TaxTMI 
TaxTMI 
TaxTMI 
2019 (5) TMI 740
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.... there was a difference of opinion between Members on the Bench. The ld.Members have drafted their orders and carved out points on which they differ. They formulated question and transmitted to the Hon'ble President for making a reference to Third Member or Members as Hon'ble President may think fit under section 255(4) of the Income Tax Act, 1961. The Hon'ble President has referred following question for opinion of this Bench: "1. Whether, having regard to the provisions of section 249(4) of the Income Tax Act, the ld.CIT(A)-IX, Ahmedabad has erred in law and on facts in entertaining assessee's appeal." 4. We have heard the ld.representatives and with their assistance gone through the record carefully. Brief facts of the case are that the assesseecompany was incorporated on 1.11.1991. It was engaged in the business of manufacturing of fire-fighting equipments. The due date for filing of the return of income for the Asstt.Year 1995-96 under section 139(1) was 30.11.1995, but it was filed on 31.3.1997 declaring total income at Rs. 1,07,02,530/- after claiming deduction under section 80IA at the rate of 30%. Shri Tanwani, ld.DR while appraising us with the facts contended that sum....
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....venue is in appeal before the Tribunal. 6. The ld.Sr.DR at the very outset contended that if orders of both the ld.Members are being perused, then it would reveal that basically there is no difference between both the ld.Members in so far as interpretation and construction of section 249(4)(a) is concerned. However, the ld.Accountant Member while arriving at a final conclusion agreed with the ld.CIT(A) that the CIT(A) had discretion to examine the facts and to entertain arguments of the assessee. This conclusion summarized in para 7.5 by the ld.AM are contradictory to each other, and therefore, demonstrate a difference in the opinion. He specifically drew or attention towards the following conclusions of the ld.AM: (i) The learned CIT(A) was not right in admitting the appeal which is against the provisions of section 249(4) of the Act. (ii) However, he is right in directing the learned AO to examine the facts described by the assessee and if necessary by invoking his discretion u/s 142(2A) of the - Act for conduct special audit in order to ascertain the taxable income of the assessee as it is nothing but a form of seeking remand report from the learned AO. (iii) Further, the....
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....nder section 254(4), there should be a valid appeal following all the requirements of section 249 of the Income Tax Act. Elaborating his arguments, he submitted that suppose an appeal was not filed within time limit provided in the Act, then unless delay in filing the appeal is being condoned with a plausible explanation by the assessee, the ld.CIT(A) cannot proceed to decide the appeal on merit. This condition is being provided in sub-section (3) of section 249 where the ld.CIT(A) has been empowered to admit an appeal after expiry of limitation if the appellant submits reasons for such delay. Likewise, unless conditions of the section 249(4)(a) are fulfilled, appeal cannot be entertained. 9. In his next fold of submissions, the ld.Sr.DR appraised us with the scheme of section 249(4) and how changes have taken place. In the paper book, he placed on record sections 249, 201 and 140 as they stood in 1961 and 1964. How changes have been made in the scheme in 1976 and 1989. He briefly took us through this historical development and pointed out that earlier in 1970s the advance tax was required to be paid on the demand made by the AO. After 1989 amendment, there is considerable change ....
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....ority to admit an appeal even where tax on the basis of the returned income has not been paid. The Amending Act, 1989 has, therefore, amended the said proviso to limit the discretion of the first appellate authorities to admit an appeal only in cases falling in clause (b) of sub-section (4), i.e., where no return has been filed by the assesses and the assessee has not paid an amount equal to the amount of advance tax payable by him. It, therefore, follows that where an assessee has filed a return of income, his appeal will now be admitted by the first appellate authority only if he has paid the tax due on the returned income. 10. On the strength of the above, the ld.DR contended that the ld.AM has misread the provision as well as ignored the explanation given by the Board in its Circular bearing no.559/1990 explaining the background for incorporating section 249(4)(a) of the Act. He submitted that the ld.AO has made reference to Hon'ble High Court's decision in the case of T. Govindappa Setty vs. ITO, (1998) 231 ITR 892 (Kar). According to the ld.DR this has wrongly been construed by the ld.AM. He pointed out that in this case assessee was a HUF who in the returned income put a no....
