2025 (7) TMI 655 - AT - Income Tax

Appeal cannot be dismissed for non-payment of advance tax under Section 249(4)(b) when no income return filed

Sangeet Kathuria Versus ITO, Ward-49 (1), Delhi

Sangeet Kathuria Versus ITO, Ward-49 (1), Delhi - TMI ISSUES PRESENTED AND CONSIDERED 1. Whether an appeal filed against an assessment completed under section 147 read with section 144 can be dismissed by the appellate authority as not maintainable on the ground that the appellant had not paid advance tax when no return was filed or no admission of income was made. 2. Whether provisions of section 249(4)(b) (relating to non-admission of appeal where advance tax liability has not been discharged) can be invoked where no return under section 139 has been filed and no return was filed in response to a notice under section 148, and the assessment was completed ex parte. 3. Whether, in the circumstances of an ex parte assessment arising from non-filing of return/response, the proper course is dismissal of appeal as unadmitted or restoration to the assessing authority for de novo adjudication with opportunities to be heard. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Maintainability of appeal where no advance tax paid but no return/admission of income exists Legal framework: The statutory scheme requires compliance with advance tax obligations and contains provisions (section 249(4)(b)) that permit non-admission of appeals where conditions (including payment of tax) are not satisfied. Sections 139 and 148 govern filing of returns and reopening of assessment; section 144 permits assessment where the assessee does not participate. Precedent Treatment: No earlier judicial authorities are cited or relied upon in the judgment; the Court applies statutory interpretation to the facts without citing controlling precedent. Interpretation and reasoning: The Tribunal reasoned that advance tax liability presupposes an admitted or declared tax liability arising from a return. Where the assessee neither filed an original return under section 139 nor filed any return in response to a section 148 notice, there was no judicial or statutory admission of income from which an advance tax obligation (for the purpose of non-admission under section 249(4)(b)) could be derived. The appellate authority's reliance on the answer 'not applicable' in Form 35 (regarding advance tax payment) was not a substitute for a return or admission of income. Hence, the statutory bar in section 249(4)(b) could not be invoked in the absence of any return/acknowledgement/admission of tax liability. Ratio vs. Obiter: Ratio - Where no return has been filed and no admission of income exists, the condition prerequisite to applying section 249(4)(b) (non-admission for non-payment of advance tax) cannot be satisfied; therefore dismissal of appeal on that ground is impermissible. Obiter - Observations on the practical expectation that an assessee without a return 'should' deposit advance tax are advisory and not determinative. Conclusions: The appellate authority erred in dismissing the appeal as not maintainable on the ground of non-payment of advance tax where the assessee had not filed any return and there was no admission of income. Issue 2 - Application of section 249(4)(b) when assessment is completed ex parte after non-filing Legal framework: Section 249(4)(b) addresses the admission of appeals; sections 139, 148, and 144 together regulate filing of returns, reopening, and ex parte assessment in absence of participation. Precedent Treatment: Not addressed by reference to prior decisions; the Tribunal undertook statutory construction based on the sequencing and prerequisites implicit in the return/advance-tax regime. Interpretation and reasoning: The Tribunal emphasized that an ex parte assessment under section 144 following non-cooperation does not equate to an admission by the assessee of the assessed income. Since section 249(4)(b) contemplates non-admission where the appellant has failed to meet tax-payment obligations in circumstances that presuppose a tax liability, applying that provision to deny appellate remedy where the underlying assessment itself was rendered without the assessee having filed a return would be legally unsupportable. The relevant inquiry is whether the appellant had a demonstrable obligation to pay advance tax arising from an admitted return; absent that, the non-payment cannot be the basis for non-admission of appeal. Ratio vs. Obiter: Ratio - An ex parte assessment without prior filing of return does not render section 249(4)(b) applicable to bar the appeal for non-payment of advance tax. Obiter - The expectation that an assessee aware of potential taxable receipt should proactively pay tax does not create statutory footing to deny appellate relief. Conclusions: Section 249(4)(b) cannot be pressed into service to dismiss an appeal where the assessment impugned was framed ex parte and no return/filing/admission existed to ground an advance-tax obligation for the purposes of non-admission. Issue 3 - Appropriate remedy: dismissal versus restoration for de novo adjudication Legal framework: Principles of natural justice and statutory adjudication require that taxpayers be given reasonable opportunity to be heard; where assessments are completed in absence of participation, appellate and adjudicatory bodies may opt to restore matters for adjudication in accordance with law rather than finally disposing appeals on technical bases inconsistent with statutory prerequisites. Precedent Treatment: Not invoked; Tribunal applied recognized remedial principles (opportunity to be heard, interest of justice) in the statutory context. Interpretation and reasoning: Given that the assessment was ex parte and the appellant had not filed any return or response to the section 148 notice, the Tribunal found it appropriate to afford the assessee an opportunity to be heard and to remand the matter to the assessing authority for de novo adjudication. The Tribunal viewed dismissal of the appeal on maintainability grounds (when the prerequisite conditions for such dismissal were absent) as unjust; restoration permits determination of substantive issues (e.g., classification of land sale as agricultural and capital-gains implications) with full participation. The Tribunal expressly directed reasonable opportunity to the assessee before the assessing officer. Ratio vs. Obiter: Ratio - Where procedural infirmity in dismissal exists and assessment is ex parte without participation, the appropriate remedy is restoration to the assessing authority for fresh adjudication with opportunity to be heard. Obiter - The Tribunal's direction that grounds are allowed 'for statistical purposes' is procedural and not a decision on merits. Conclusions: The appeal was to be restored to the assessing authority for de novo adjudication, with directions to afford reasonable opportunity of being heard; dismissal by the appellate body on the ground of non-payment of advance tax was set aside. Cross-references and Interconnected Findings 1. The analysis of Issues 1 and 2 is interlinked: both depend on the foundational fact that no return was filed and therefore there was no admission from which advance tax obligations (for the purpose of section 249(4)(b)) could be inferred. 2. The finding under Issue 3 flows from Issues 1 and 2: because the statutory condition for non-admission did not exist, dismissal was improper and restoration was the corrective course to secure fair adjudication on merits.