2024 (4) TMI 598 - AT - Income Tax

Tribunal Recognizes Son's Financial Role, Allowing Appeal Due to Unique Circumstances in Property Ownership Case.

Rajlaxmi Satishkumar Sharma Versus The Income Tax Officer, Ward-3 (3) (2), Ahmedabad

The ITAT Ahmedabad allowed the appellant's appeal, recognizing the unique circumstances where the appellant's son paid for the property, and the ... Dismissal of appeal in limine u/s 249 by CIT(A) - Addition of purchase price of the property bought by assessee son - as argued payment made for purchase of property for which the investment is made by assessee's son from his own independent source - D.R. submitted that as per section 249(4)(b) the assessee is liable to file the return of income and pay the advance tax before filing the appeal before the CIT(A) but assessee failed to do so HELD THAT:- The provisions of section 249(4)(b) of the Act is clear that the appeal before the CIT(A) should be admitted only when the assessee paid the advance tax where return of income has not been filed. The proviso to said section also describes that the assessee will get exemption from this clause if the application is made before the CIT(A) for not filing return of income or paying advance tax. But in the present case assessee has explained that the assessee herself has not obtained the said property but her son has paid the said amount for purchase of property from his own fund. In fact, the assessee’s son is a joint owner of the said property and for the sake of conveyance specially the conveyance deed, the stamp deed is lesser therefore the assessee’s name has been utilised in the conveyance deed. The relation is direct relation between the mother and son and therefore this should have been considered by the Assessing Officer as well as by the CIT(A). In the peculiar circumstances of the present case, the proviso to section 249(4)(b) of the Act should have been pointed out by the CIT(A) during the hearing which the CIT(A) failed to do so. Merely on the technical ground, the appeal before the CIT(A) cannot be dismissed and in fact after seeing the merit of the case, it appears that the transaction was not doubted and the investment made by the son of the assessee was also not questioned by the Assessing Officer. Decided on favour of assessee. ISSUES PRESENTED AND CONSIDERED 1. Whether an appeal before the Commissioner (Appeals) is maintainable under section 249(4)(b) of the Income-tax Act where the appellant has not filed a return of income and has not paid advance tax. 2. Whether the proviso to section 249(4)(b) (permitting admission of an appeal where the assessee applies to the Commissioner (Appeals) for exemption from filing return/paying advance tax and shows good and sufficient reasons) required invocation or consideration by the CIT(A) where the assessee contends income below exemption limit and that the challenged investment was funded by a third party (her son) whose position was not disputed by the Assessing Officer. 3. Whether the appeal dismissal on a technical/liminal ground under section 249(4)(b) was justified when factual circumstances showed non-personal source for the investment and the AO/CIT(A) had not impugned the transaction or the source of funds. ISSUE-WISE DETAILED ANALYSIS Issue 1: Maintainability under section 249(4)(b) where no return filed and no advance tax paid Legal framework: Section 249(4)(b) provides that an appeal to the Commissioner (Appeals) shall not be admitted where a return of income has not been filed unless the assessee pays advance tax equal to the tax as per the section; the proviso allows the Commissioner (Appeals) to admit an appeal if the assessee applies for exemption and shows good and sufficient reasons for non-compliance. Precedent Treatment: No specific precedent was cited in the decision. Interpretation and reasoning: The Court reiterates the clear statutory requirement that appeals are ordinarily inadmissible in absence of filing the return and payment of advance tax. However, the statutory proviso grants the appellate authority discretion to excuse non-compliance on demonstration of good and sufficient reasons. The power under the proviso is intended to be exercised on consideration of the circumstances, not merely treated as a technical bar. Ratio vs. Obiter: The holding that section 249(4)(b) ordinarily bars admission unless complied with is ratio. The direction that the proviso must be considered in appropriate factual circumstances is also ratio to the extent it determines admissibility in this case; broader statements about application of proviso in other circumstances are obiter. Conclusions: The statutory bar exists but is subject to the proviso; where good and sufficient reasons are shown, the CIT(A) should entertain the appeal rather than dismissing it in limine. Issue 2: Application of the proviso - effect of income below taxable limit and explanation that purchase consideration was paid by a third party (son) Legal framework: The proviso to section 249(4)(b) contemplates that the Commissioner (Appeals) may admit an appeal despite non-filing/non-payment if an application is made and good and sufficient reasons are shown; reasons may include lack of legal obligation to file a return or payment of tax. Precedent Treatment: No specific authority was relied upon or distinguished. Interpretation and reasoning: The Court examined the factual matrix: the assessee did not file a return because her income was below the basic exemption; the assessee explained that the purchase price of the property recorded in her name was in fact paid by her son from his independent funds and the son was a joint owner; the Assessing Officer did not question the transaction or the source of funds. Given these peculiar facts, the Court concluded that the CIT(A) should have considered the proviso and the surrounding facts rather than dismiss the appeal mechanically. The Court emphasized that dismissal on a mere technicality without considering the substantive explanation, especially where the AO did not dispute the source of funds, was inappropriate. Ratio vs. Obiter: The determination that these particular facts constituted 'good and sufficient reasons' to invoke the proviso and admit the appeal is ratio as applied to this appeal. The Court's statement that such a decision is limited to the peculiar facts and not to be treated as precedent is an explicit limiting ratio (i.e., narrow ratio) and a placement of other wider remarks into obiter. Conclusions: The proviso should have been pointed out and applied by the CIT(A) in the present factual scenario; the explanation that the son funded the purchase and that the assessee's income was below the exemption limit amounted to good and sufficient reasons to admit the appeal. Issue 3: Whether dismissal for non-compliance under section 249(4)(b) was justified when the AO had not impugned the reality of the transaction or source of funds Legal framework: The appellate authority must consider both procedural compliance and substantive fairness; an appeal dismissed purely on procedural grounds may be set aside where substantive facts justify relief under statutory provisos. Precedent Treatment: None cited or applied. Interpretation and reasoning: The Court noted that the AO assessed the total income by invoking reassessment provisions but did not question or disbelieve the claim that the son had paid the consideration. Because the underlying transaction and source of funds were not impugned by the AO, dismissing the appeal on a procedural default without examining the substance would result in undue rigidity and possible injustice. Therefore, in these circumstances, the appeal merited admission and adjudication on merits. Ratio vs. Obiter: The conclusion that absence of AO's challenge to source of funds strengthens the case for applying the proviso in this instance is ratio to this fact pattern; the general proposition that every procedural dismissal should be avoided is obiter, limited by the Court's express caution that the decision is fact-specific. Conclusions: Dismissal on the technical ground of non-compliance under section 249(4)(b) was not justified in the peculiar circumstances where the AO had not disputed the son's funding; the appeal should have been admitted and adjudicated on merits. Final Disposition and Limitation on Precedential Effect Interpretation and reasoning: Applying the foregoing analysis to the record, the Court allowed the appeal, reasoning that the CIT(A) failed to invoke the proviso and consider the assessee's explanations (income below exemption, third-party funding by son, joint ownership, and lack of AO's challenge). The Court expressly grounded its decision on the peculiar facts and stated the decision is not to be treated as a precedent. Ratio vs. Obiter: The allowance of the appeal on the specific facts is the operative ratio for this case; the explicit statement limiting precedential effect places broader pronouncements into obiter. Conclusions: The appeal was allowed on the facts; the decision is confined to the peculiar factual matrix and is not a general precedent for other cases where non-filing and non-payment under section 249(4)(b) occur without similar justificatory facts.