M/s Keti Construction Ltd, Indore V. ACIT Central -2, Indore

ITSSA 2/Ind/2023

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Keti Construction Ltd. filed appeals against the orders of the Commissioner of Income Tax (Appeals) for the Assessment Years 2009-10 and 2011-12, which were dismissed in limine due to non-payment of self-assessment tax at the time of filing the appeals. The assessee argued that the tax was fully paid before the impugned orders were passed, citing financial difficulties as the reason for the initial non-payment. The Tribunal referenced several precedents, including decisions from the Bangalore Benches and the Supreme Court, which supported the view that if the admitted tax is paid subsequently, the appeal should be admitted and decided on merits. The Tribunal set aside the CIT(A)'s orders and remanded the cases for a decision on merits, subject to verification of the tax payment.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 131020 (ITAT-INDORE)
• Duration Of Justice: 2 month(s) 9 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 28-05-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 22-05-2023
• Assessment Year: 2009-2010
• Appeal Filed On: 19-03-2023
• Other Referred Cases: M/s. Fiza Developers & Inter Trade P. Ltd. vs. ITA No.1257/Bang/2013, Annapoorneshwari Investment vs. DCIT 177 ITD 707, CIT vs. Filmistan Ltd. 42 ITR 163 (SC), CIT vs. K. Satish Kumar Singh 2012 209 Taxman 0512, Principal CIT vs. Abdul Ahid M 394 ITR 727 (Karn.), Bhumiraj Constructions vs. ACIT 131 ITD 406 (Mumbai), M.L. Srinivasa Setty & Sons vs. State of Karnataka (1991) 99 CTR (Kar) 77, CIT vs. Trehan Enterprises (2001) 168 CTR (J&K) 274, Vijay Prakash D. Mehta vs. Collector of Customs [1989] 175 ITR 540(SC)
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Right to appeal; TDS; Set aside
• Section: 274

Judgement Text

Page 1 of 9 आयकर अपील य अ धकरण, इंदौर यायपीठ, इंदौर IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI B.M. BIYANI, ACCOUNTANT MEMBER IT(SS)A No.1 & 2/Ind/2023 (Assessment Year:2011-12 & 2009-10) Keti Construction ltd. 31/6, Vatsalya Chambers, Sapna Sangeeta Road, Sneh Nagar Indore Vs. ACIT(Central)-2 Indore (Appellant / Assessee) (Respondent/ Revenue) PAN: AAACK6893Q Assessee by Shri Pankaj Shah & Shri Soumya Bumb ARs Revenue by Shri P.K. Mishra CIT DR Date of Hearing 23.05.2023 Date of Pronouncement 25.05.2023 O R D E R Per Vijay Pal Rao, JM: These two appeals by the assessee are directed against the two separate orders of Ld. Commissioner of Income Tax (Appeals) (in short Ld. CIT(A)-3, dated 27.02.2023 & 28.02.2023 for Assessment Years 2011-12 & 2009-10 respectively. The assessee has raised common grounds in these appeals, the grounds raised for the A.Y.2009-10 are reproduced as under: Ground 1: Against non-admissibility of appeal On the facts and circumstances of the case and in law the learned Commissioner of Income tax (Appeals)-3, Bhopal ("CIT(A)") erred in not IT(SS)A No.1 & 2 /Ind/2023 Keti Construction ltd. Page 2 of 9 Page 2 of 9 admitting the appeal without appreciating that the requirement of Section 249(4)(a) of the Act was fulfilled. The Appellant prays that the order of learned CIT(A) dismissing the appeal in limine be set aside with directions to decide the appeal on merits. Ground 2: Against non appreciation of judicial pronouncements On the facts and circumstances of the facts and in law the learned CIT(A) erred in not appreciating the decisions of various High Courts and Apex Court holding that if the admitted tax has been paid subsequently the appeal ought to be admitted as maintainable. The Appellant prays that the learned CIT(A) be directed to admit the appeal and decide the appeal on merits. Ground 3: The Appellant craves leave to add, amend any or all grounds at the time of hearing. 2. Ld. AR of the assessee has submitted that the ld. CIT(A) has dismissed the appeal of the assessee in limine due to non-payment of self- assessment tax at the time of filing the appeal though the assessee duly paid the full tax during the pendency of the appeal and before impugned orders were passed. He has referred to the details of payments of the self- assessment tax and submitted that due to financial crises and closure of the business of assessee company, the assessee was facing a serious financial crunch which has led to non-payment of the self-assessment tax at the time of filing of the appeal required u/s 249(4)(a) of the Act. He has pointed out that subsequent payment of the full tax by the assessee was brought to the knowledge of the Ld. CIT(A) however, the Ld. CIT(A) dismissed the appeals of the assessee. IT(SS)A No.1 & 2 /Ind/2023 Keti Construction ltd. Page 3 