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2024 (7) TMI 1631 - AT - Income TaxDismissal of appeal as infructuous and non-maintainable by CIT(A) - as alleged assessee had failed to fulfil the mandatory conditions specified u/s 249(4) for entertainment of appeal - assessee to have not filed any return of income and to have not complied with the conditions specified u/s 249(4)(b) of the Act of having paid advance tax on his income - HELD THAT - As per the provisions of said section 249(4)(b) two conditions need to be satisfied for invoking the same. First no return of income is filed by the assessee and second advance tax is not paid by the assessee. As far as the contention of the assessee that the first condition was not satisfied since the assessee had filed return of income we are not in agreement with the same. The findings of the AO to which our attention was drawn to the effect that the assessee had filed return of income in response to notice u/s 148 of the Act is an incomplete finding to which the assessee has drawn our attention. AO goes on to note this return of income filed by the assessee in response to notice u/s 148 of the Act had not been e-verified which means that the necessary validation of the return filed by the assessee had not been done by it; and for all purposes therefore no return of income had been filed by the assessee. Therefore this contention of the assessee that it had filed its return of income and therefore Section 249(4)(b) of the Act could not be invoked is dismissed. Whether CIT(A) had incorrectly interpreted the provisions of law holding that the assessed tax liability was to be treated as an advance tax liability? - Admittedly the ld. CIT(A) has referred to the provisions of Section 234B of the Act for holding that the assessed tax liability is the advance tax liability of the assessee. We have gone through the provisions of the said section reproduced above in our order and we find that the said section nowhere states so. It only states that where the advance tax paid by the assessee falls short of the assessed tax by 90% the assessee has to pay interest for the entire period of the shortfall at the specified rate. The Section itself identifies a difference between the advance tax liability and the assessed tax liability. Therefore reliance placed by the ld. CIT(A) on the provisions of Section 234B(1) for holding that the assessed tax liability was the advance tax liability of the assessee is incorrect Assessee has on the contrary drawn our attention to the provisions of Section 209 of the Act which provided for computation of advance tax liability as reproduced above in the earlier part of our order. Since we have noted that the ld. CIT(A) has on an incorrect interpretation of law held the assessee to have not discharged his advance tax liability for the purposes of dismissing the appeal as infructuous in terms of provisions of Section 249(4)(b) of the Act we consider it fit to restore the issue back to the ld. CIT(A) for reconsideration of both the aspect of admitting the appeal in terms of the provisions of Section 249(4) of the Act and if considered fit for admission, to deal with the merits of the grounds raised by the assessee.
The core legal questions considered in this judgment are:
(1) Whether the appeal filed by the assessee is maintainable under Section 249(4)(b) of the Income-tax Act, 1961, given the conditions relating to filing of return of income and payment of advance tax; (2) Whether the Assessing Officer was correct in treating the agricultural land sold by the assessee as a capital asset and consequently taxing the long-term capital gain arising therefrom; (3) Whether the assessee was rightly denied exemption under Section 54B of the Act for reinvestment in agricultural land within two years; (4) The correctness of the Commissioner of Income-tax (Appeals) (CIT(A)) in dismissing the appeal as infructuous and non-maintainable on the ground of non-compliance with Section 249(4)(b). Issue-wise Detailed Analysis Issue 1: Maintainability of Appeal under Section 249(4)(b) of the Act Relevant Legal Framework and Precedents: Section 249(4)(b) stipulates that where no return of income has been filed by the assessee, the appeal shall not be entertained unless the assessee has paid an amount equal to the advance tax payable by him. The proviso allows the Commissioner (Appeals) to exempt the assessee from this requirement for sufficient reasons recorded in writing. Section 209 details the computation of advance tax, requiring the assessee or the Assessing Officer to estimate current income and calculate tax accordingly. Section 234B provides for levy of interest on shortfall of advance tax but does not equate assessed tax liability with advance tax liability. Court's Interpretation and Reasoning: The assessee contended that the appeal was maintainable since (i) a return of income was filed in response to notice under Section 148, and (ii) the advance tax liability had not been correctly computed by the CIT(A). The CIT(A) had dismissed the appeal as infructuous, holding that the assessee had not filed any return of income and had not paid advance tax equal to the assessed tax liability, relying on Section 234B and Section 208. The Tribunal examined the Assessing Officer's order and found that although a return was filed in response to the notice under Section 148, it was not e-verified and hence not validly filed for all purposes. This meant the first condition of Section 249(4)(b) - that no return was filed - was satisfied, allowing invocation of that provision. However, the Tribunal disagreed with the CIT(A)'s reliance on Section 234B to equate assessed tax