2025 (4) TMI 790 - AT - Income Tax

Section 249(4)(b) advance tax requirements don't apply when additions made through ex-parte orders by AO

ITAT Mumbai held that Section 249(4)(b) provisions regarding advance tax payment requirements for non-filer assessees do not apply when additions are made ... Non compliance of section 249(4)(b) as the assessee has failed to pay the advance-tax before filing of appeal - CIT(A) conceded that the assessee is a non filer, so section 249(4)(b) of the Act should be complied during filing of appeal - HELD THAT:- We find that the applicability of Section 249(4)(b) of the Act is contingent upon certain conditions, namely: (i) whether the assessee is a non-filer, and (ii) whether the assessee was required to make an advance tax payment at the time of filing the appeal. If advance tax has not been paid, the assessee must satisfy the statutory requirements as prescribed under Section 249(4)(b) of the Act. However, in the present case, the assessee failed to comply with these statutory requirements. Furthermore, the addition was made by the Ld. AO through an ex-parte order. We hold that the provisions of Section 249(4)(b) of the Act are not applicable in the present case. Accordingly, we restore the matter to the file of the Ld. CIT(A) and direct that the appeal be adjudicated on its merits. Needless to say, the assessee shall be afforded a reasonable opportunity of hearing in the set-aside appellate proceedings. ISSUES PRESENTED and CONSIDEREDThe core legal issues considered in this judgment are: Whether the assessee's appeal was correctly dismissed by the CIT(A) due to non-compliance with Section 249(4)(b) of the Income-tax Act, 1961, which mandates the payment of advance tax for non-filers before an appeal can be admitted. Whether the assessee was liable to pay advance tax under Sections 208 and 209 of the Income-tax Act, given the reported net loss for the financial year 2018-19.ISSUE-WISE DETAILED ANALYSIS1. Compliance with Section 249(4)(b) of the Income-tax Act Relevant legal framework and precedents: Section 249(4)(b) of the Income-tax Act requires that if an assessee has not filed a return of income, they must pay an amount equal to the advance tax payable to maintain an appeal. The Tribunal referenced precedents, including the ITAT, Raipur decision in Vishnusharan Chandravanshi v. ITO, which discusses exceptions to this requirement. Court's interpretation and reasoning: The Tribunal examined whether the statutory requirement to pay advance tax as per Section 249(4)(b) was applicable. The Tribunal noted that the provision is triggered only when there is an obligation to pay advance tax, which is determined by the assessee's taxable income. Key evidence and findings: The assessee presented a Profit & Loss account showing a net loss of Rs. 5,45,561/- for the financial year 2018-19. This was used to argue that there was no liability to pay advance tax under Sections 208 and 209. Application of law to facts: The Tribunal found that since the assessee reported no taxable income, there was no obligation to pay advance tax. Consequently, the requirement under Section 249(4)(b) was not applicable. Treatment of competing arguments: The Tribunal considered the argument from the Department that the assessee had not complied with Section 249(4)(b), but it was countered by the assessee's evidence of no taxable income, supported by judicial precedents. Conclusions: The Tribunal concluded that the CIT(A) erred in dismissing the appeal based on Section 249(4)(b) as the assessee was not liable to pay advance tax due to the absence of taxable income.SIGNIFICANT HOLDINGS Preserve verbatim quotes of crucial legal reasoning: The Tribunal quoted: 'As in the present case, the assessee had not only before me but had also in the 'Statement of facts' stated before the CIT(Appeals) that he had no taxable income, therefore, in my view in absence of any obligation cast upon the assessee to compute/pay 'advance tax' u/ss. 208 and 209 of the Act for the subject year, the first appellate authority could not have held that he had failed to comply with the statutory conditions contemplated in Sec. 249(4)(b) of the Act.' Core principles established: The Tribunal reinforced the principle that the obligation to pay advance tax under Section 249(4)(b) is contingent upon the existence of taxable income, as determined under Sections 208 and 209. If no such obligation exists, the appeal cannot be dismissed on the grounds of non-compliance with advance tax payment requirements. Final determinations on each issue: The Tribunal set aside the CIT(A)'s order and directed the appeal to be adjudicated on its merits, allowing the appeal for statistical purposes. The Tribunal emphasized the need for the CIT(A) to provide the assessee with a reasonable opportunity of hearing in the subsequent proceedings.