of 9 Page 3 of 9 3. He has relied upon the decision of Bangalore Benches of the Tribunal dated 27.08.2015 in ITANo.1257/Bang/2013 in case of M/s. Fiza Developers & Inter Trade P. Ltd. and submitted that the Tribunal has decided an identical issue by holding that once admitted tax stood fully paid then the appeal of the assessee ought to have been decided on merits instead of dismissing the same in limine. He has also relied upon the decision of the Bangalore Bench of the Tribunal in case of Annapoorneshwari Investment vs. DCIT 177 ITD 707. Ld. AR has also relied upon the Hon’ble Supreme Court in case of CIT vs. Filmistan Ltd. 42 ITR 163 (SC) and submitted that Hon’ble Supreme Court has held that the word “no appeal shall lie” means that the appeal will not be held to be properly filed until the tax has been paid. 4. On the other hand, Ld. DR has submitted that the provisions of section 249(4)(a) of the Act used the word “shall” and therefore if the appeal is filed without payment of self-assessment tax the same is not maintainable and liable to be dismissed. He has relied upon the impugned orders of the Ld. CIT(A). 5. We have considered the rival submissions as well as relevant material on record. The undisputed fact as merged from the records are that at the time of filing the appeal by the assessee did not pay the self-assessment tax fully however, during the pendency of the appeal before the Ld. CIT(A) the assessee paid full self-assessment tax as required u/s 249(4)(a) of the Act. The assessee has also explained the reasons for non-payment of the self-assessment tax as the assessee company was passing through serious financial crises and consequently, the assessee was not in a position to pay the self-assessment tax at once. The ld. CIT(A) has not disputed these facts of subsequent payment of self-assessment tax by the assessee but dismissed these appeals on the ground that at the time of filing these appeals as on 15.01.2022 the assessee has not paid the due tax payable on the return income. The provisions of section 249(4)(a) of the Act set out IT(SS)A No.1 & 2 /Ind/2023 Keti Construction ltd. Page 4 of 9 Page 4 of 9 the condition that no appeal shall be admitted unless, at the time of filing the appeal, the assessee has paid the tax due on the income that return by him. Thus, it is clear that there is no limitation prescribed for payment of the tax but it is required to be paid at the time of filing the appeal and consequently the delay in payment of the due tax on the return income can be at the most considered as delay in filing the appeal. The Bangalore Bench of the Tribunal in case of M/s. Fiza Developers & Inter Trade P. Ltd (supra) has considered this issue in para 4 as under: “04. We have perused the orders and heard the rival contentions. Copy of the return filed by assessee show that the total amount of tax payable was Rs.87,14,679 TDS against the above amount was Rs.16,90,412/-. Assessee has enclosed self-assessment tax challan for Rs.45,79,085/- paid on 28.01.2010, Rs.25,00,000/- paid on 31.03.2006 and Rs.36,33,854/- paid on 30.05.2006. Thus the admitted tax stood fully paid by 2010. CIT (A) dismissed appeal of the assessee for the sole reason that admitted taxes were not paid relying on sub- section (4)(a) of Section 249 of the Act. That, once admitted tax is paid, appeal has to be decided on merits in a settled position of law by virtue of judgment of Hon'ble jurisdictional High Court in the case of CIT v. K. Satish Kumar Singh (2012) 209 Taxman 0512 hereunder. Para 4 & 5 of this judgment is reproduced hereunder: 4. Section 249 of the Act deals with form of appeal and limitation. Sub-Section (4) of Section 249 of the Act reads as under: "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) (b) Where no return has been fifed 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 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. Therefore, from the aforesaid provision, it is clear when the return has been filed by the assessee, unless the assessee pays the admitted tax due on the income returned by him, no appeal shall be entertained and admitted. Therefore, if admitted tax is not paid IT(SS)A No.1 & 2 /Ind/2023 Keti Construction ltd. Page 5 of 9 Page 5 of 9 which falls under Clause (a) of Sub-Section (4) of Section 249 of the Act, the Commissioner (Appeals) is not vested with any power to waive payment of such admitted tax and entertain the appeal. The order of dismissing the appeal in such circumstances is automatic. Therefore, the appeal dismissed under Clause (a) of Sub-Section (4) of Section 249 of the Act for non-payment of admitted tax due on the income returned by the assessee cannot be found fault with. However, if after such dismissal, if the assessee pays the admitted tax and requests the Appellate Authority to recall the order dismissing the appeal in limine and to consider the appeal on merits under the aforesaid provision or under any other provision of the Act, there is no prohibition or legal impediment for the Appellate Authority to recall its earlier order and entertain the appeal and decide the same on merits. 