST AS WELL AND THAT IT IS ON LY DUE TO SEARCH AND SEIZURE OPERATIONS CARRIED OUT THAT THE ASSESSEE HAS FILED RETURN AND OFFERED THE INCOME TO TAX. IT WAS ALSO NOTED THAT THE ASSESSEE HAS RECEIVED SALE PROCEEDS OF RS.110,01,08,699/- FROM SEPTEMBER 2007 TO MARCH 2008 AND YET THE ASSESSEE HAS NOT GIVEN ANY EXPLANATION AS T O WHY SELF-ASSESSMENT TAX HAS NOT BEEN FULLY PAID. THIS LAPSE, ACCORDING TO THE ASSESSING OFFICER, CLEARLY INDICATED INTENTIONAL DISREGARD OF STATUTOR Y OBLIGATION BY THE ASSESSEE. THE ASSESSING OFFICER FURTHER NOTED THAT THE ASSESSEE HAS ALSO INVESTED RS.6.00 CRORES IN MUTUAL FUNDS AND HAD A C ASH BALANCE OF RS.84.26 CRORE AS AT THE END OF THE YEAR AND, THEREFORE, THE PLEA OF LIQUIDITY CRISIS, WHICH HAS BEEN MADE OUT BY THE ASSESSEE, IS DEVOID OF ANY SUBSTANCE. THUS THE ASSESSING OFFICER THUS PROCEEDED TO IMPOSE PENA LTY OF RS. 1.00 CRORE FOR NON-PAYMENT OF SELF-ASSESSMENT TAX IN TIME. AGGRIE VED BY THE ORDER OF ASSESSING OFFICER ASSESSEE CARRIED THE MATTER IN AP PEAL BEFORE THE LD. CIT (A) BUT WITHOUT ANY SUCCESS. THE LD. CIT (A) WAS OF TH E VIEW THAT IN THE LIGHT OF PROVISIONS OF SECTION 249(4)(A) THE APPEAL ITSELF IS NOT MAINTAINABLE AS THE ASSESSEE HAS NOT PAID THE SELF-ASSESSMENT TAXES. I T WAS OBSERVED THAT THE PAYMENT OF SELF-ASSESSMENT TAX IS A CONDITION PRECE DENT FOR FILING IN APPEAL AND SINCE THE ASSESSEE HAS NOT PAID THE SELF-ASSESS MENT TAX THE APPEAL IS NOT MAINTAINABLE. THE LD. CIT (A), THEREFORE, SUMM ARILY DISMISSED THE APPEAL ON THE GROUND OF NON-MAINTAINABILITY. THE A SSESSEE IS NOT SATISFIED BY THE STAND SO TAKEN BY THE LD. CIT (A) AND IS IN APPEAL FURTHER BEFORE US. 4. SHRI ATAL, LEARNED COUNSEL FOR THE ASSESSEE SUBM ITS THAT THE INTERPRETATION TO SECTION 249(4), AS CANVASSED BY T HE LD. CIT (A), WILL RENDER ITA NO 3252/MUM/2010 A.Y.2008-2009 5 THE RIGHT TO APPEAL AGAINST PENALTY U/S 221(1) R.W. S. 140A NUGATORY AND REDUNDANT. HE SUBMITS THAT THE VERY QUESTION OF TH IS PENALTY ARISES WHEN THE ASSESSEE IS UNABLE TO PAY SELF-ASSESSMENT TAXES AND IF ASSESSEE IS RIGHT TO APPEAL AGAINST THE SAID PENALTY IS TO BE MADE AS CONTINGENT UPON PAYMENT OF SELF-ASSESSMENT TAXES. THE ASSESSEE WIL L NOT BE ABLE TO FILE APPEAL TILL THE SELF-ASSESSMENT TAXES ARE PAID, AND ONCE THE TAXES ARE SO PAID OBVIOUSLY THERE CANNOT BE A SITUATION IN WHICH PENA LTY U/S 221(1) R.W.S 140A IS IMPOSED. IT IS THUS SUBMITTED THAT THE LD. CIT (A) WAS CLEARLY IN ERROR IN PROCEEDING ON THE BASIS THAT PAYMENT OF SE LF-ASSESSMENT TAXES ARE A CONDITION PRECEDENT FOR FILING