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January, 24th 2014
*    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.


PRA MOD K UMA R DANG                             ..... R ESPONDENT

                   Through:      Mr. Prakash Kumar, Advocate.




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


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


11.    On 12.02.1999, an assessment order was passed

       whereby an additional demand of Rs.60 odd lakhs was


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


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

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


                                     SANJEEV SACHDEVA, J.

JANUARY          , 2014              SANJIV KHANNA, J.


ITA 62-2001                                                Page 13 of 13
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