2024 (7) TMI 1629 - AT - Income Tax

Dismissal of appeal of the assessee in limine as not admissible for want of payment of advance tax as per provisions of section 249(4)(b) - assessee did not file any return of income u/s 139 of the Act as the income of the assessee was below the taxable limit - HELD THAT - AO has stated the reasons for reopening of the assessment as CIB information received regarding the transactions of Multi Commodity Exchange (MCX). AO noted that the assessee has not filed any return of income for the year under consideration. Even in response to notice u/s 148 the assessee did not file any return of income. The AO accordingly proceeded to frame the assessment as best judgment assessment u/s 144 of the Act. Undisputedly the assessee has not filed any return of income and therefore there is no question of any self-assessment tax or advance tax payable by the assessee. Further the AO has estimated the income of the assessee at Rs.3 lac and addition of Rs.6 lac has been made as unexplained investment. Therefore it is only a case of estimation of income and not a case of undisclosed income or income assessable to tax as escaped assessment revealed by some material. Carrying out the transactions in Multi Commodity Exchange (MCX) does not ipso facto lead to the conclusion that the assessee has earned income as it may be a case of loss or no income. This tribunal has taken a consistent view on this point that the income assessed by the AO in the reassessment proceedings does not attract provisions of section 249(4)(b) of the Act. This Tribunal has taken a consistent view and held that for filing the appeal before the CIT(A) against the reassessment order passed by the AO the question for payment of advance tax by the assessee as per clause (b) of sub-section (4) of section 249 of the Act does not arise. Accordingly this issue is now covered by the earlier decisions of this tribunal and consequently the impugned order of the CIT(A) is set aside being contrary to the provisions of law. Since the assessment order was also passed ex-parte due to non-appearance of the assessee therefore in the facts and circumstances of the case when the CIT(A) has not adjudicated appeal of the assessee on merits the matter is remanded to the record of the jurisdictional AO for fresh adjudication after considering relevant details/evidences as well as explanation to be filed by the assessee.

Summary

The core legal questions considered in this appeal are:

1. Whether the order passed by the Assessing Officer (AO) reopening the assessment and making additions based on unexplained investments in Multi Commodity Exchange (MCX) trading was justified and lawful.

2. Whether the Commissioner of Income Tax (Appeals) [CIT(A)] was justified in dismissing the appeal filed by the assessee on the ground of non-payment of advance tax as mandated under section 249(4)(b) of the Income Tax Act, given that the assessee had not filed any return of income for the relevant assessment year.

3. Whether the CIT(A) erred in dismissing the appeal without adjudicating the merits and without providing a fair and meaningful opportunity to the assessee.

4. Whether the additions of Rs. 6,00,000 towards unexplained investment in MCX trading and Rs. 3,00,000 as estimated income were correctly confirmed by the CIT(A).

Issue-wise Detailed Analysis:

Issue 1: Legality and Justification of Reopening the Assessment and Additions Made by AO

The AO reopened the assessment based on information received from the Central Information Branch (CIB) regarding transactions in MCX by the assessee. The assessee had not filed any return of income for the year under consideration, and even after notice under section 148, failed to file a return. Consequently, the AO proceeded to frame the assessment under section 144 as a best judgment assessment.

The AO estimated unexplained investments in MCX at Rs. 6,00,000 and further estimated income at Rs. 3,00,000, totaling Rs. 9,00,000. The AO's approach was grounded on the information from CIB and the absence of any explanation or return from the assessee.

The Tribunal noted that carrying out transactions in MCX does not ipso facto establish income; it could also result in loss or nil income. The additions were based on estimation rather than direct proof of undisclosed income.

Issue 2: Applicability of Section 249(4)(b) and Dismissal of Appeal by CIT(A)

Section 249(4)(b) of the Income Tax Act requires that if an assessee has not filed a return of income, the appeal before the CIT(A) shall not be admitted unless the assessee has paid an amount equal to the advance tax payable by him. The CIT(A) dismissed the appeal on the ground that the assessee had neither filed a return nor paid any advance tax or sought exemption from this requirement.

The assessee contended that since no return was filed due to income being below taxable limit, no advance tax was payable. The Tribunal examined this contention in light of the statutory provisions and relevant precedents.

The Tribunal referred to its consistent view, supported by recent decisions, that in reassessment proceedings where the assessment is framed under section 144 without any return filed by the assessee, the requirement of payment of advance tax under section 249(4)(b) does not apply. The rationale is that advance tax obligations arise only when there is taxable income and a return filed or required to be filed. Since the income was estimated by the AO and no return was filed, the obligation to pay advance tax was not triggered.

Precedents cited include decisions from various benches of the Tribunal, notably in cases where appeals were dismissed for non-compliance with section 249(4)(b) but later set aside on the ground that the provision does not apply to reassessment orders passed without a return.

The Tribunal also highlighted the proviso to section 249(4)(b) allowing exemption by the CIT(A) for good and sufficient reasons, which was not invoked in the present case.

Issue 3: Dismissal of Appeal Without Adjudication on Merits and Denial of Opportunity

The CIT(A) dismissed the appeal in limine on procedural grounds without considering the substantive grounds of appeal raised by the assessee. The Tribunal found this approach improper, especially since the assessment was framed ex-parte due to non-appearance of the assessee.

The Tribunal emphasized the need to provide the assessee a fair and meaningful opportunity to present evidence and explanations. The matter was remanded to the AO for fresh adjudication after considering relevant details and explanations to be filed by the assessee, with appropriate opportunities for hearing.

Issue 4: Confirmation of Additions of Rs. 6,00,000 and Rs. 3,00,000

The Tribunal did not decide on the merits of the additions since the appeal was dismissed without adjudication. The matter was remanded for fresh consideration after allowing the assessee to present his case. The additions were based on estimation of unexplained investment and income, but the Tribunal noted that such estimations require detailed examination and opportunity to the assessee.

Significant Holdings and Core Principles Established:

"In the present case, the assessee had not filed any return of income and therefore, there is no question of any self-assessment tax or advance tax payable by the assessee."

"Carrying out the transactions in Multi Commodity Exchange (MCX) does not ipso facto lead to the conclusion that the assessee has earned income as it may be a case of loss or no income."

"For filing the appeal before CIT(A) against the reassessment order passed by the AO, the question of payment of advance tax by the assessee as per clause (b) of sub-section (4) of section 249 of the Act does not arise."

"The appeal was dismissed as not admissible for want of payment of advance tax as per section 249(4)(b) of the Act. Undisputedly, the assessee has not filed any return of income and therefore, there is no question of any self-assessment tax or advance tax payable by the assessee."

"Since the assessment order was also passed ex-parte due to non-appearance of the assessee, therefore, in the facts and circumstances of the case when the CIT(A) has not adjudicated appeal of the assessee on merits, the matter is remanded to the record of the jurisdictional AO for fresh adjudication after considering relevant details/evidences as well as explanation to be filed by the assessee."

The Tribunal conclusively held that the CIT(A)'s dismissal of the appeal on the ground of non-payment of advance tax under section 249(4)(b) was contrary to law and set aside the order. The appeal was allowed for statistical purposes, and the matter was remanded for fresh adjudication on merits with due opportunity to the assessee.