OF APPEAL AGAINST PE NALTY U/S 221(1) ON ACCOUNT OF NON-PAYMENT OF SELF-ASSESSMENT TAXES. OU R ATTENTION IS ALSO INVITED TO THE DECISION OF A COORDINATE BENCH OF TH IS TRIBUNAL IN THE CASE OF SATYAM ENTERPRISES VS. JCIT (1 SOT 675), WHEREIN DEALING WITH A MATERIAL OF IDENTICAL SITUATION THE COORDINATE BENCH HAS HEL D THAT PAYMENT OF SELF- ASSESSMENT TAXES IS NOT NECESSARY FOR FILING OF APP EAL AGAINST PENALTY U/S 221(1) IN CONNECTION WITH NON-PAYMENT OF SELF-ASSES SMENT TAXES. IT IS THEN CONTENDED THAT ON EVEN MERITS ASSESSEE HAS REASONAB LE GROUNDS FOR NON- PAYMENT OF TAXES IN AS MUCH AS ASSESSEE WAS FACING A GENUINE FINANCIAL HARDSHIP AT THE RELEVANT POINT OF TIME. OUR ATTENT ION IS INVITED TO ASSESSEES CONTENTION THAT SALE PROCEEDS WERE HARDLY ENOUGH TO MEET DAY TO DAY COSTS OF THE ASSESSEES OPERATIONS AND THAT THE ASSESSEE WAS FACING SERIOUS LIQUIDITY CRUNCH. IT IS ALSO SUBMITTED THAT THE FA CT THAT THE ASSESSEE HAD ALREADY PAID UP A SUBSTANTIAL PART OF THE SELF-ASSE SSMENT TAXES SHOWS THAT ASSESSEE WAS SERIOUS ABOUT THE FULFILLING HIS TAX O BLIGATIONS. LEARNED COUNSEL THEN SUBMITTED THAT THE RELATIONSHIP BEING SOUGHT TO BE PROJECTED IN ITA NO 3252/MUM/2010 A.Y.2008-2009 6 SEARCH AND SEIZURE OPERATIONS BEING CARRIED OUT AGA INST THE ASSESSEE AND THE FILING OF RETURN IS WHOLLY IRRELEVANT AND DEVOI D OF ANY BASIS. AS REGARDS THE INVESTMENTS IN MUTUAL FUNDS, LEARNED COUNSEL FO R THE ASSESSEE SUBMITS THAT THESE INVESTMENTS IN MUTUAL FUNDS WERE FOR THE PURPOSE OF PROVIDING COLLATERAL SECURITY AT THE INSTANCE OF THE BANK. I T IS FURTHER CONTENDED THAT THE FACT THAT THE REAL ESTATE INDUSTRY WAS PASSING THROUGH A DIFFICULT SITUATION AT THE RELEVANT POINT OF TIME IS WELL KNO WN, AND THAT IT WAS BECAUSE OF THESE DIFFICULTIES THE GOVERNMENT HAD TO TAKE SE VERAL MEASURES TO BAIL OUT THE INDUSTRY, INCLUDING DIRECTION TO THE BANKS TO R ESTRUCTURE THE LOANS AS MAY BE NECESSARY. LEARNED COUNSEL FINALLY POINTED OUT THAT ALL THESE SELF- ASSESSMENT TAXES HAVE SINCE BEEN PAID AND FILED THE DETAILS OF THESE PAYMENTS. TO SUM UP, ACCORDING TO THE LEARNED COUN SEL FOR THE ASSESSEE, THE NON-PAYMENT OF SELF-ASSESSMENT TAXES WAS NOT DU E TO GUILTY INTENTION OF THE ASSESSEE BUT DUE TO LIQUIDITY PROBLEMS WHICH TH E ASSESSEE WAS FACING AND AS SOON AS ASSESSEE WAS ABLE TO DO SO AS THE AS SESSEE HAS MADE PAYMENT OF SELF-ASSESSMENT TAXES. WE ARE, THUS, URG ED TO DELETE THE PENALTY ON MERITS. SHRI SINGH, LD. DEPARTMENTAL REPRESENTA TIVE FAIRLY ACCEPTS THAT SO FAR AS LEGAL ISSUE REGARDING