Tax appeal valid once admitted tax on income adopted under sections 147 and 148 is paid, satisfying 249(4)(b)

ITAT held that dismissal of assessee's appeal by CIT(A) for alleged non-compliance with s. 249(4)(b) was unjustified. Though the return in response to notice u/s 148 was filed belatedly, the AO had adopted the declared income of Rs. 10,54,060 as the starting point for computation u/s 147 and made further additions. The Tribunal held that tax relatable to such returned income constituted "admitted tax", and once that stood paid, no further tax on disputed additions was required for appeal maintainability. Relying on analogous ITAT precedent, it concluded that the assessee had satisfied s. 249(4)(b). Appeal was allowed for statistical purposes and restored for adjudication on merits.

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1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether an appeal before the first appellate authority is liable to be treated as not maintainable under section 249(4)(b) for non-payment of "advance tax", where the assessee has filed a return in response to notice under section 148 and paid tax on the income so returned.

1.2 Whether, in the facts of the case, the first appellate authority was justified in treating the assessee as a "no return" case for purposes of section 249(4)(b) and dismissing the appeal as infructuous without adjudicating the additions on merits.

1.3 Scope and application of the principle that obligation to pay "advance tax" under sections 208 and 209 is a precondition for triggering section 249(4)(b) in "no return" cases.

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2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 & 2: Applicability of section 249(4)(b) where return is filed in response to section 148 and tax on returned income is paid; correctness of dismissal of appeal as not admitted

(a) Legal framework (as discussed by the Tribunal)

2.1 The first appellate authority reproduced and relied upon section 249(4), and specifically section 249(4)(b), which mandates that where no return has been filed, the assessee must pay an amount equal to the amount of advance tax payable by him, failing which the appeal "shall not be admitted", subject to possible exemption by the appellate authority on application.

2.2 The first appellate authority also referred to sections 234B(1) and 208 to link the concept of "advance tax" with "assessed tax" and the conditions of liability to pay advance tax.

2.3 The Tribunal again set out section 249(4), including the proviso empowering the appellate authority to exempt the assessee, in appropriate cases, from the operation of clause (b).

(b) Interpretation and reasoning

2.4 The first appellate authority treated the return filed on 09.09.2023 in response to notice under section 148 as "invalid", having been filed beyond 30 days from the notice, and proceeded on the footing that, for purposes of section 249(4), this was a case where "no return has been filed". On that basis, it concluded that the assessee was required to have paid an amount equal to the advance tax payable, which, admittedly, had not been done. No application for exemption under the proviso to section 249(4) was made. The appeal was consequently dismissed as not liable to be admitted.

2.5 The Tribunal noted that, notwithstanding the above reasoning, the Assessing Officer had in fact taken the income of Rs. 10,54,060 declared in the return filed on 09.09.2023 as the starting point for computing taxable income and had made further additions of Rs. 62,59,549 to that returned income in the order passed under section 147. Thus, for assessment purposes, the Assessing Officer had accepted and acted upon the returned income.

2.6 Proceeding from this factual premise, the Tribunal reasoned that once the Assessing Officer has adopted the returned income as the base for computation and the assessee has paid tax on such returned income, the tax so paid is "admitted tax" on returned income. In such a situation, the condition in section 249(4) is to be viewed with reference to clause (a) (tax due on income returned) rather than clause (b) (advance tax in case of 'no return').

2.7 The Tribunal held that, in substance, the assessee had complied with the requirement of paying tax on the income returned by him; consequently, treating the case as one falling under section 249(4)(b) and insisting on payment of an amount equal to "advance tax" on the disputed additions was not warranted.

2.8 The Tribunal further observed that, on these facts, any further requirement to pay tax with respect to the entirely disputed additions, as a precondition to admission of the appeal, does not arise for purposes of section 249(4)(b).

(c) Conclusions

2.9 The appeal could not have been dismissed as not admitted under section 249(4)(b) solely on the ground of non-payment of advance tax, when the assessee had filed a return (albeit belatedly in response to section 148) and paid tax on the income so returned, and the Assessing Officer had used that return as the basis for computation.

2.10 The first appellate authority erred in treating the case as one of "no return filed" for the purposes of section 249(4)(b) and in dismissing the appeal as infructuous without adjudicating the additions on merits.

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Issue 3: Relevance of obligation to pay advance tax under sections 208 and 209 for triggering section 249(4)(b); reliance on precedent

(a) Legal framework (as discussed by the Tribunal)

3.1 The Tribunal referred to and relied upon a prior decision where the principle was laid down that the requirement in section 249(4)(b) to pay an amount equal to "advance tax" applies only where an obligation to compute and pay advance tax is in fact cast upon the assessee under sections 208 and 209.

3.2 In that precedent, it was held that where an assessee had no taxable income for the year, no obligation arose to compute or pay any advance tax under sections 208 and 209, and therefore the condition in section 249(4)(b) could not be invoked to reject the appeal as not maintainable for non-payment of such tax.

(b) Interpretation and reasoning

3.3 While the present case did not involve a plea of "no taxable income", the Tribunal applied the underlying principle from the cited decision: the condition in section 249(4)(b) is not an abstract requirement but is linked to the existence of a statutory obligation to pay advance tax, which is to be determined from the assessee's own computation and position.

3.4 The Tribunal noted that in the cited decision, it was clarified that the obligation to pay advance tax under sections 208 and 209 is determined from the assessee's own determination of income, and not mechanically from the income assessed ex parte by the Assessing Officer.

3.5 By analogy, in the present case, where the assessee had, in fact, filed a return showing taxable income and paid tax thereon, and had fully disputed the subsequent additions, the Tribunal reinforced its view that there was no basis to insist on payment of tax relating to the disputed additions as a condition for admission of the appeal.

(c) Conclusions

3.6 The Tribunal, relying on the principle that section 249(4)(b) hinges on an actual obligation to pay advance tax under sections 208 and 209 as per the assessee's own income position, held that the first appellate authority's mechanical invocation of section 249(4)(b) was unsustainable.

3.7 On that basis, and in consonance with the cited precedent, the Tribunal set aside the order of the first appellate authority and directed that the appeal be admitted and disposed of on merits, thereby allowing the assessee's appeal for statistical purposes.

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