Shri Nagin A Vaghela, Vadodara V. The ACIT, Central Circle-3, Vadodara

ITSSA 491/AHD/2019

AI Insights

The case involves Shri Nagin A. Vaghela, an individual engaged in the real estate business, who faced an exparte assessment under sections 153A and 144 of the Income Tax Act, 1961, for the Assessment Year 2013-14. Following a search operation, the assessee was issued a notice to furnish a return of income, which he complied with by filing a return showing a substantial income. However, due to non-cooperation and failure to pay the self-assessment tax, the Assessing Officer made various additions to the income, resulting in a significantly higher assessed income and tax demand. The CIT(A) dismissed the appeal for non-payment of self-assessment tax as per section 249(4)(a) of the Act. The Tribunal, referencing several precedents, found that the non-payment of tax was a curable defect and restored the matter to the CIT(A) for a decision on the merits.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 114243 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 6 month(s) 2 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 17-04-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 18-01-2023
• Assessment Year: 2013-2014
• Appeal Filed On: 15-10-2019
• Other Referred Cases: J.K. Chaturvedi vs. ACIT, ITO Vs. Ankush Finstock Ltd., Collector, Land Acquisition v. MST Katiji, Auto Centre v. State of U.P., Voltas Ltd. v. Dy. CIT, Rajendrakumar Maneklal Sheth (HUF) v. CIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Recovery proceedings; Principle of natural justice; Reasonable cause; Right to appeal; Set aside
• Section: 153A; 139(1); 119

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “C” BENCH Before: Shri Waseem Ahmed, Accountant Member And Shri T.R. Senthil Kumar, Judicial Member Nagin A. Vaghela Parva Bungalow, Near Mangalam Deuplex, Sama-Savali Road, Vadodara PAN: AAKPW5302R (Appellant) Vs The ACIT, Central Circle-3, Vadodara (Respondent) Assessee Represented: Shri Mukund Bakshi, A.R. Revenue Represented: Shri A.P. Singh, CIT-DR Date of hearing : 19-01-2023 Date of pronouncement : 18-04-2023 आदेश/ORDER PER : T.R. SENTHIL KUMAR, JUDICIAL MEMBER:- This appeal is filed by the Assessee as against the Appellate order dated 27.08.2019 passed by the Commissioner of Income Tax (Appeals)-12, Ahmedabad, arising out of the exparte Assessment order passed under section 153A r.w.s. 144 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) relating to the Assessment Year (A.Y) 2013-14. IT(SSA No. 491/Ahd/2019 Assessment Year 2013-14 I.T(SS).A No. 491/Ahd/2019 A.Y. 2013-14 Page No Shri Nagin A. Vaghela vs. ACIT 2 2. The brief facts of the case is that the assessee is an individual engaged in Real Estate business. There was a search action u/s. 132 of the Act in the case of the assessee on 30.08.2013. The assessee was issued with notice u/s. 153A on 04.02.2014 requiring him to furnish Return of Income. The assessee filed his original Return of Income u/s. 139(1) of the Act on 28.06.2014, showing total income of Rs. 2,79,02,780/-, but however not to filed return in compliance to the notice issued u/s.153A of the Act. As there was non-cooperation by the assessee, assessment was completed exparte by making various additions namely sale of immovable properties, cash deposits, unsecured loan, current liabilities and making the total assessed income of Rs. 27,71,32,290/- and demanded a tax of Rs. 9,22,99,540/-. 3. Aggrieved against the same, the assessee filed an appeal before Ld. CIT(A)-12, Ahmedabad. The Ld. CIT(A) found that the assessee has made payment of Rs. 1,59,774/- only as against the Returned income of Rs. 2,79,02,780/-. As the assessee has not paid the admitted tax as per the Return of Income, the appeal filed by the assessee is not maintainable, as per Section 249(4)(a) of the Act and thereby dismissed the appeal as not maintainable. 4. Aggrieved against the same, the assessee is in appeal before us raising the following Grounds of appeal: 1. The Ld. CIT(A)-12, Ahmedabad has dismissed the appeal filed against the order dated 18.02.2016 for want of payment of self-assessment tax by invoking the provisions of Sec. 249(4)(a) of the I.T. Act. The appeal may please be restored to the file of the Ld. CIT(A) on fulfilment of the payment of self-assessment tax as required u/s. 249(4)(a). I.T(SS).A No. 491/Ahd/2019 A.Y. 2013-14 Page No Shri Nagin A. Vaghela vs. ACIT 3 2. The Ld. CIT(A)-12, Ahmedabad may please be directed to hold that the non-payment of self-assessment tax is a curable defect for the admission and adjudication of appeal and on the defect being cured, the appeal ought to be restored and be adjudicated in accordance with the law. 3. Your appellant craves liberty to add, alter, delete or substitute any of the grounds of appeal herein above contained. 4.1. The Ld. Counsel Mr. Mukund Bakshi appearing for the assessee submitted before us that the assessee is liable to pay the tax of Rs. 1,07,83,908/- as per the return income of Rs.2,79,02,780/-. However the assessee made self-assessment tax on the following dates: (i) Self-Assessment tax paid on 28.09.2013 1,50,000 (ii) Self-Assessment tax paid on 06.02.2018 12,00,000 (iii) Self-Assessment tax paid on 14.03.2019 35,00,000 (iv) Self-Assessment tax paid on 29.08.2022 15,00,000 (v) Self-Assessment tax paid on 29.08.2022 15,00,000 (vi) Self-Assessment tax paid on 17.01.3033 29,25,000 4.2. Thus the assessee paid the entire tax liability and also filed an Affidavit explaining the reasons for the delay as follows: I, the undersigned, Nagin Vaghela, son of late Shri Amtabhai Vaghela, residing at Parva Bungalows, Besides Mangalam Duplex, Sama-Savli Road, Vadodara 390008 affirm on oath the following: 1 I am regularly assessed to tax and my PA No is AAKPW5302R and the present jurisdiction for assessment is DCIT, Central Circle-3, Vadodara 2 I am engaged in the business of investment and dealing in real estate for several years 3 Due to circumstances beyond my control and on account of various adverse circumstances, my investment in the various properties got stuck for want of clearances/approvals from the various authorities leading to financial difficulties since F.Y 2013-14. 4 This situation has led me into borrowings from private financiers as well as the banks which I was unable to service in time. 5 I was also unable to pay the income-tax demand for various years. 6 The failures as above has caused- I.T(SS).A No. 491/Ahd/2019 A.Y. 2013-14 Page No Shri Nagin A. Vaghela vs. ACIT 4 (a) Recovery actions, proceedings including survey for recovery, attachment of my bank accounts, etc. by the Income-tax Department during the period December 2016 to March 2018. The necessary evidences in support are enclosed as page nos. 01 to 09 to this affidavit. (b) The Private Lenders have filed police complaints and criminal cases for the bouncing of cheques during the period March and April 2019 onwards leading to issue of non-bailable warrants, cases before the Hon'ble Judicial Magistrate, etc. The necessary evidences in support are enclosed as page nos. 10 to 19 to this affidavit. (c) The Central Bank of India from whom borrowing was made against the security of the residential house was also running overdue which I was able to manage from being otherwise dealt with for recovery proceedings. (d) To protect the house, I entered into an Agreement for Sale of the residential house on 11.12.2019 and the entire proceeds were paid to the Bank. The necessary evidences in support are enclosed as page nos. 20 to 35 to this affidavit. 7. Owing to the above factors and circumstances as prevailing then and also thereafter for a long time, I was unable to pay the self-assessment tax for the A.Y. 2013-14 and also any tax for the A.Y. 2014-15. My entire time and attention was devoted towards dealing with these pressing issues only and I was unable to concentrate on any other work including the attendance or response to the income-tax proceedings including the payment of tax. This has led to certain assessments also being made ex- parte. Thereafter, due to prevalence of Covid pandemic, my business and my financial position have further worsened. 8. It is in the above circumstances that various income-tax proceedings including the payment of advance tax/self-assessment tax for the AY 2013-14 and 2014- 15 could not be made. Even my appeals for the A.Y. 2013-14 and 2014-15 have been dismissed for want of payment of self- assessment tax or the advance tax. 9. I do want to pursue my appeals so that the income is assessed in accordance with law and the tax in relation thereto can be paid. With this intent, on recovery of business, I have gradually made the payment of self- assessment tax for the A.Y. 2013-14 and intend to make the payment for the A.Y. 2014-15 also. I declare that whatever is stated above is true and correct to the best of my knowledge and information. I.T(SS).A No. 491/Ahd/2019 A.Y. 2013-14 Page No Shri Nagin A. Vaghela vs. ACIT 5 4.3. The Ld. Counsel further submitted non-payment of self- assessment tax is a curable defect, for admission and adjudication of an appeal when the defect is being cured by paying the admitted taxes the appeal ought to have been restored to the file of the Ld. CIT(A) for adjudication on merits of the case. 4.4. In this connection, the Ld. Counsel relied upon Co-ordinate Bench decisions in the case of J.K. Chaturvedi vs. ACIT reported in [2004] 3 SOT 456 (AHD.) and ITO Vs. Ankush Finstock Ltd. reported in [2012] 21 taxmann.com 119 (Ahd.). Thus the Ld. A.R. pleaded the assessee having paid the admitted self-assessment tax, the matter be restored to the file of the Ld. CIT(A) to decide the case on merits. 5. Per contra, the Ld. CIT-DR Shri A.P. Singh appearing for the Revenue supported the order of the Lower Authorities and submitted that the assessee having paid the self-assessment taxes in piecemeal and after a period of 10 years cannot be accepted, thereby the appeal is not maintainable before Ld. CIT(A). Therefore the order passed by Ld. CIT(A) does not require any interference. Thus the Ld. CIT-DR requested to dismiss the appeal filed by the assessee. 6. We have given our thoughtful consideration and perused the materials available on record including the affidavit and self- assessment tax payment challan filed by the assessee between 20/08/2013 to 17/01/2023. The assessee in support of its affidavit placed before us copy of the recovery proceedings initiated by the Assessing Officer, police complaints filed by private lenders, I.T(SS).A No. 491/Ahd/2019 A.Y. 2013-14 Page No Shri Nagin A. Vaghela vs. ACIT 6 non-bailable warrant issued for cheque bouncing cases and Central Bank of India recovery proceedings to sell the residential house of the assessee, the prevalence of Covid-19 pandemic situation, which made the assessee could not pay the self-assessment tax. In our considered view non-payment of admitted taxes and dismissal of appeal u/s. 249(4), whether is a curable one, is no more res integra, following the decisions of the Co-ordinate Bench judgment in the case of J.K. Chaturvedi, where it was set aside the appeal to the file of the Commissioner (Appeals) to decide the case on merits observing as follows: An appeal is a continuation of the original proceedings and right of appeal is not an inherent right but it is a statutory right. It is open to the Legislature so give or not to give a right of appeal against decisions made by authorities. The right of appeal, wherever conferred by statute, has to be exercised strictly in conformity with the statutory provisions which create it. If the statute puts any restriction, then such right would be available along with such restrictions [Para 10] A plain reading of section 249(3) shall reveal that of the assessee showed sufficient reasons for late filing of his appeals, then such delay can be condoned and controversy would be silenced on merit. Similarly, for sake of explanation, if an assessee did not have sufficient funds for complying with the requirement of section 249(4) and has not filed the appeal within the time provided under section 249(2) and subsequent to expiry of limitation, he makes compliance of section 249(4) and files the appeal with a prayer for condonation of delay, then it would be in discretion of first appellate authority to see whether sufficient reasons for late filing of appeal existed or not. If the Commissioner (Appeals) arrived at a conclusion that sufficient reasons exist then again the controversy would be decided on merits. Thus, on a conjoint reading of sub-sections (3) and (4) of section 249, it is inferred that defect which arises due to non- compliance of section 249(4) is a curable one and in a given case, if the Tribunal is satisfied that there exist sufficient reasons for curing such defects after the expiry of limitation, it would be in the realm of the Tribunal's discretion to restore such matters to the file of the Commissioner (Appeals) for deciding the controversy on merit because section 254(1) provides wide powers to the Tribunal for passing such orders thereon as it thinks fit in the interest of justice. [Para 13] In the instant case, the records showed that assessee had discharged the huge tax liability of more than Rs. 75 lakhs in instalments. [Pore 14] I.T(SS).A No. 491/Ahd/2019 A.Y. 2013-14 Page No Shri Nagin A. Vaghela vs. ACIT 7 Whenever legal justice fails to achieve the solemn purpose of securing justice, then natural justice is called in aid of legal justice. From the details submitted by assessee, it was revealed that the assessee kept on making the payment of tax along with interest in instalments. If the assessee was having sufficient funds with him, then no prudent businessman would allow to swell the liability of interest in such a way. Thus, the assessee was not having sufficient funds with him at the relevant time for compliance of section 249(4), which rendered the appeals of the assessee defective. The question that arose for consideration was as to whether sufficient reasons existed for curing the defect after the expiry of limitation provided under section 249(2) of the Act. An appeal filed in violation of section 249(4) would be termed as a defective one and the moment defect is cured then it can be disposed of on merit subject to limitation. The Courts and the quasi-judicial bodies are empowered to condone the delay if a litigant satisfies the Court that there were sufficient reasons for availing the remedy after expiry of limitation. Such reasoning should be to the satisfaction of the Court The expression sufficient cause or reason", as provided in sub-section (3) of section 249 is used in identical position in a number of statutes and the Supreme Court as well as the High Courts have time and again held that expression 'sufficient cause' for condonation of delay should receive a liberal construction so as to advance substantial justice when no negligence or inaction or want of bona fide is imputable to a party because the judiciary is on account of its powers, to legalize injustice on technical grounds but because it is capable of removing injustice and is expected to do so. A litigant does not stand to benefit by resorting to delay or breaching any provision of a statute. In the instant case, there existed sufficient reasons for not filing valid effective appeals before the Commissioner (Appeals). Hence, the order of the Commissioner (Appeals) was set aside and the matter restored before him for deciding the controversy on merit. 6.1. Similarly, the Co-ordinate Bench of this Tribunal in the case of Ankush Finstock Ltd. (cited supra) held that only requirement of section 249(4) is payment of tax due on returned income and there is no time limit prescribed for payment of such taxes, thereby allowed the assessee appeal as follows: 6. Having heard the submissions of both the sides, we are of the considered view that a litigant must not be thrown out of the litigation at the very threshold without providing an opportunity of hearing. Particularly in this case, we have noticed that the assessee was vigilant about his right of appeal and, therefore, knocking one door or the other and seeking for justice. It is not the case that no appeal at all was filed earlier. The first I.T(SS).A No. 491/Ahd/2019 A.Y. 2013-14 Page No Shri Nagin A. Vaghela vs. ACIT 8 appeal was filed very much in time but it was treated as non-est due to non-payment of tax. A second appeal was filed after making the payment of taxes, stated to be a sum of Rs. 3,47,830/- as T.D.S. and Rs. 10,96,409/- as self assessment tax thus totalling to Rs.14,44,239/- i.e. admitted tax liability. Meanwhile, against the first appeal, the assessee had gone before Tribunal, however, that appeal was withdrawn in the month of November-2005 because by that time the assessee obtained the impugned order of CIT(A) Ahmedabad which was dated 27/10/2005, the impugned appellate order now under appeal before us. On account of these facts, it is not logical to conclude that the assessee was negligent or irresponsible, therefore, did not entitled for any discretion or sympathy. On the contrary, in such circumstances, the Hon'ble superior courts have taken a view favouring such a defaulter. 7. Following a Landmark decision of Hon'ble Supreme Court in the case of Collector, Land Acquisition v. MST Katiji [1987] 167 ITR 471 wherein certain guidelines have been laid down such as that refusing to condone the delay can result in a meritorious case being thrown out at the very threshhold and therefore, the cause of justice could be defeated. The Hon'ble Court has also said that when substantial justice and technical considerations are pitted against each other, the cause of substantial justice deserves to be preferred. Also placing reliance on Auto Centre v. State of U.P. [2005] 278 ITR 291/148 Taxman 573 (All.) and Voltas Ltd. v. Dy. CIT [2000] 241 ITR 471 [1999] 106 Taxman 361 (AP). We hereby affirm the finding of Ld. CIT (Appeals) that the appellant legally deserves condonation of delay. 8. Further, in the case of Rajendrakumar Maneklal Sheth (HUF) v. CIT [1995] 213 ITR 715 (Guj.), it was held that if the first appellate authority had held that the liquidity crunch was a reasonable cause, then ordinarily such discretionary power should not be disturbed. We may also like to add that section 249(3) of the Act prescribes that CIT(A) may admit an appeal after the expiration of the said period if he satisfied that the appellant had sufficient cause for not presenting the appeal within the prescribed period. There is an another sub-section in that Chapter prescribing the conditions for the admission of an appeal. As per section 249(4) of the Act no appeal before CIT(A) should be admitted unless at the time of filing of the appeal, where a return has been filed by the assessee, tax due on the income returned has been paid. In this sub-section, there is a clause (b) which is in respect of a condition where no return at all has been filed by the assessee. A Proviso underneath the section also prescribes that the cases falling under the said clause (b), ld. CIT(A) can grant exemption from the operation of the said clause. An inference can be drawn on combined reading of both the sub-clauses of sub-section (4) of section 249 that in case of default of non-payment of tax an appeal is not to be admitted, but on removal of the defect of non- payment of tax an appeal deserves to be admitted and in one of the condition the assessee can be granted exemption by ld. CIT(A). An another aspect has also been discussed before us that on one hand sub-section (3) of section 249 pertains to those I.T(SS).A No. 491/Ahd/2019 A.Y. 2013-14 Page No Shri Nagin A. Vaghela vs. ACIT 9 appellants who have filed the return and paid the tax but belatedly filed an appeal On the other hand, sub-section (4) of section 249 pertains to those appellants who have defaulted in payment of tax or did not file the return. Since the present appellant is in the category of sub-section (4), therefore, we are of the considered view that ld. CIT(A) was judicially correct in condoning the delay. This objection of the Revenue is therefore dismissed. 6.2. Further it is noticed that the assessee has not filed the Return of Income in response to the notice issued u/s. 153A of the Act and the assessee has not complied to the various notices issued by the A.O. thereby an exparte assessment order was passed by the Assessing Officer. The Ld. CIT(A) at Para 2.2 of this order stated that the original Return of Income filed by the assessee u/s. 139(1) is treated as the return of income in response to notice u/s. 153A of the Act and thereby held that the self assessment tax not paid by the assessee for the Assessment Year 2013-14 and thereby the appeal cannot be admitted as per the provisions of Section 249(4) of the Act. Now the assessee has paid the entire self assessment tax of Rs. 1,07,83,908/- and also explained the financial liquidity crunch faced by the assessee with the due evidences. 6.3. In the above circumstances and also following the decision of the Co-ordinate Benches of this Tribunal, we hereby set aside the impugned order to the file of the Ld. CIT(A) with the direction to entertain the appeal and dispose of the same on merits by giving proper opportunity to the assessee. Needless to say, the assessee should cooperate with the Ld. CIT(A) by producing all the required details and adjudicate the appeal on merits expeditiously. Thus the grounds raised by the assessee are hereby allowed. I.T(SS).A No. 491/Ahd/2019 A.Y. 2013-14 Page No Shri Nagin A. Vaghela vs. ACIT 10 7. In the result, the appeal filed by the Assessee is allowed for statistical purpose. Order pronounced in the open court on 18-04-2023 Sd/- Sd/- (WASEEM AHMED) (T.R. SENTHIL KUMAR) ACCOUNTANT MEMBER True Copy JUDICIAL MEMBER Ahmedabad : Dated 18/04/2023 आदेश कȧ ĤǓतͧलͪप अĒेͪषत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से, उप/सहायक पंजीकार आयकर अपीलȣय अͬधकरण, अहमदाबाद