NON-MAINTAINABILITY OF APPEAL IS CONCERNED THE SAME IS COVERED IN THE CASE OF SATYAM ENTERPRISES ( SUPRA) , EVEN AS HE DUTIFULLY RELIES UPON THE STAND OF THE LD. CIT (A). LEARNED DEPARTMENTAL REPRESENTATIVE, HOWEVER, SUBMITS THAT THE MATTER IS REQUIRED TO BE REMITTED TO THE FILE OF THE LD. CIT (A) FOR FRESH ADJUDICATI ON ON MERITS IN VIEW OF THE FACT THAT THE LD. CIT (A) HAS NO OCCASION TO DEAL W ITH THE CONTENTIONS WHICH HAVE BEEN RAISED ON MERITS AGAINST LEVY OF PENALTY ON THE FACT THAT OF CASE. IT IS CONTENTED THAT WHEN THE LD. CIT (A) HAD NO OPPOR TUNITY TO DEAL WITH THE ITA NO 3252/MUM/2010 A.Y.2008-2009 7 ISSUE REGARDING MERITS OF PENALTY BEING IMPOSED, RI GHT COURSE OF ACTION CAN ONLY BE WITH THE MATTER IS REMITTED FOR DEALING WIT H THE MERITS. 5. WE FIND THAT SO FAR AS THE QUESTION OF MAINTAINA BILITY OF APPEAL IS CONCERNED THE SAME IS COVERED IN FAVOUR OF THE ASSE SSEE BY THE DECISION OF COORDINATE BENCH IN THE CASE OF SATYAM ENTERPRISES ( SUPRA). WHILE DEALING WITH THIS ISSUE THE COORDINATE BENCH, SPEAKING THRO UGH ONE OF US (I.E., ACCOUNTANT MEMBER) INTER ALIA OBSERVED AS FOLLOWS:- 7. WHILE CONSIDERING THE SCOPE OF THE PROVISIONS O F S. 249(4) OF THE ACT, HON BLE KARNATAKA HIGH COURT, IN THE CASE OF T. GOVINDAPPA SHETTY VS. ITO & ANR. (1998) 144 C TR (KAR) 28 : (1998) 231 ITR 892 (KAR), HAS OBSERVED THAT 'S UB-S. (4) OF S. 249 HAS TO BE CONSTRUED IN THE BACKDROP OF THE R IGHT TO APPEAL PROVIDED TO THE ASSESSEE UNDER S. 249 OF THE ACT.. WHILE INTERPRETING THE SUB-S. (4) OF S. 249 OF THE ACT, THE COURT WILL HAVE TO KEEP IN MIND THE OBJECT OF SUB-S. (4) OF S. 249 AND ALSO THE RIGHT TO PREFER AN APPEAL GUARANTEED TO AN ASSESSEE'. HON BLE HIGH COURT FURTHER OBSERVED THAT, 'IN THA T VIEW OF THE MATTER, SUB-S. (4) HAS TO BE LIBERALLY CONSTRUED TO SERVE THE OBJECT OF THE RIGHT OF THE APPEAL PROVIDED TO AN AS SESSEE, AND NOT WITH A VIEW TO DEPRIVE THE RIGHT PROVIDED TO AN ASSESSEE TO PREFER AN APPEAL'. 8. LET US NOW COME BACK TO THE FACT SITUATION BEFO RE US. IN CASE AN ASSESSEE FILES AN IT RETURN BUT HAS NOT PAI D THE SELF- ASSESSMENT TAX, TWO SETS OF CONSEQUENCES FOLLOWSON E AS NORMAL COURSE OF ASSESSMENT AND THE OTHER AS A PENA L COURSE OF ACTION FOR NON-PAYMENT OF SELF- ASSESSMENT TAXES . THE NORMAL ASSESSMENT PROCEEDINGS CONTINUE WHETHER OR N OT THE SELF- ASSESSMENT TAX IS PAID, BUT IN ADDITION TO TH OSE PROCEEDINGS, THE AO MAY INITIATE PENALTY PROCEEDING S UNDER S. 221 FOR BEING AN ASSESSEE IN DEFAULT. THESE TWO PRO CEEDINGS ARE QUITE DISTINCT AND SEPARATE. THESE ARE IN NO WA Y INTERCONNECTED SAVE AND EXCEPT FOR THE FACT THAT PE NALTY ITA NO 3252/MUM/2010 A.Y.2008-2009 8 PROCEEDINGS ARE IN RESPECT OF THE SELF-ASSESSMENT T AX LIABILITY, BUT THEN THE NATURE OF LIABILITY IS NOT RELEVANT FO R THE PURPOSE OF PENALTY PROCEEDINGS UNDER S. 221 OF THE ACT. THE PENALTY UNDER S. 221 CAN BE IMPOSED FOR NON-PAYMENT OF ANY TAX IN RESPECT OF PAYMENT OF WHICH AN ASSESSEE IS IN DEFAU LT OR IS DEEMED TO BE IN DEFAULT. THE VERY NATURE OF PENAL P ROCEEDINGS UNDER S. 221 IS DIFFERENT FROM, AND HAS NOTHING TO DO WITH, THE ASSESSMENT PROCEEDINGS. AS FAR AS THE ASSESSMENT IS CONCERNED, THE ASSESSEE IS DEPRIVED OF HIS RIGHT TO APPEAL UNTIL AND UNLESS HE ATLEAST PAYS THE ADMITTED TAX LIABILI TY. THE RATIONALE FOR THIS SCHEME OF THINGS HAS BEEN SUMMED UP BY THE HON BLE KARNATAKA HIGH COURT IN GOVINDAPPA SHETTY S CASE (SUPRA) AS 'WHAT IS CONTEMPLATED BY CL. (A) OF SUB- S. (4) OF S. 249 IS THAT WHEN THERE IS AN UNDISPUTED LIABILITY, THE APPEAL IN RESPECT OF A DISPUTED LIABILITY CANNOT BE ADMITTED UNLESS THE ASSESSEE PAYS THE UNDISPUTED TAX LIABILITY'. THIS C LEARLY PROCEEDS ON THE PREMISES THAT THE DISPUTED TAX AND UNDISPUTED TAX PERTAIN TO THE SAME SET OF OR RELATE D SET OF PROCEEDINGS. HOWEVER, WHEN IT COMES TO THE MAINTAIN ABILITY OF AN APPEAL AGAINST PENALTY UNDER S. 221, IN OUR CONS IDERED VIEW, THE PAYMENT OF TAXES IN THE ASSESSMENT PROCEE DINGS IS NOT REALLY RELEVANT. IT IS SO FOR THE REASON THAT T HE PROCEEDINGS UNDER S. 221 ARE WHOLLY DISTINCT AND SEPARATE FROM THE ASSESSMENT PROCEEDINGS AND THESE PROCEEDINGS BELONG TO A DIFFERENT GENUS ALTOGETHER. IT IS A DIFFERENT KIND OF DISPUTE ON AS TO WHETHER THE ASSESSEE HAS GOOD AND SUFFICIENT REASONS FOR NOT PAYING THE TAXES. THE ADJUDICATION ON THE CORRE CTNESS OF LEVY OF PENALTY UNDER S. 221 HAS NOTHING TO DO WITH THE QUANTUM ASSESSMENT PROCEEDINGS OR EVEN PENALTIES IM POSABLE FOR CONCEALMENT OF INCOME AND FURNISHING OF INACCUR ATE PARTICULARS. 9. IN OUR CONSIDERED VIEW, IT IS NOTHING SHORT OF AN ABSURDITY TO DEMAND, AS A PRE-CONDITION FOR DETERMI NATION OF CORRECTNESS OF PENALTY FOR NON-PAYMENT OF ADMITTED TAXES, THAT THE ADMITTED TAXES BE PAID BY THE ASSESSEE. TH E ADVICE OF JUSTICE HAND, QUOTED WITH APPROVAL IN K.P. VARGHESE S CASE (SUPRA) BY HON BLE SUPREME COURT, THAT 'STATUTES ALWAYS HAVE SOME PURPOSE OR OBJECT TO ACCOM PLISH, WHOSE SYMPATHETIC AND IMAGINATIVE DISCOVERY IS THE SUREST GUIDE TO THEIR MEANING' DOES NOT GO ALONG WITH SUCH A MECHANICAL INTERPRETA TION OF ITA NO 3252/MUM/2010 A.Y.2008-2009 