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.... order can be taken. For buttressing his contentions, the relied upon the following decisions: i) K. Nagesh, 376 ITR 473 (Kar) ii) Harjinder Kaur, 310 ITR 71 (P&H) iii) Bake Food Products P.Ltd., 356 ITR 690 (AP) 12. He also contended that ld.DR during the course of hearing made reference to the CBDT circular available on page no.295 of the Department's PB and submitted that defective return, if not rectified, then become non est return, and accordingly , provisions of section 249(4)(a) would not apply to the facts of the present case. But in the decision referred above, in the case of K. Nagesh and others (supra) Hon'ble High Courts were unanimous in their conclusion that if the return is defective, then no cognizance can be taken on such return. He further drew attention to the judgment of Hon'ble Delhi High Court in the case of Pramod Kumar Dang, 361 ITR 137 (Del). He submitted that the tax payable by an assessee on an admitted income, if not paid then such return would be construed as defective return. Elaborating further, he took us through decision of Punjab & Haryana High Court in the case of Harijinder Kaur (supra) and submitted that if an assessee fails to rectify d....
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....lid return. 15. We have duly considered rival contentions and gone through the record carefully. Section 249(4) has a direct bearing on the controversy. Therefore, it is imperative upon us to take note of this clause. It reads as under: "...... (4) No appeal under this Chapter shall be admitted unless at the time of filing of the appeal,- (a) where a return has been filed by the assessee, the assessee has paid the tax due on the income returned by him; or (b) where no return has been filed by the assessee, the assessee has paid an amount equal to the amount of advance tax which was payable by him: Provided that, in a case falling under clause (b) and on an application made by the appellant in this behalf, the Commissioner (Appeals) may, for any good and sufficient reason to be recorded in writing, exempt him from the operation of the provisions of that clause." 16. A perusal of the above would indicate that sub-clause (a) contemplates in unambiguous term that where an assessee has filed return, then unless he pays tax on the returned income, his appeal could not be admitted. With regard to the assessee falling in clause (b) i.e. those who have not filed return then disc....
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....ould be considered as defective. It reads as under: "..... "[(9) Where the [Assessing] Officer considers that the return of income furnished by the assessee is defective, he may intimate the defect to the assessee and give him an opportunity to rectify the defect within a period of fifteen days from the date of such intimation or within such further period which, on an application made in this behalf, the [Assessing] Officer may, in his discretion, allow; and if the defect is not rectified within the said period of fifteen days or, as the case may be, the further period so allowed, then, notwithstanding anything contained in any other provision of this Act, the return shall be treated as an invalid return and the provisions of this Act shall apply as if the assessee had failed to furnish the return : Provided that where the assessee rectifies the defect after the expiry of the said period of fifteen days or the further period allowed, but before the assessment is made, the [Assessing] Officer may condone the delay and treat the return as a valid return. Explanation.-For the purposes of this sub-section, a return of income shall be regarded as defective unless all the follow....
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....f such taxes on self-assessment, and if he failed to give proof of such payment, then the AO would call for furnishing such proof, only then the return will be treated as defective. In the present case, the assessee nowhere claimed payment of self-assessment taxes along with return. Therefore, no inquiry was required to be made for furnishing evidence in support of such claim. The return of the assessee cannot necessarily be treated as defective return. The ld.counsel for the assessee made reference to the decision of Hon'ble Karnataka High Court in the case of K. Nagesh (supra). In that case the assessee has filed revised return, which was declared to be invalid, hence, the assessee claimed refund of tax and interest paid on revised return. Hon'ble High Court in those circumstances concluded that such taxes and interest cannot be retained by the Revenue. They deserve to be repaid because revised return was an invalid return and no cognizance of such return could be taken. The discussion made by the Hon'ble High Court in para 17 is worth to note. It reads as under: "17. Considering the scheme of the Act, the word 'return' in Section 240 of the Act, should be understood a....
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....ch a sum of Rs. 4.60 lakhs was seized by the Department. The assessee filed an application before the tax authorities to appropriate this cash qua the demand against self-assessment case. Department did not give effect to this request of the assessee, and ultimately matter travelled to the Hon'ble High Court. The Hon'ble High Court has observed that since money of the assessee was lying with the Revenue, and it is to be construed that the assessee has paid taxes on self-assessment tax, and if that money is being used qua the advance tax require to be paid by the assessee, then it was construed as a compliance of section 249(4)(a) of the Act. No such circumstances are available before us. 21. Next proposition raised by the ld.counsel for the assessee before us was that real income ought to have been taxed, and for that purpose, he made reference to the decision of Hon'ble Supreme Court in the case of Godhra Electricity Co. Ltd. (supra) and Excel Industries Ltd. (supra). On due consideration of the above proposition, we are of the view that all these arguments on merit can possibly be raised if there is a valid appeal before the ld.CIT(A). Upto and until, the assessee pays tax on se....