2025 (11) TMI 1393 - AT - Income Tax

Non-filing of return alone not enough for section 249(4)(b); ex parte section 144 assessment remanded for reconsideration

ITAT held that non-filing of return does not by itself attract section 249(4)(b) where the assessee claims no income and no advance tax is payable, and ... Non admission of appeal for the reason assessee has not filed any return of income and therefore the assessee should have paid the amount equal to the amount of advance tax - HELD THAT:- It is an admitted fact that assessee has not filed any return of income and it is the claim of the assessee that there is no income earned by the assessee for the year and therefore there is no advance tax payable by him and thus he is not hit by the provisions of section 249(4)(b) of the Act. The ld. CIT(A) has merely applied the provisions of the above section without showing that was there any advance tax payable by the assessee. If there is no advance tax payable by the assessee and no return of income is filed, assessee is not required to deposit any tax before his appeal is admitted as no tax is admitted by him. Therefore the order passed by the CIT(A) dismissing the appeal of the assessee is not correct. Assessment order is passed u/s. 144 - Finance (No.2) Act, 2024 w.e.f. 1.10.2024 has provided that where appeal is filed against an order on assessment made u/s. 144 of the Act, the ld. CIT(A) has power to set aside the assessment and refer the case back to the AO for making fresh assessment. Though the order passed by the ld. CIT(A) is dated 5.1.2024 i.e., prior to 1.10.2024, however, the principle enunciated is that if the order is passed without hearing the assessee, the assessee if in appeal against such an order, may be granted an opportunity to represent his case before the AO for determination of his correct income. In this case naturally the order is passed u/s. 144 of the Act and assessee has not been heard. Appeal of the assessee is restored back to the file of the ld. AO and assessee is directed to produce the relevant details about the cash transactions noted by the AO. AO may examine the same and decide the issue afresh after giving opportunity of hearing to the assessee. Assessee is allowed for statistical purposes. ISSUES PRESENTED AND CONSIDERED 1. Whether the delay of 451 days in filing the appeal should be condoned. 2. Whether an appeal filed by a person who did not file a return of income can be rejected under the requirement in section 249(4)(b) to deposit an amount equal to advance tax payable where the assessee asserts no advance tax was payable. 3. Whether an assessment completed under section 144 (ex parte for non-appearance) without hearing the assessee can be set aside or remitted to the assessing officer for fresh adjudication and hearing, having regard to the principle that such assessments require opportunity to be heard. ISSUE-WISE DETAILED ANALYSIS - ISSUE 1: Condonation of Delay Legal framework: Jurisdictional power to condone delay in filing appeals is exercised on the basis of 'sufficient cause' as established by settled law; relevant considerations include bona fides, reasons for non-receipt of communication, and steps taken on coming to know of the order. Precedent Treatment: The Tribunal notes reliance by Revenue on the Supreme Court's principles that delays must be explained by sufficient cause; the Tribunal applied those principles in assessing the facts. Interpretation and reasoning: The assessee was not a habitual income-tax filer, had no prior taxable income, was not registered on the tax portal, and stated non-receipt/unawareness of the appellate notice and order. The assessee promptly consulted a chartered accountant and filed the appeal upon discovery of demand/recovery action. The Tribunal accepted that ignorance of law is generally not an excuse but may constitute a sufficient cause in this context where the assessee genuinely lacked prior tax engagement and did not receive notice. Ratio vs. Obiter: Ratio. The Tribunal's condonation rests on the factual finding that the assessee was a first-time non-filer unaware of proceedings and acted promptly upon learning; those facts formed the basis for exercise of discretion. Conclusion: Delay of 451 days is condoned and the appeal admitted for adjudication on merits. ISSUE-WISE DETAILED ANALYSIS - ISSUE 2: Admissibility of Appeal under Section 249(4)(b) Where No Return Filed and No Advance Tax Payable Legal framework: Section 249(4)(b) allows an appellate authority to admit an appeal filed by a person who has not filed a return of income only if the appellant deposits an amount equal to the advance tax payable if no return had been filed. The statutory condition applies where there exists an advance-tax liability that would have been payable. Precedent Treatment: The Tribunal examined the lower appellate authority's literal application of section 249(4)(b) to deny admission solely because no return was filed, without establishing that any advance tax was in fact payable. Interpretation and reasoning: The Tribunal held that the CIT(A) mechanically applied section 249(4)(b) on the basis that no return was filed, but failed to ascertain whether any advance tax was actually payable by the assessee. Where the assessee asserts that he had no income chargeable to tax for the year and therefore no advance tax liability arose, the statutory precondition (payment of an amount equal to advance tax payable) cannot be enforced unless liability is shown. The appellate authority must examine whether an advance tax obligation existed before invoking the deposit bar to admission. Ratio vs. Obiter: Ratio. The holding clarifies that non-filing alone does not justify dismissal under section 249(4)(b) unless advance-tax liability is established; the requirement to deposit is tied to the existence of such liability. Conclusion: The CIT(A)'s dismissal of the appeal on the ground that the appellant had not deposited an amount equal to advance tax payable was incorrect in the absence of any finding that advance tax was payable; the appeal could not be refused merely because no return was filed. ISSUE-WISE DETAILED ANALYSIS - ISSUE 3: Validity of Assessment Under Section 144 Made Without Hearing and Remand for Fresh Adjudication Legal framework: Section 144 permits an assessment where the assessee fails to comply with notice or does not appear; however, principles of natural justice and subsequent statutory changes recognize that assessments framed without hearing may require opportunity to be heard on appeal. The Tribunal also notes the legislative provision (Finance (No.2) Act, 2024, effective 1.10.2024) empowering appellate authorities to set aside assessments under section 144 and remit for fresh assessment where appropriate. Precedent Treatment: The Tribunal treated the post-enactment principle as articulating the broader, pre-existing jurisprudential requirement that an assessment passed without hearing, particularly on matters of undisclosed cash deposits and unveri?ed bank information, may be reopened to permit the assessee to explain and produce evidence. The Tribunal did not overrule prior authority but applied the principle of affording a hearing in the interests of justice. Interpretation and reasoning: The assessment was made under section 144 after the assessee failed to respond to notices. The AO treated cash deposits (including amounts during demonetisation) as unexplained/unassessed under section 69A and applied an 8% computation for non-demonetisation period deposits. The Tribunal observed that the assessment was ex parte and the assessee was not heard on the merits; given that the primary source of the addition is bank-reported deposits and that the assessee asserts absence of taxable income and offered to produce details, fairness requires that the AO have the opportunity to examine evidence afresh and record reasons after hearing the assessee. The Tribunal invoked the remedial principle (mirroring statutory amendment) to remit the matter to the assessing officer for fresh adjudication after affording the assessee opportunity of hearing and to examine relevant documents concerning cash transactions. Ratio vs. Obiter: Ratio. The direction to restore the appeal and remit the matter for fresh assessment is a dispositive order arising from the Tribunal's finding that the assessment was rendered without hearing and that the appellate authority should not have dismissed the appeal without determining existence of advance-tax liability; the remand is central to the judgment. Conclusion: The assessment order passed under section 144 without hearing is remitted to the assessing officer for fresh consideration; the assessee is directed to produce relevant details on cash transactions, and the AO is to examine and decide the issue afresh after giving the assessee an opportunity of hearing. DISPOSITION The appeal is allowed for statistical purposes: delay condoned, the CIT(A)'s dismissal under section 249(4)(b) set aside for lack of inquiry into advance-tax liability, and the assessment under section 144 remitted to the assessing officer for fresh adjudication after hearing the assessee and examining the bank-deposit evidence.