9 STATUTE. AS WE WILL NOW SEE, THE INTERPRETATION ADO PTED BY THE LEARNED CIT IS ALSO CLEARLY NOT UT RES MAGIS VALEAT QUAM PEREAT BECAUSE THE SAID INTERPRETATION DOES NOT MAKE THE A PPELLATE RIGHT IN THE STATUTE EFFECTIVE, RATHER IT RENDERS T HE SUCH RIGHT NUGATORY. LET US VISUALISE A SITUATION IN WHICH AN ASSESSEE HAS GOOD AND SUFFICIENT REASONS FOR NON-PAYMENT OF SELF - ASSESSMENT TAXES, BUT HE IS STILL IMPOSED PENALTY U NDER S. 221 FOR NON-PAYMENT OF SELF-ASSESSMENT TAXES. NOW, THE WORDS OF AO ARE NOT FINAL NOR ARE THEY SO SACROSANCT THAT EV EN AN APPEAL AGAINST THE SAME IS A MEANINGLESS FORMALITY, BUT THEN BEFORE THE ASSESSEE CAN GOT AN ADJUDICATION ON THE CORRECTNESS OF THIS PENALTY FROM THE APPELLATE AUTHORITY, HE HA S TO PAY THE SELF-ASSESSMENT TAXES FIRST. IT IS NOTHING SHORT OF AN ABSURDITY THAT AS A PRE-CONDITION OF ADJUDICATION AS TO WHETH ER OR NOT HIS REASONS FOR NOT PAYING THE TAXES ARE GOOD AND SUFFI CIENT, HE HAS TO PAY THE TAXES FIRST. LET US SAY HIS GENUINE FINANCIAL CONSTRAINTS ARE SO SEVERE THAT HE CANNOT PAY THE TA XES. CAN IT ADVANCE THE CAUSE OF JUSTICE OR SERVE THE OBJECT OF THE APPELLATE MECHANISM PROVIDED IN THE IT ACT, IF AN A SSESSEE IS TO BE DEPRIVED OF AN APPELLATE REMEDY IN SUCH A SIT UATION ? IF NOT, THEN WE HAVE TO SEEK GUIDANCE FROM THE WORDS O F HON BLE KARNATAKA HIGH COURT IN GOVINDAPPA SHETTY S CASE (SUPRA) TO THE EFFECT THAT '.. SUB-S. (4) HAS TO BE LIBERALLY CONSTRUED TO SERVE THE OBJECT OF THE RIGHT OF THE APPEAL PROVIDE D TO AN ASSESSEE, AND NOT WITH A VIEW TO DEPRIVE THE RIGHT PROVIDED TO AN ASSESSEE TO PREFER AN APPEAL'. IN THIS VIEW OF T HE MATTER, WE ARE OF THE CONSIDERED VIEW THAT THE PROVISIONS OF S . 249(4) ARE RELEVANT ONLY IN THE CONTEXT OF AN APPEAL WHICH IS RELATABLE TO THE ASSESSMENT OF INCOME, I.E., APPEALS AGAINST THE ASSESSMENT ORDERS AND AGAINST THE ORDERS IMPOSING PENALTIES IN CONNECTION WITH THE ASSESSMENT OF INCOME. VIEWED IN THE ABOVE PERSPECTIVE, THE LIMITATION UNDER S. 249(4) C AN APPLY ONLY IN A SITUATION IN WHICH THE ISSUE IN APPEAL HA S SOMETHING TO DO WITH THE RESULT OF ASSESSMENT OR PENALTY IN C ONNECTION WITH THE SAID RETURN. IN THE LIGHT OF THE ABOVE DIS CUSSIONS, IN OUR CONSIDERED VIEW, THE PROVISIONS OF S. 249(4) WI LL NOT APPLY IN A CASE WHERE THE APPEAL IS NOT RELATABLE TO THE ASSESSMENT OF INCOME, SUCH AS, PENALTY FOR BEING AN ASSESSEE I N DEFAULT UNDER S. 221. ITA NO 3252/MUM/2010 A.Y.2008-2009 10 10. FOR THE DETAILED REASONS SET OUT ABOVE, WE ARE OF THE CONSIDERED VIEW THAT THE CIT(A) SHOULD