* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment reserved on: 1 s t November, 2013
Judgment pronounced on: January, 2014
+ ITA 62/2001
COMMISSIONER OF INCOME TA X . ... Appellant
Through: Mr. Rohit Madan, Advocate.
Versus
PRA MOD K UMA R DANG ..... R ESPONDENT
Through: Mr. Prakash Kumar, Advocate.
CORAM:
HON'BLE MR. JUSTICE SANJIV KHANNA
HON'BLE MR. JUSTICE SANJEEV SACHDEVA
SANJEEV SACHDEVA, J.
1. The Revenue has filed the present appeal under
Section 260A of the Income Tax A ct, 1961 (hereinafter
referred to as "the Act") impugning the order dated
28.08.2000 passed by the Income Tax Appellate
Tribunal (hereinaft er referred to as "the Tribunal").
2. The Tribunal vide the impugned order set aside the
=======================================================================
ITA 62-2001 Page 1 of 13
order of the Commissioner Income Tax (Appeals)
(hereinafter referred to as the CIT (Appeals) )
dismissing the appeal of the Assessee holding that the
Assessee had not paid the amount of tax due on the
income returned by him prior to filing of the appeal.
The Tribunal while setting aside the order has returned
a finding that the Assessee had not committed any
default under Section 249(4)(a) of the Act and restor ed
the matter to the file of the CIT (Appeals) for deciding
the appeal on merits.
3. Vide the order dated 30.07.2001, the present appeal
was admitted and the following substantial question of
law was framed:-
"Whether the Tribunal was correct in its view
that requirements of Section 249(4)(a) of the
Income- Tax Act, 1961 were complied with?"
4. Since the dispute is in a very narrow campus, we will
briefly refer to the facts in the case.
=======================================================================
ITA 62-2001 Page 2 of 13
5. The Assessment Year in issue is 1996-97. A search
and seizure operation under Section 132(1) was
conducted on the respondent Assessee on 14 th /15 th
September, 1995 at the residential premises of the
Assessee.
6. Alongwith certain documents and other materials,
cash of Rs.4,60,000/- was recovered and seized from
the premises of the Assessee.
7. On 28.11.1996, the Assessee filed his return of
income declaring an income of Rs.4,97,700/ - and as
per the return, the due tax payable was shown as
Rs.1,61,080/-. The Assessee claimed and had stated
that Rs. 50,000/- was paid as advance tax and the
amount seized during search at Rs.4,60,000/-, should
be treated as paid. Thus, the total amount claimed as
paid was Rs.5,10,000/- and accordingly, after
adjustment of the due tax as calculated by the
Assessee on the return ed income of Rs.1,61,080/-,
=======================================================================
ITA 62-2001 Page 3 of 13
refund of Rs.3,48,920/- was claimed.
8. On 31.03.1997, an intimation under Section 143(1)(a)
was issued by the Assessing Officer creating a
demand of Rs.2,15,926/-. No credit on account of
payment of due tax was given. Neither was credit
given on account of advance tax payment nor was
credit given on account of cash seized during the
course of search.
9. On 11.09.1997, the Assessee moved an application
under Section 154 of the Act requesting adjustment
against the demand of Rs.2,15,926/-. It was
requested that intimation under Section 143(1)(a) be
modified by giving credit for the payment of
Rs.50,000/- as advance tax and a sum of
Rs.4,60,000/- seized during the course of search.
10. On 23.09.1999, order under Section 154 was passed
whereby credit was granted for Rs.50,000/- paid as
advance tax. However, no order was passed in
=======================================================================
ITA 62-2001 Page 4 of 13
respect of the request for adjustment of the seized
amount of Rs.4,60,000/-. No order in this regard was
passed even till the date of passing of the impugned
order, as noticed in paragraph 5 of the impugned
order.
11. On 12.02.1999, an assessment order was passed
whereby an additional demand of Rs.60 odd lakhs was
created.
12. The respondent Assessee preferred an appeal before
the CIT (Appeals). However, the CIT(Appeals) vide
order dated 22.12.1999 dismissed the appeal in -limine
holding that the Assessee had failed to pay due tax on
the amount of the return income and had defaulted in
terms of the provisions of Section 249( 4)(a) of the Act.
13. By the impugned order on an appeal by the Assessee,
the Tribunal noticed the fact that the amount which
was found in cash was still lying under the custody of
the Revenue and there were no liquid fund s with the
=======================================================================
ITA 62-2001 Page 5 of 13
Assessee for making payment under Section 140A.
The Tribunal noticed that there was no dispute that the
Assessee had filed return declaring an income of
Rs.4,97,700 on which tax due was at Rs.1,73,080/ -
and the total amount claimed by the Assessee as paid
was Rs.5,10,0 00/- which was more than the tax due
and payable by the returned income .
14. The Tribunal held that the AO had failed to discharge
his duty by not passing any order in regard to
adjustment of Rs.4,60,000/- which was seized by the
Department on 14.09.1995. The Tribunal, therefore,
held that the amount of Rs.4,60,000/ - should be
treated against payment of due tax on returned
income. The Tribunal further noticed that the liquid
funds of the Assessee were exhausted either by
attachment of bank accounts or by seizure of cash
amount and thus held that the Assessee's intentions
were bona fide for not depositing the tax under Section
=======================================================================
ITA 62-2001 Page 6 of 13
140A and requesting for adjustment of the seized
amount against the due tax payable on return ed
income.
15. The Tribunal thus held that the Assessee had not
committed default under Section 249(4)(a) and
restored the matter to the file of the CIT (Appeal) for
deciding the issue on merits. The Revenue has filed
the present appeal impugning the order of restoration
of the appeal to the file of the CIT (Appeals).
16. We find no infirmity in the order of the Tribunal and
find no merit in the appeal filed by the Revenue.
17. Section 249 (4) reads as under:-
"(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
=======================================================================
ITA 62-2001 Page 7 of 13
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 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."
18. Section 249(4)(a) stipulates that an appeal shall not be
admitted unless at the time of the filing of the appeal,
the Assessee has paid the tax due on the income
returned by him, in case, a return has been filed and
in case, no return has been filed, the Assessee has
paid an amount equal to the amount of the advance
=======================================================================
ITA 62-2001 Page 8 of 13
tax which was payable by him. In case, where the
Assessee had not filed a return, power is granted to
the Commissioner (Appeals) to exempt the Assessee
from the requirements to pay the tax for good and
sufficient reasons.
19. In support of his case the counsel for the respondent
relied upon the judgment of this Court in
C OMMISSIONE R OF INCOME TAX VS . R AMA B ODY
B UILDERS (D ELH I), (2001) 250 ITR 825 (D E L.). In the
said case, the Division Bench of this High Court
upheld the decision of the Tribunal in restoring the
appeal in a case where the Assessee had paid only
part of the tax as advance tax and paid the balance of
the tax payable as worked out on the return filed on
the date later than filing of the appeal but prior to the
appeal being taken up for hearing. The High Court
held that if prior to issuance of a show cause notice,
the Assessee had made deposit of the deficit tax then
=======================================================================
ITA 62-2001 Page 9 of 13
it would tantamount to compliance of the provisions of
Section 249(4) .
20. The facts of the case at hand are at a much better
footing. Admittedly, the tax due on the returned
income was Rs.1,73,080/-. The Assessee had paid
Rs.50,000/- by way of advance tax and Rs.4,60,000/ -
was seized during the search and seizure operations
and thus a sum of Rs.5,10,000/- was available with the
Department. The Assessee had even moved an
application under Section 154 requesting the
Assessing Officer to adjust the amount of tax payable
on the returned income from the amount that had been
seized from the Assessee. No order in this regard
was passed rejecting the said requ est of the
Assessee. The Tribunal has even noticed that there
was an attachment order vis-à-vis the bank accounts
of the A ssessee and as such, the A ssessee had no
cash available for payment of the tax as computed on
=======================================================================
ITA 62-2001 Page 10 of 13
the returned income. The Tribunal has held that the
action of the Assessee of requesting for adjustment of
the amount was bond fide. No reason or ground for
not accepting the said request is stated or mentioned
in the grounds of appeal. Section 132B of the Act
relates to application of seized assets towards tax
liability. It is not stated why and on what ground the
application or adjustment was not made. It is not the
case of the revenue that that the cash seized was
adjusted for another year or was claimed and
assessed in the hands of a third person.
21. The rationale behind Section 249(4) appears to be that
where an Assessee has filed a return of income, then
the tax which is admittedly payable by the Assessee
should be paid prior to the hearing of any appeal filed
by the Assessee. The rationale seems very logica l for
the reason that no Assessee can be heard in an
appeal where the tax which is admittedly payable by
=======================================================================
ITA 62-2001 Page 11 of 13
the Assessee is outstanding. It is to enforce payment
of tax on admitted income . Where an Assessee files
the return of income then at least the tax which is
payable in terms of the return income should be paid
by the Assessee. But where the Assessee either has
paid the tax on the returned income or sought
adjustment of the amount admittedly lying with the
revenue towards the tax payable on the returned
income, the Assessee cannot be denied a hearing. In
the present case, the amount of Rs.4,60,000/-
belonging to the Assessee which was admittedly
available with the appellant was far in excess of the
amount of tax payable in terms of the return ed income
and was even in excess of the demand created under
Section 143(1)(a). The Assessee could not have been
denied a hearing merely on the ground of nonpayment
of tax due on the returned income.
22. In view of the above, we are of the considered opinion
=======================================================================
ITA 62-2001 Page 12 of 13
that the Tribunal was correct in holding that the
requirements of Section 249( 4)(a) of the Act were duly
complied with. The question of law is thus answered in
favour of the Assessee and against the Revenue. The
appeal is accordingly dismissed with no order as to
costs.
SANJEEV SACHDEVA, J.
JANUARY , 2014 SANJIV KHANNA, J.
st
=======================================================================
ITA 62-2001 Page 13 of 13
|