liability with advance tax liability. Section 234B imposes interest for shortfall in advance tax but does not define advance tax liability as equal to assessed tax. The Tribunal emphasized that advance tax liability must be computed as per Section 209, which involves estimation of current income and tax payable thereon, not merely the assessed tax determined after assessment. Application of Law to Facts: Since the CIT(A) had incorrectly equated assessed tax liability with advance tax liability, the dismissal of the appeal as infructuous on this basis was erroneous. The Tribunal found merit in the assessee's contention on this point and restored the matter to the CIT(A) for reconsideration. Treatment of Competing Arguments: The Revenue supported the CIT(A)'s order, but the Tribunal found the legal interpretation flawed. The assessee's arguments were accepted on the point of advance tax computation, while the Tribunal upheld the Assessing Officer's finding on the return not being validly filed. Conclusion: The appeal was allowed for statistical purposes, and the CIT(A) was directed to reconsider the maintainability of the appeal and, if admitted, to decide the merits afresh. Issue 2: Classification of Agricultural Land as Capital Asset and Taxation of Long-Term Capital Gain Relevant Legal Framework: Under the Income-tax Act, capital gains tax is levied on transfer of capital assets. Agricultural land in rural areas is generally exempt from capital gains tax if it qualifies as agricultural land under the Act. Section 2(14) defines capital asset, excluding agricultural land in specified rural areas. Court's Interpretation and Reasoning: The Assessing Officer held that the agricultural land sold was a capital asset and computed long-term capital gains of Rs. 52,41,028/-, rejecting the assessee's contention that the land was rural agricultural land exempt from capital gains tax. The CIT(A) did not decide on this issue since the appeal was dismissed as non-maintainable. The Tribunal did not delve into the merits of this issue due to the procedural dismissal but noted that the matter was to be reconsidered if the appeal was admitted. Application of Law to Facts: The Assessing Officer's classification was challenged but remained undetermined by the appellate authorities due to procedural issues. Treatment of Competing Arguments: The assessee argued the land was rural agricultural land and not a capital asset, while the Assessing Officer and CIT(A) treated it as a capital asset for taxation. Conclusion: The issue remains open for reconsideration upon admission of appeal. Issue 3: Denial of Exemption under Section 54B for Reinvestment in Agricultural Land Relevant Legal Framework: Section 54B provides exemption from capital gains tax if the assessee invests the capital gains from sale of agricultural land in another agricultural land within two years. Court's Interpretation and Reasoning: The Assessing Officer denied the exemption under Section 54B, rejecting the claim that the assessee had purchased agricultural land within two years to qualify for exemption. The CIT(A) did not address this issue due to dismissal of the appeal on procedural grounds. Application of Law to Facts: The factual determination regarding reinvestment was not examined by the appellate authorities. Treatment of Competing Arguments: The assessee claimed eligibility for exemption; the Assessing Officer denied it. Conclusion: This issue is to be reconsidered if the appeal is admitted. Issue 4: Correctness of Dismissal of Appeal as Infructuous under Section 249(4)(b) Relevant Legal Framework: Section 249(4)(b) mandates payment of advance tax equal to the amount payable when no return is filed for entertaining appeal; failure leads to dismissal as infructuous. Court's Interpretation and Reasoning: The CIT(A) dismissed the appeal relying on the premise that the assessee had neither filed a valid return nor paid advance tax equal to assessed tax liability. The Tribunal upheld the finding of no valid return but rejected the CIT(A)'s interpretation equating assessed tax with advance tax liability. Application of Law to Facts: The Tribunal found that the CIT(A) erred in law by relying on Section 234B and assessed tax for advance tax liability computation, which should be as per Section 209. Treatment of Competing Arguments: The assessee argued for correct interpretation of advance tax liability; the Revenue supported the CIT(A)'s dismissal. Conclusion: The appeal was restored to the CIT(A) for fresh consideration on maintainability and merits. Significant Holdings "The Assessing Officer goes on to note this return of income filed by the assessee in response to notice u/s 148 of the Act, had not been e-verified - which means that the necessary validation of the return filed by the assessee had not been done by it; and for all purposes, therefore, no return of income had been filed by the assessee." "The provisions of Section 234B(1) of the Act nowhere state that the assessed tax liability is the advance tax liability of the assessee. It only states that where the advance tax paid by the assessee falls short of the assessed tax by 90%, the assessee has to pay interest for the entire period of the shortfall at the specified rate." "Since the ld. CIT(A) has, on an incorrect interpretation of law, held the assessee to have not discharged his advance tax liability, for the purposes of dismissing the appeal as infructuous in terms of provisions of Section 249(4)(b) of the Act, we consider it fit to restore the issue back to the ld. CIT(A) for reconsideration." Core principles established include:
Final determinations:
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