HAVE ADMITTE D THE APPEAL AND CONSIDERED THE SAME ON MERITS. WE, THERE FORE, DEEM FIT AND PROPER TO DIRECT THE CIT(A) TO DISPOSE OF THE APPEAL ON MERITS IN ACCORDANCE WITH THE LAW, BY WAY OF A SPEAKING ORDER AND AFTER GIVING DUE AND FAIR OPPORT UNITY OF HEARING TO THE ASSESSEE. ACCORDINGLY, THE MATTER ST ANDS RESTORED TO THE FILE OF THE CIT(A) WITH THE ABOVE D IRECTIONS. FOR THIS REASON, WE ALSO SEE NO NEED TO ADDRESS OURSELV ES TO MERITS OF THE CASE AND DECLINE TO DEAL WITH THE GROUNDS CH ALLENGING IMPOSITION OF PENALTY UNDER S. 221 ON MERITS 6. WE, THEREFORE, NO REASONS TO TAKE ANOTHER VIEW O F THE MATTER THAN THE VIEW SO TAKEN BY THE LEARNED COORDINATE BENCH. RES PECTFULLY FOLLOWING THE SAME, WE UPHOLD THE GRIEVANCES OF THE ASSESSEE AND HOLD THAT THE APPEAL AGAINST PENALTY U/S 221(1) R.W.S 140A IS MAINTAINAB LE IRRESPECTIVE OF PAYMENT OF SELF-ASSESSMENT TAXES AND THAT THE BAR U /S 249(4) WILL ONLY BE APPLICABLE WITH REGARD TO AN APPEAL WHICH IS RELATA BLE TO THE ASSESSMENT OF INCOME. HOWEVER, AS LEARNED DEPARTMENTAL REPRESENT ATIVE RIGHTLY CONTENDS, THE FIRST APPELLATE AUTHORITY HAD NO OCCASION TO DE AL WITH THE SUBMISSION OF THE ASSESSEE ON MERITS AND, THEREFORE, RIGHT COURSE OF ACTION WILL BE TO SEND THE MATTER BACK TO LD. CIT (A) FOR ADJUDICATION ON MERITS I.E., ON THE QUESTION AS TO WHETHER OR NOT OF THE FACTS AND CIRCUMSTANCES OF THIS CASE THE PENALTY U/S 221(1) R.W.S. 140A WAS INDEED LEVIABLE. AS WE ARE REMITTING THIS ISSUE TO THE FILE OF THE LD. CIT (A) WE DO NOT WANT TO MAKE ANY OBSERVATION ON THE SUBMISSIONS SO STRENUOUSLY MADE BEFORE US BY THE LE ARNED COUNSEL. SUFFICE TO SAY THAT WHILE DECIDING THE MATER AFRESH, LD. CI T (A) WILL DEAL WITH ALL THESE CONTENTIONS AND DECIDE THE MATTER IN ACCORDAN CE WITH THE LAW, BY WAY OF SPEAKING ORDER, IN A FAIR AND OBJECTIVE MANNER AND AFTER GIVING A ITA NO 3252/MUM/2010 A.Y.2008-2009 11 REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. WITH THESE DIRECTIONS THE MATTER IS STAND RESTORED TO THE FILE OF THE LD. CI T (A). 7. IN THE RESULT, THE APPEAL IS ALLOWED FOR STATIST ICAL PURPOSES. PRONOUNCED IN THE OPEN COURT TODAY ON 23 RD JUNE, 2011 IMMEDIATELY UPON CONCLUSION OF HEARING. SD/- SD/- V. DURGA RAO PRAMOD KUMAR JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED 24 TH JUNE, 2011. OKK* COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS)- 40, MUMBA I 4. COMMISSIONER OF INCOME TAX, CONCERNED 5. DEPARTMENTAL REPRESENTATIVE, BENCH J, MUMBAI TRUE COPY BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI