2014 (1) TMI 762 - HC - Income Tax

Court affirms ITAT decision on tax compliance before appeals under Income Tax Act.

Commissioner of Income Tax Versus Pramod Kumar Dang

Commissioner of Income Tax Versus Pramod Kumar Dang - [2014] 361 ITR 137 Issues:Interpretation of Section 249(4)(a) of the Income Tax Act, 1961 regarding payment of tax due on the income returned by the assessee before filing an appeal.Analysis:The appeal before the High Court arose from an order passed by the Income Tax Appellate Tribunal (ITAT) setting aside the order of the Commissioner Income Tax (Appeals) dismissing the appeal of the assessee for not paying the tax due on the income returned before filing the appeal. The Tribunal found that the assessee had not committed any default under Section 249(4)(a) of the Act and directed the matter to be reconsidered on merits by the CIT (Appeals).The facts of the case revolved around the assessment year 1996-97, where a search and seizure operation resulted in the recovery of cash from the assessee. The assessee filed a return of income declaring an amount and claimed that the seized cash should be treated as paid towards the tax due. However, the Assessing Officer did not credit this amount in the intimation issued under Section 143(1)(a). Subsequently, the assessee requested adjustment of the seized amount against the demand created but no action was taken by the authorities.The ITAT held that the assessee's request for adjustment was valid as the cash seized was available with the department and the assessee had no liquid funds due to attachment of bank accounts. The tribunal found the assessee's intentions genuine and held that no default was committed under Section 249(4)(a), leading to the restoration of the appeal to the CIT (Appeals).The High Court analyzed Section 249(4)(a) which mandates the payment of tax due on the returned income before filing an appeal. Referring to precedent, the court emphasized that if the tax is paid before the appeal is taken up for hearing, it satisfies the requirements of the provision. In this case, the court found that the assessee had paid the tax due on the returned income through the seized amount, and the failure of the authorities to act on the adjustment request was unjustified.The court concluded that the assessee had complied with the requirements of Section 249(4)(a) as the tax due on the returned income was effectively paid through the seized amount. The appeal by the Revenue was dismissed, affirming the decision of the ITAT and emphasizing the logical rationale behind the provision to ensure payment of tax on admitted income before appeal hearings.In summary, the High Court upheld the decision of the ITAT, ruling in favor of the assessee and against the Revenue, highlighting the importance of complying with tax payment requirements before pursuing appeals under the Income Tax Act.