5. The Apex Court in the case of Vijay Prakash D. Mehta v. Collector of Customs [1989] 175 ITR 540(SC) dealing with the similar provisions under the Customs Act has held that the right of appeal is neither an absolute right nor an ingredient of natural justice, the principles of which must be followed in all judicial and quasi-judicial adjudications. The right of appeal is a statutory right and it can be circumscribed by the conditions in the grant. It is not the law that adjudication by itself, following the rules of natural justice, would be violative of any right, constitutional or statutory without any right of appeal, as such. If the statute gives a right to appeal upon certain conditions, it it upon fulfilment of those conditions that the right becomes vested in, and exercisable by, the appellant. If discretion is vested, then there is an obligation to act judicially and properly. The purpose of such restriction is to act in terrorem to make the people comply with the provisions of law. Therefore, the object of stipulating conditions such as demand of admitted tax is a condition precedent for entertaining the appeals and admitting the appeals is to see that the appellant obeys the law, Though the right of appeal is conferred under a statute, the said right is subjected to the restrictions imposed under the very same statute. There cannot be any absolute right de hors the provisions of the statute. Therefore, in the instant case, the statute has conferred a right of appeal. It also in unequivocal terms expressly has stated that in cases where the assessee files a return and admits the liability to pay tax on the income returned, unless he pays the said admitted tax due on the income returned, he may not exercise the statutory right of appeal. As is clear from Clause (b) of Sub-Section (4) of Section 249 of the Act in all cases falling under Sub-Section (4) of Section 249, no discretion is vested with the Appellate Authority. Therefore, in cases falling under clause (a) of Sub- Section (4) of Section 249 of the Act, if the said condition is not fulfilled by the assessee, the appeal shall not be admitted and the only order that can be passes is dismissal of the appeal in limine. Keeping in IT(SS)A No.1 & 2 /Ind/2023 Keti Construction ltd. Page 6 of 9 Page 6 of 9 mind, the object with which these provisions are introduced, once the assessee realises his obligations under the Statute, the purpose with which these provisions in terrorem are introduced under the Act, obeys the statutory obligations, pays the tax, then he may not be denied the right of appeal which the Statute has provided to him. In the absence of any express words circumscribing the powers of the Tribunal, the Tribunal has the ample power to recall its earlier order dismissing the appeal in limine and to hear the appeal on merits. If the admitted tax had been paid, the Appellate Authority ought to have admitted the appeal and hear the appeal on merits. Of course, while recalling the order, it is open to the authority to find out whether the said application is made bona fide, is there any unreasonable delay in approaching the Tribunal and other matters. But once the conduct of the assessee is not such as to disentitle him to exercise his right of appeal by obeying the law, that is by depositing the admitted tax liability, the Appellate Authority should be liberal in entertaining these applications and hear the appeal on merits and pass appropriate orders, in accordance with law. In the light of what we have stated, the order passed by the Tribunal cannot he found fault with. Accordingly, the appeal is dismissed. Following the above judgment, we set aside the order of CIT (A) and remit the issue back for consideration in accordance with law. 6. Similarly, in case of Annapoorneshwari Investment vs. DCIT (supra) the Bangalore Bench of the Tribunal has again considered this issue in para 5 to 7 as under: “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 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 filling under Clause (b) and on an application made by the appellant in this behalf, the CIT(A) may, for any good and sufficient reason to be recorded in writing, exempt him from the operation of the provisions of that clause." ITA No. 99/Bang/2016 IT(SS)A No.1 & 2 /Ind/2023 Keti Construction ltd. Page 7 of 9 Page 7 of 9 6. The Hon'ble Karnataka High Court in the case of CIT Vs. K.Satish Kumar Singh 2012 209 Taxman 502(Karn.) and in the case of Principal CIT Vs. Abdul ahid M 394 ITR 727 (Karn.) took the view that if admitted tax on returned income is paid then the appeal has to be admitted for adjudication by the 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 Hon'ble Mumbai ITAT in the case of Bhumiraj Constructions Vs. ACIT 131 ITD 406 (Mumbai) had an occasion to deal 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 provision. If the non-compliance with the requirement of law exposes the assessee to the penal provision, then it is mandatory, but 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 action void, whereas omission to do the directory requirement makes it only defective or irregular. On the removal of such defect, the irregularity stands removed and the status of validity is attached. The tribunal relied on the following decision 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 observed that appeal filed without paying tax due on returned income is only defective but not void. Thus if tax is paid 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 which tax is paid after the filing of return, should be before the admission 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 assessee 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 subsequently the required amount of tax is paid, the appeal shall be admitted on payment of tax and taken up for hearing. The tribunal 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 validates the defective appeal, then there is no reason as to why the doors of justice be closed on a poor assessee who could manage 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 is only directory and not mandatory. Whereas the payment of such ITA No. 99/Bang/2016 tax is mandatory but the requirement of paying such tax before filing appeal is only directory. When the defect in the IT(SS)A No.1 & 2 /Ind/2023 Keti Construction ltd. Page 8 of 9 Page 8 of 9 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 implies that all the consequences which follow on the removal of defect are that the validity is attached to the appeal from the date when it was originally filed and not when the defect is removed. The Tribunal ultimately held that if tax due on income returned 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 is claimed to has been paid. Therefore the appeal by the Assessee against the order of assessment should be admitted 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 the assessee should be considered as properly instituted and should be heard and decided by the CIT(Appeals) on merits. Following the aforesaid decision, we set aside the order of CIT(Appeals) and direct the CIT(Appeals) to decide the appeal ITA No. 99/Bang/2016 on merits, subject to verification of payment of taxes (excluding interest) due on the returned income. 7. Thus, it is held that non-payment of tax due on return income would amount a defect in appeal and not avoid appeal. Following the orders of the Coordinate Benches, we are of the considered view that once the assessee made full payment of tax due on return income, the appeals of the assessee ought to have been decided on merits instead of dismissed the same in limine. 8. For A.Y. 2011-12 the Ld. CIT(A) has referred in the impugned order that the refund of assessment year 2013-14 of Rs.1,70,33,975/- was determined by the AO vide order dated 10.01.2023 and sent proposal to CPC to adjust the refund against the demand of year under consideration. However, the said refund was not found to be reflected on the CPC portal. The Ld. AR of the assessee has fairly submitted that the appeal for A.Y.2011-12 may be considered by CIT(A) after verification of the said refund from the portal of the CPC. Accordingly in the facts and circumstances of the case and in the interest of justice, we set aside the IT(SS)A No.1 & 2 /Ind/2023 Keti Construction ltd. Page 9 of 9 Page 9 of 9 impugned orders of the ld. CIT(A) and the appeals for A.Y.2009-10 and 2011-12 are remanded to the record of the Ld. CIT(A) for adjudication on merits after giving an appropriate opportunity of hearing to the assessee. 9. In the result, appeals of assessee are allowed for statistical purposes. Order pronounced in the open court on 25.05.2023. Sd/- Sd/- (B.M. BIYANI) (VIJAY PAL RAO) Accountant Member Judicial Member Indore, 25.05.2023 Patel/Sr. PS Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order UE COPY Sr. Private Secretary Income Tax Appellate Tribunal Indore Bench, Indore