M/s Annapoorneshwari Investment, Bangalore V. DCIT, Bangalore

ITA 99/BANG/2016

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 6813 (ITAT-BANGALORE)
• Duration Of Justice: 3 year(s) 2 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-04-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2006-2007
• Appeal Filed On: 01-02-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR P V PRADEEP KUMAR
• Assessee Lawyers: V K GURUNATHAN
• Keywords: Set aside
• Section: 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, VICE PRESIDENT AND SHRI JASON P.BOAZ, ACCOUNTANT MEMBER ITA NO.99/BANG/2016 ASSESSMENT YEAR : 2006-07 M/S. ANNAPOORNESHWARI INVESTMENT, NO. 10/1, LAKSHMINARAYANA COMPLEX, PALACE ROAD, BANGALORE [PAN: AALFA0704E] VS. THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 2(2), BANGALORE APPELLANT RESPONDENT APPELLANT BY : SHRI V.K. GURUNATHAN, ADVOCATE RESPONDENT BY : DR. P.V. PRADEEP KUMAR, ADDL .CIT(DR) (ITAT), BENGALURU DATE OF HEARING : 24-04-2019 DATE OF PRONOUNCEMENT : 26-04-2019 O R D E R PER N.V. VASUDEVAN, VICE PRESIDENT : THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER D ATED 28-12-2015 OF COMMISSIONER OF INCOME TAX(APPEALS)-1 1, BANGALORE, RELATING TO ASSESSMENT YEAR 2006-07. ITA NO. 99/BANG/2016 PAGE 2 OF 8 2. THE ASSESSEE IN THIS CASE IS A COMPANY ENGAGED IN THE REAL ESTATE BUSINESS. FOR THE AY 2006-07 AN ORDER OF ASSESSMENT DATED 26-03-2014 WAS PASSED U/S. 144 READ WITH SEC.147 OF THE INCOME-TAX ACT, 1961 [THE ACT] DETERMI NING THE TOTAL INCOME OF ASSESSEE AT RS.2,76,94,769. THE SUM DETERMINED AS TOTAL INCOME BY THE ASSESSING OFFICER (A O) WAS BASED ON A RETURN OF INCOME FILED BY THE ASSESSEE ON 19-03-2014 IN WHICH THE ASSESSEE HAD DECLARED THE AF ORESAID TOTAL INCOME. SINCE THE ASSESSEE DID NOT PAY THE TAX PAY ABLE ON THE INCOME SO RETURNED, THE RETURN FILED WAS CONSIDE RED AS DEFECTIVE AND A NOTICE U/S.139(9) OF THE ACT WAS ISSU ED CALLING UPON THE ASSESSEE TO SHOW CAUSE AS TO WHY THE RETURN OF INCOME FILED SHOULD NOT BE TREATED AS DEFECTIVE. THE ASSESSEE SOUGHT TIME TO PAY THE TAX DUE ON RETURNED INCOME BUT THE SAID REQUEST WAS REFUSED BY THE AO. THE AO PROCEEDED TO DETERMINE THE TOTAL INCOME U/S.144 OF THE ACT TO THE BEST OF HIS JUDGEMENT AND ADOPTED THE TOTAL INCOME OF THE ASSESSE E ON THE BASIS OF THE TOTAL INCOME DECLARED IN THE RETURN FILE D BY THE ASSESSEE WHICH WAS TREATED AS DEFECTIVE. 3. AGGRIEVED BY THE ADDITIONS MADE IN THE ORDER OF ASSESSMENT, THE ASSESSEE FILED APPEAL BEFORE THE CIT(A PPEALS). THE CIT(APPEALS) NOTICED THAT THE ASSESSEE HAD NOT PAID TAXES ON THE RETURNED INCOME AND THEREFORE IN VIEW OF THE PR OVISIONS OF SECTION 249(4)(A) OF THE ACT, THE APPEAL FILED BY THE ASSESSEE, WAS NOT MAINTAINABLE AND ACCORDINGLY THE ASSESSEES A PPEAL WAS DISMISSED IN LIMINE UNADMITTED. AGGRIEVED BY THE ITA NO. 99/BANG/2016 PAGE 3 OF 8 AFORESAID ORDER OF CIT(APPEALS), THE ASSESSEE HAS FI LED THE PRESENT APPEAL BEFORE THE TRIBUNAL. 4. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED BEFORE US TH AT THE CIT(APPEALS) HAS NOT DECIDED THE APPEAL OF THE ASSE SSEE ON MERITS FOR THE REASON THAT THE TAXES DUE ON THE RETURNED INCOME WAS NOT PAID BY THE ASSESSEE. THE ASSESSEE FI LED BEFORE US CHALLANS EVIDENCING THE PAYMENT OF TAXES ON THE INCO ME DECLARED IN THE RETURN OF INCOME. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT SINCE THE TAXES DUE ON THE RETURNED INCOME ARE PAID, THE APPEAL SHOULD BE ADMITTED FOR ADJUDICATION. ON THE OTHER HAND, THE LD. DR SUBMITTED TH AT THE PAYMENT OF TAXES NEEDS TO BE VERIFIED. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. THE PROVISIONS OF SEC.249(4) OF THE ACT READS AS FOLLOWS: SECTION 249(4) : NO APPEAL UNDER THIS CHAPTER SHAL L 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 RETURNE D 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 FILLING UNDER CLAUSE (B) A ND ON AN APPLICATION MADE BY THE APPELLANT IN THIS BEHALF, T HE CIT(A) MAY, FOR ANY GOOD AND SUFFICIENT REASON TO BE RECOR DED IN WRITING, EXEMPT HIM FROM THE OPERATION OF THE PROVI SIONS OF THAT CLAUSE. ITA NO. 99/BANG/2016 PAGE 4 OF 8 6. THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT V S. K.SATISH KUMAR SINGH 2012 209 TAXMAN 502(KARN.) AND IN THE CASE OF PRINCIPAL CIT VS. ABDUL AHID M 394 ITR 7 27 (KARN.) TOOK THE VIEW THAT IF ADMITTED TAX ON RETURNED INCOME IS PA ID THEN THE APPEAL HAS TO BE ADMITTED FOR ADJUDICATION BY TH E CIT(A) AND HELD THAT TRIBUNAL WAS RIGHT IN DIRECTING THE CIT(A) TO HEAR AND DECIDE THE APPEAL OF THE ASSESSEE ON MERITS . THE HONBLE MUMBAI ITAT IN THE CASE OF BHUMIRAJ CONSTRUC TIONS VS. ACIT 131 ITD 406 (MUMBAI) HAD AN OCCASION TO DE AL WITH A CASE WHERE AN APPEAL BY THE ASSESSEE WAS DISMISSED FOR NON PAYMENT OF TAX DUE ON THE INCOME DECLARED IN THE RETURN OF INCOME. THE TRIBUNAL FIRSTLY OBSERVED THAT THERE IS A DISTINCTION BETWEEN A MANDATORY AND DIRECTORY PROVISIO N. IF THE NON-COMPLIANCE WITH THE REQUIREMENT OF LAW EXPOSES THE ASSESSEE TO THE PENAL PROVISION, THEN IT IS MANDATORY, B UT IF NO PENAL CONSEQUENCES FOLLOW ON NON-FULFILLMENT OF THE REQUIREMENT, THEN USUALLY IT IS A DIRECTORY PROVISION. OMISSION TO COMPLY WITH A MANDATORY REQUIREMENT RENDERS THE ACTIO N VOID, WHEREAS OMISSION TO DO THE DIRECTORY REQUIREMEN T MAKES IT ONLY DEFECTIVE OR IRREGULAR. ON THE REMOVAL OF SUC H DEFECT, THE IRREGULARITY STANDS REMOVED AND THE STATUS OF VALID ITY IS ATTACHED. THE TRIBUNAL RELIED ON THE FOLLOWING DECISIO N IN COMING TO THE ABOVE CONCLUSION.M.L. SRINIVASA SETTY & SONS VS. STATE OF KARNATAKA (1991) 99 CTR (KAR) 77 : (1992 ) 193 ITR 548 (KAR) AND CIT VS. TREHAN ENTERPRISES (2001) 168 CTR (J&K) 274 : (2001) 248 ITR 333 (J&K). THE TRIBUNAL THEREAFTER ITA NO. 99/BANG/2016 PAGE 5 OF 8 OBSERVED THAT APPEAL FILED WITHOUT PAYING TAX DUE ON RETU RNED INCOME IS ONLY DEFECTIVE BUT NOT VOID. THUS IF TAX IS P AID ON THE INCOME RETURNED, EITHER BEFORE OR AT THE TIME OF OR AFTER THE FILING OF RETURN, IT WILL BE SUFFICIENT COMPLIANCE WITH THE PROVISIONS OF SUB-S. (4) OF S. 249. THE PREREQUISITE IS THAT THE PAYMENT OF SUCH TAX, IN THE CATEGORY OF CASES IN WHI CH TAX IS PAID AFTER THE FILING OF RETURN, SHOULD BE BEFORE THE A DMISSION OF FIRST APPEAL. IN CASE SUCH TAX IS NOT PAID UPTO THE FILING OF APPEAL BEFORE THE CIT(A), THE SAME SHALL NOT BE ADMITTED . IN OTHER WORDS IF THE APPEAL IS TO BE ADMITTED BY THE FIRST APPELLATE AUTHORITY, IT IS SINE QUA NON THAT THE ASSESS EE MUST HAVE MADE THE PAYMENT OF TAX ON THE INCOME RETURNED. IF NO PAYMENT OF TAX ON THE INCOME RETURNED IS MADE AT ALL AND THE APPEAL IS FILED, THAT CANNOT BE ADMITTED. IF HOWEVER THE APPEAL IS FILED WITHOUT THE PAYMENT OF SUCH TAX BUT SUBSEQUENTL Y THE REQUIRED AMOUNT OF TAX IS PAID, THE APPEAL SHALL BE AD MITTED ON PAYMENT OF TAX AND TAKEN UP FOR HEARING. THE TRIBU NAL EXAMINED THE OBJECTIVE BEHIND S. 249(4) AND OBSERVED THAT THE SAME IS TO ENSURE THE PAYMENT OF TAX ON INCOME RETURNED BEFORE THE ADMISSION OF APPEAL. IF SUCH PAYMENT AFTER THE FILING OF APPEAL BUT BEFORE IT IS TAKEN UP FOR DISPOSAL VALID ATES THE DEFECTIVE APPEAL, THEN THERE IS NO REASON AS TO WHY TH E DOORS OF JUSTICE BE CLOSED ON A POOR ASSESSEE WHO COULD MANAG E TO MAKE THE PAYMENT OF TAX AT A LATER DATE. THE STIPULATION AS TO THE PAYMENT OF SUCH TAX ANTE THE FILING OF FIRST APPEAL I S ONLY DIRECTORY AND NOT MANDATORY. WHEREAS THE PAYMENT OF SUCH ITA NO. 99/BANG/2016 PAGE 6 OF 8 TAX IS MANDATORY BUT THE REQUIREMENT OF PAYING SUCH TAX BEFORE FILING APPEAL IS ONLY DIRECTORY. WHEN THE DEFE CT IN THE APPEAL, BEING THE NON-PAYMENT OF SUCH TAX, IS REMOVED , THE EARLIER DEFECTIVE APPEAL BECOMES VALID. ONCE WE CALL AN APPEAL AS VALID, IT IS IMPLICIT THAT IT IS NOT TIME-BARRED. IT I MPLIES THAT ALL THE CONSEQUENCES WHICH FOLLOW ON THE REMOVAL OF D EFECT ARE THAT THE VALIDITY IS ATTACHED TO THE APPEAL FROM THE DATE W HEN IT WAS ORIGINALLY FILED AND NOT WHEN THE DEFECT IS REM OVED. THE TRIBUNAL ULTIMATELY HELD THAT IF TAX DUE ON INCOME RETUR NED IS PAID EVEN AFTER DISPOSAL OF THE APPEAL BY THE CIT(A) , IF SUCH PAYMENT IS MADE THE DEFECT IN THE APPEAL DUE TO NON- COMPLIANCE OF A DIRECTORY REQUIREMENT OF PAYING SUCH TAX BEFORE THE FILING OF THE APPEAL, STOOD REMOVED. EX CONSEQUENTIAL THE APPEAL SHOULD HAVE BEEN REVIVED BY THE FIRST APPELLATE AUTHORITY. 7. IN THE PRESENT CASE, THE TAXES DUE ON RETURNED INCOME I S CLAIMED TO HAS BEEN PAID. THEREFORE THE APPEAL BY THE ASSESSEE AGAINST THE ORDER OF ASSESSMENT SHOULD BE ADM ITTED AND ADJUDICATED BY THE CIT(APPEALS) ON MERITS. IN THE DECISION REFERRED TO ABOVE, IT HAS BEEN HELD THAT IF THE ADMITTED TAXES ARE PAID AT A LATER POINT OF TIME, THEN THE APPEAL OF T HE ASSESSEE SHOULD BE CONSIDERED AS PROPERLY INSTITUTED AND SHOULD BE HEARD AND DECIDED BY THE CIT(APPEALS) ON M ERITS. FOLLOWING THE AFORESAID DECISION, WE SET ASIDE THE OR DER OF CIT(APPEALS) AND DIRECT THE CIT(APPEALS) TO DECIDE THE APPEAL ITA NO. 99/BANG/2016 PAGE 7 OF 8 ON MERITS, SUBJECT TO VERIFICATION OF PAYMENT OF TAXES (EXCLUDING INTEREST) DUE ON THE RETURNED INCOME. 8. IN THE RESULT, THE APPEAL BY THE ASSESSEE IS ALLOWED F OR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON THIS 26 TH DAY OF APRIL, 2019 SD/- SD/- ( JASON P.BOAZ ) ( N.V. VASUD EVAN ) ACCOUNTANT MEMBER VICE PRESIDENT BANGALORE, DATED, THE 26 TH APRIL, 2019 TNMM ITA NO. 99/BANG/2016 PAGE 8 OF 8 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR, ITAT, BANGALORE 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE