S.Ravinder, V. The Commissioner of Income Tax-IV,

WP/5974/2005

AI Insights

The case involves a writ petition filed by S. Ravinder, challenging the rejection of a revision application under Section 264 of the Income Tax Act, 1961, concerning an assessment order for the year 1997-98. The petitioner, representing his deceased father, contested an assessment order passed by the Income Tax Officer, which was initially upheld by the Commissioner of Income Tax (Appeals). The appeal was dismissed due to non-payment of admitted tax, leading to the filing of a revision application that was also rejected on the grounds that the matter was 'subject of an appeal'. The High Court examined whether the rejection of the appeal due to non-compliance with procedural requirements barred the exercise of revisional powers under Section 264.

• Counselvise Citation: [2021] 140 COUNSELVISE.COM (IT) 767567 (HC-TELANGANA)
• Appeal Type: Others
• Pronouncement Date: 25-06-2021
• Assessment Year: misc
• Other Referred Cases: ERODE YARN STORES V/s. STATE OF MADRAS, BOARD OF REVENUE V/s. RAJ BROTHERS AGENCIES, CHIRANJILAL DAGA V/s. COMMISSIONER OF INCOME TAX, C.C. JAYARAM V/s. COMMISSIONER OF INCOME TAX
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: J V PRASAD
• Assessee Lawyers: A V KOUNDINYA
• Keywords: Agricultural Land; Assessment Order; Income Tax; Long Term Capital Gains; Mandamus; Revision
• Section: 147; 144; 264; 251(1); 254(1); 249(4)(a); 226

Judgement Text

"HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD (Special Original Jurisdiction) FRIDAY, THE TWENTY FIFTH DAY OF JUNE TWO THOUSAND AND TWENTY ONE PRESENT THE HON'BLE SRI JUSTICE M.S. RAMACHANDRA RAO AND THE HON'BLE SRI JUSTICE T. VINOD KUMAR .,.PETITIONER 1. The Commissioner of lncome Tax-lV, Hyderabad. 2, The Commissioner of lncome Tax(Appeals)-V, Hyderabad. 3. The lncome Tax Officer - 5(3), Hyderabad. ...RESPONDENTS Petition under Article 226 of the Constitution of lndia praying that in the circumstances stated in the affidavit filed therewith, the High Court may be pleased to issue a Writ, order or direction one in the nature of Mandamus declaring that the proceedings of the 1st respondent dt.30-09-2004 passed u/s.264 of the lncome Tax Act, 1961 for the assessment year 1997-98 as arbitrary, illegal and bad in law and consequently set aside the assessment d1.31.03.2003 made by the lncome Tax Officer, ward 5(3), Hyderabad i.e., the 3rd respondent herein, under section 144 rlw. section 147 of the lncome Tax Act, 1961 . Counsel for the Petitioner: SRl. A.V. KRISHNA KOUNDINYA Counsel for the Respondents: SRI J.V. PRASAD SC FOR SENIOR S.C. INCOME TAX The Court made the following: ORDER WRIT PETITION NO: 5974 OF 2005 Between: S. Ravinder, S/o. Late S.Balaiah, 5-8-619, Abids, Hyderabad. AND W.P.No.5974 of 2005 THE HON'BLE SRI JUSTICE M,S.RAMACHANDRA RAO AND THE HON,BLE SRI ]USTICE T.VINOD KUMAR w P ON No.5 974 of 2005 3 o D R i(per Hon'ble Sri Justice T.Vinod Kuna) In this writ petition, the petitioner assails the correctness of the proceeding, dt.30.09.2004, passed by the lst respondent' under Section 264(6) of the Income-tax Act, 1961 Assessment Year 1997-98. (for short, 'the Act'), for the 2,HeardSriA.V.SivaKarthikeya,learnedCounse|forthepetitioner, and sri l.V.Prasad, learned senior standing counsel, appearing on behalf of the respondents. 3. The petitioner contends that the 3'd respondent passed an Order of Assessment dt.31.03.2003, for the Assessment Year 1997-98 under Section 144 read with Section 147 of the Act' on the father of the petitioner, represented by the petitioner as the son and legal heir; that aggrieved by the said Assessment Order' the petitioner had filed an appeal before the 2nd respondent, as provided under the AcU the said appeal flled by the petitioner was dismissed by the 2nd respondent' by order dt.09.07.2003, holding that the appeal filed was void ab initio and cannot be admitted, since the appellant had failed to pay the admitted tax due, as per the return of income filed voluntarily on 31'03'2003; and the 2nd respondent, thus, held that no adjudication on merits of the appeal' is warranted, having regard to the express provisions of Section 249(4Xa) of the Act. 4. Petitioner fufther contends that' upon the rejection of the appeal by the 2.d respondent (as cannot be admitted)' the petitioner invoked the W.P.No.5974 of 2005 power of Revision conferred on the 1s respondent under Section 264 of the Act, and filed an application on 29.03.2004, seeking Revision of the assessment order dt. 31.03.2003 made by the 3'd respbndent. In the said Revision preferred, the petitioner sought for reconsideration of the issue relating to proceeds from sale of agricultural land by the petitioner's father being subjected to Long Term Capital Gains, applying the provisions of Section 54-F of the Act. 5. The 1't respondent by order dt.30.09.2004, rejected the said Revision application filed by the petitioner. In the order, the 1st respondent stated the reason for such rejection as, since, the petitioner/assessee filed an appeal against the Assessment Order of the 3'd respondent, dt.31.03.2003 before the 2nd respondent under Section 246 of the Act, and the 2nd respondent having dismissed the same by order dt.09.07.2003, the provisions of Section 264(4) of the Act would stand attracted. According to the 1st respondent, as per the mandate of provisions of Section 26a() of the Act, the l't respondent shall not exercise the power of revision in respect of an order that has been made \"subject of an appeal\" to the Commissioner of Appeals or the Appellate Tribunal. Thus, the 1st respondent rejected the Revision petition without admitting the same. 6. The petitioner contends that the rejection of the Revjsion petition by the 1't respondent, is without proper appreciation and understanding of the scope and application of provisions of Section 2649) of the Act; that since the appeal filed by the petitioner to the 2,d respondent having not been adjudicated, on merits and having been rejected as void ab initio due to non-payment of admitted tax due, the same cannot be considered as an \"appeal adjudicated\" under Section 251 of the AcU and also that the rejection of the revision petition by the 1st respondent is also 4 W.P.No.5974 of 2Oo5 contrary to Circular No.367, dt.26.05.1983, issued by the Central Board of Direct Taxes, wherein it has been clarified tiat \"where the appeal was dismissed on the ground that the appeal was incompetent\", the same cannot be said to have made\"subject of an appeal' under Section 251(1) or Section 254(1) of the Act, thereby, attracting provisions of Section 264(4)(c) of the Act preventing/precluding the exercise of powers by the 1* respondent under Section 264 of the Act. 7. On the othelr hand, learned Senior Standing Counsel placing reliance on the counter-affidavit supports the impugned order passed by the 1't respondent under Section 264(6) of the Act and seeks for sustaining the same. B. We have given due consideration to the submissions made by the learned counsel appearing for the parties. 9. The short question that falls for our consideration in this writ petition is \"Whether the rejection of the appeal by the Zd respondent as void ab initio for having been filed without complying with mandatory provisions of Section 249(4)(a) of the Act, can be considered as a matter having been \"subject of an appeal'i to oust or prevent the ld respondent from exercising the power of Revision conferred on him under Section 264 of the Act?\" 10. Admittedly, in the facts of the present case, the appeal filed by the petitioner against the order of the 3'd respondent dt.31.03.2003, had been filed without payment of admitted tax due as per the return of income. Since, the admitted tax due is required to be paid for filing the appeal before the 2nd respondent for it to be entertained, and the appeal having been filed by the petitioner without making such payment, the said appeal, even if filed, cannot be considered as a validly presented appeal. 5 W.P.No.5974 of 2005 It is for the said reason, the 2nd respondent, without adjudicating the matter on merits, has rejected the appeal as void ab initio, though by using the term as \" dismissed'. 11. Any appeal, which is not accompanied either by the requisite Couft fee, or any other mandatory payment required to be made as per the provisions of the relevant Statute, cannot be considered as a validly presented appeal, and such appeal would be non-est in the eye of law. Once an appeal is considered as non-est in the eye of law, any order impugned in such appeal cannot be considered as \"subject of an appeal,, as there is no asceftainment or adjudication of the issues raised in the appeal on its merits. \"This questlon does present some difficulty. But in vlew of the circumstances, which we shall presently set out, we wi/l not be justifled ln examining the correctness of the conclusion reached by the High Court. As far back as 1963 the scope of Section 34 came up for consideration before the Madras High Court in ERODE YARN STORES V/s. STATE OF MADRA*. Therein, the assessee contended that once an appeal is fited before a Tribunal, -the Board is precluded from invoking its power under Section 34. The State of Madras controverted ihat position. r (1973) 3l sTC 434 SC. 2 (1963) 14 STC 724 Mad 12. The expression \" subject of an appeal, as used ln Section 264 of Act, is analogous to the language used in Section 34 of Madras General Sales Tax Act, 1959 (for short, 'the Sales Tax Act), dealing the power of review conferred on Board of Revenue. The Hon,ble Supreme Court in BOARD OF REVENUE V/s, RAJ BROTHERS AGENCIEI, while construing the meaning of the expression \"fhe order has been made subject of an appeal' as used in the Sales Tax Act, in deciding the question, whether an appeal against an order, which was dismissed, as having been barred by tlme, can be considered as an order, which had been subject of an appeal, held that - 6 W.P.No.5974 oJ 2OO5 Therein the State contended that before the jurisdiction of the Bzard to exercise its power under Section 34 can be held to be taken away, the appeal filed before the Tribunal must have been an eFfective appeal and that an appeal which was dismissed on the ground of limitation is not an effective appeal. The High Court of Madras accepted that contention and decided the case in favour of the State. In arriving at the conclusion that the words \"subject of an appeal\" mean subject of an \"effective appeal'i the High Court took into consideration the mischief that would otherwise arise, namely, all that an assesseel who wants to stifle the Boardb suo motto power of revision, has to do is to file a time-barred appeal and get it dismissed. It was because of that difficulty the High Couft in Erode Yarn Stores' case came to the conclusion that the expression \"the order which has been the subject of an appeal\" as meaning \"subject of an effective appeal\".\" 13. In CHIRANJILAL DAGA V/s, COIT1MISSIONER OF INCOME Tile, the Madras High Court, while construing Section 33A of the Indian Income Tax Act, 7922, which corresponds to Section 264 of the Act, expressed the view that an order is made the \" subject of an appeal' within the meaning of Clause (c) of the first proviso to Sub-section (2) of Section 33A, only when it is the subject-matter of an \"effectivd' appeal. The Madras High Court also held that if an appeal to the Appellate Tribunal under Section 33 is not admitted and is disposed of on the ground that it was filed after the prescribed time, the order cannot be said to be the \" subject of an appeal. 14. The Kerala High Court in C.C. JAYARAM V/s. CIta also expressed a similar view and held that- \"There is no effective disposal of the petitioner's appeal either by the Commissioner of Income Tax (Appeals) or by the Income Tax Appellate Tribunal. In exhibit P-2, the Commissioner of Income Tax (Appeals) refused to entertaln the appeal filed by the petitioner on the ground that the petitioner failed to pay the admitted tax and the said decision was confirmed by exhibit P-3 order of the Appellate Tribunal, so much so that there is no effective disposal of the petitioner's appea/ and, consequently, the first respondent has jurisdiction to revise the order whtch has been made the subject of appeal before the Appellate Tribunal.\" 3 (1978) 113ITR 363 Mad 4 ll994l 2O7 ITR 662 Ker. / I I t 8 W.P. No.5974 o.f 2005 15. It is also to be noted that Section 251(1Xa) of the Act stipulates that an appeal filed before the appellate authority to be considered as disposed, would require such order under challenge to be either confirmed, reduced, enhanced or annulled. It goes without saying that the disposal is by considering the merits of the matter. In the facts of the present case, the order passed by the 2'd respondent, in rejecting the appeal as void ab initio, cannot be considered as disposing the appeal by any of the above modes specified. Thus, it cannot be said that the order of assessment of the 3'd respondent is \" subject of an appeal' placing embargo/ousting the jurisdiction of the lst respondent under Section 264(4) of the Act. 16. Fufther, the Circular No.367, issued by the Central Board of Direct Taxes, also supports the contention of the petitioner. It is trite law that the Circulars issued by the CBDT are binding on the Revenue, in view of the authoritative pronouncement of the Apex Court in COMMISSIONER OF CUSTOMS V/5. INDIAN OIL CORPORATION LIMITEf. ThC Supreme Couft after examining the entire case law, culled out the following principles: (i) Although a circular is not binding on a court or an assessee, it is not open to the Revenue to raise a contention that it is contrary to a binding circular by the Board. When a circular remains in operation, the Revenue is bound by it and cannot be allowed to plead that it is not valid nor that it is contrary to the terms of the Statute. (ii) Despite the decision of this Court, the Depaftment cannot be permiffed to take a stand contrary to the instructions issued by the Board. 5 (2004) 267 ITR 272 SC = (2004) 3 SCC 488 (ili) A show cause notice and demand contrary to existlng circulars of the Board are ab initio bad. W.P.No.5974 of 2OOs (iv) It is not open to the Revenue to advance an argument or file an appeal contrary to the circulars. 18. Accordingly, .the Writ Petition is allowed; the impugned order dt.30.09.2004, passed by the 1't respondent, is set aside; the matter is remitted back to the 1't respondent (or the concerned Commissioner, in view of passage of time and change of jurisdiction); the 1st respondent (or the concerned Commissioner) is directed to dispose of the Revision petition filed by the petitioner within a period of three (3) months from the date of receipt of a copy of this order, by passing a reasoned order in accordance with law, after affording personal hearing to the petitioner and communicate the same to the petitioner. 19. Pending misiellaneous petitions, if any, shall stand closed in the light of this final order. No order as to costs. 9 That Rule Nisi has been made absolute as above. Witness the Hon'ble the Chief Justice HIMA KOHLI, on this Friday, the Twenty Fifth day of June, Two Thousand and Twenty One. SD/.T.TIRUMALA DEVI ASSISTANT REGIS RAR ,TRUE COPY// SECTION OFFICER To, 1. The Commissioner of lncome Tax-lV, Hyderabad. 2. The Commissioner of lncome Tax(Appeals)-V, Hyderabad. 3. The lncome Tax Officer - 5(3), Hyderabad. 4. 1'1 L.R. Copies. 5. The Under Secretary, Union of lndia, Ministry of Law, Justice and Company Affairs, New Delhi. 6. The Secretary, Telangana Advocates Association Library, High Court for the State of Telangana at Hyderabad. 7. One CC to Sri A.V. Krishna Koundinya, Advocate [OPUC] 8. One CC to Sri J.V. Prasad, Senior S.C. for lncome Tax [OPUC] 9. Two CD Copies CHR sal: A.' > L7. Having regard to the position of law elucidated above, this Coutt is of the considered view that the impugned order passed by the 1't respondent under Section 246(6) of the Act, refusing to exercise Revisional power conferred on him under Section 264(4) of the Act, on the ground that the order of the 3'd respondent dt.31.03.2003 was \"subiect of an appeal\"(underlining supplied by the Couft) before the 2nd respondent, cannot be sustained. HIGH COURT DATED:2510612021 ORDER W.P.No.5974 of 2005 ALLOWING THE WRIT PETITION WITHOUT COSTS 5iArE o t oFS?;.1 ts? ) 1t tut .,i 4 o L) ct "